When it comes to financial investments, don’t count on luck. Only methodical work can ensure you select the right stocks, the best funds or even the most suitable savings products to enhance your assets over the long term.
Unfortunately, this means that there are no miracle recipes or dogmas to follow with your eyes closed to successful investing. There are, however, a few easy-to-apply rules and principles that you can borrow from professionals.
So what broad principles can investors follow to achieve better long-term results?
The keys to successful investing are quite simple. The following five proven principles can help you build an effective long-term strategy to achieve your financial goals.
1. Have a plan
When markets are volatile, even experienced investors can overly focus on short-term movements. Rash decisions can be made, especially if one tries to anticipate the markets. Thus, investors buy at a high price when they see the markets rise or lose confidence and sell at a loss when they see the markets fall. The key to avoiding rushed investment decisions is to maintain a long-term perspective.
By having a well-structured plan, you can stay on course with confidence. You know that daily market fluctuations will have little impact on your long-term goals and the investment strategy designed to achieve them.
Remember that events will always affect the stock markets in the short term. In the long run, however, the markets have always been advancing.
2. Diversify your investment portfolio
If you deal with your investments yourself and are responsible for building your investment portfolio, you should consider its diversification. Certainly, the appropriate selection of safe and risky assets will be of great importance. Diversification is a kind of protection against lack of knowledge, and in the case of novice investors, it is most advisable. As you gain experience and capital, you can shift more money towards risky assets.
3. Defense, not attack
As the saying goes in football, you can’t lose a game if you don’t concede a goal. It is the same with investing. Until we fall into a spiral of losses, we do not get stuck in a “slippery hole”; we still have a chance to profit. In the long term, limiting your risk and avoiding bad times in the stock market is crucial to achieving good returns on your investment. This can be done in two ways: by yourself or by relying on professionals.
4. Choose the best time to act
Buying and selling at the right time – is one of the keys to successful investing. But it is an extremely difficult exercise, including for a professional. Without a good dose of luck, it is impossible to buy at the lowest and sell at the highest. Keep this in mind! However, there are methods to strive for this ideal. Easy-to-Use Portfolio Management Software like StockMarketEye is a useful tool for hands-on research and keeping an eye on your holdings and the markets.
5. Regularly monitor your investments
As a private investor, unlike professionals, you do not have management constraints to respect or regular reports to provide on your decisions. But that should not make you forget to carry out a one-off review of your assets. Often, individuals make an effort to choose their investments well in the first place, and then they no longer care. But this is a very bad habit. The financial profitability of an investment depends on its good long-term follow-up.
Do a checkup at least once a year, and ideally, check-in quarterly. Ensure that your objectives and situation have not changed, that your investments align with your risk tolerance, and that the performances are there.
In conclusion
By applying these five proven principles to successful investing, you ensure that your portfolio is well-positioned for success.