You are planning to invest your savings but before deciding to put the money in a financial product, the saver should keep in mind ten aspects that will help him not to make mistakes.
“An investor needs to do very few things well if he avoids big mistakes, so you do not have to do extraordinary things to get extraordinary results.” It is one of the famous messages of the American guru Warren Buffett.
Before putting the savings to work, it is convenient that the investor feels and analyzes the steps to follow. These are ten tips that you should consider to invest successfully …
1# Do not invest in what you do not understand
It is one of the recommendations that the experts gives to all investors. Today, the saver has a wide range of investment options at his disposal: stocks, investment funds, derivatives, fixed income, etc. … But not all will be appropriate for his investment profile.
Therefore, it is important to understand both the characteristics of the investment option (expected return, risk, time horizon, liquidity) and the market in which it is negotiated. If it’s the stock market, you should never invest in a company without understanding your accounts. And “the biggest losses in stocks come from companies with a weak balance,” says the expert.
2# Know your investment profile
Once you understand the product you are interested in, you should make sure that it fits with the type of investor you are. With the entry of MiFID II, the entities have focused on the correct commercialization of financial products. To do this, they classify clients into three types: conservative, moderate and risky. As a general rule, if a person is not willing to lose a lot of money and wants to take little risk, it should be considered conservative. In this case, you should be willing to accept a low return, since risk and profitability are usually directly related: the higher the expected return, the greater the risk assumed.
3# Contrast the official information
The saver should know that he has at his disposal all the detailed information on the characteristics of an investment option. In this place you can see from the relevant figures of each listed company, as well as the detailed data of the investment entities and the products that are commercialized.
In the case of the Stock Exchange, Buffett often says that the correct thing is not to take the annual results too seriously. Instead, the ideal is to focus on 4 or 5 year averages that give a more realistic view of a company.
4# Do not put all the eggs in the same basket
Even the most risky investors usually play all the capital on the same card. To reduce the risk, the correct thing is to diversify the investment with types of assets. And if they only invest in the stock market, they advise having companies in different sectors and profiles in their portfolio that can help overcome the volatility of the market.
5# Invest only the money you do not need in the short term
One of the maxims that the saver must fulfill is that you only have to invest that capital that you do not need in the short term. And it is that no matter how conservative a company seems, there is always a risk. Therefore, the individual must always be prepared to lose part of the investment and that this does not create a serious problem.
6# Adapt your investments to the deadlines of your objectives
There are products that work several months (bills) a year (deposits) or several (investment funds). For its part, the Exchange does not have a defined time horizon beyond what the investor wants to give it. The most advisable, according to the experts, is to combine assets with different time frames in order to reduce volatility.
7# Do not chase the successes of yesterday
Another maxim that the saver should not forget is that past performance does not guarantee future returns. That is, historical returns do not have to be repeated, so you have to be always ready to face losses. And it is that nobody knows what the markets will do and how they will affect your investment, even the most successful ones of the last decade.
8# Know the characteristics of the channel you use to invest
If the saver wants to contract a company an order on the Stock Exchange via the Internet, the terms of the contract must be taken into account. One of the drawbacks of these agreements is that nobody can resolve the doubts live.
In the case of the Exchange, it is essential that the investor remembers that the speed of the transmission of data affects the transmission phase of the order but not the execution phase. Therefore, when you see on your screen that the order has been “accepted” or “generated”, follow the market closely and be interested in its effective introduction into it.
9# Follow-up and discipline
All investments require constant monitoring, especially those related to the Exchange. If someone decides to buy shares, they must be aware of the price they reach at all times, set an objective and act with discipline. That is, if you buy some titles, you should be clear about how much we are willing to lose and sell when you reach a certain level. And is that greed is the investor’s great enemy, hence the saying: “that the last dollar will win another.”
In general, investment products and the operation of markets are increasingly complex and require a lot of attention, so each saver should evaluate whether it is advisable to use professional advice to manage their portfolio. In case a person decides to put themselves in the hands of an expert, he or she should be responsible for determining their investment profile, as well as making several proposals so that you have different options to choose from.