Secrets to Investment Success
Investing isn’t magic.
Although it may seem intimidating, complicated and mysterious - investing is simply the art of putting money into financial shares, schemes or property with the goal of achieving a profit. It doesn’t have to be difficult - and anyone can learn how to invest.
With some research, a level-headed approach and a healthy dose of patience, you can build up an investment portfolio that will bring you good returns.
The following are some of the basic secrets of successful investing that you should know when you start out on your journey.
Get Started Early
One of the first things you should know about investing is that the sooner you get started, the better.
The power of compound interest means that even small stocks and investments can gather serious wealth over time. Investments often grow like a snowball, bringing in more of a return year on year.
Even if you only have a small amount of money to invest, it’s worth getting started anyway. Your money can be working for you rather than just sitting in your account. The great thing about fractional ownership options such as Partbnb is that you can start investing with a very small amount. Our vacation rental properties are divided into 10,000 parts, starting from $34 each.
We’ve already mentioned on this blog why it’s important to diversify your investment portfolio.
However, it’s so important that it’s worth saying again. Never put all your eggs in one basket - or rely too much on one type of investment.
You can diversify your portfolio by including many different types of investments - as well as choosing investments in different locations as well. You can also keep adding diversity into your portfolio by tweaking, adjusting and improving it over time.
Investments can fluctuate and drop in value at any time. When you have a diverse portfolio, your assets will balance each other out. It will lower the risk of your entire portfolio being wiped out by any change in the market. This not only means you’ll make more money, but you’ll also be able to worry less and sleep better at night.
Manage Your Emotions
Emotions can cloud your ability to make smart investing decisions. If you are too excited about something, you might make an impatient move that will cause you to lose money.
It’s not always wise to base your investment decisions on emotional feelings without considering all of the other important factors. For example, you might panic and sell an investment out of fear when you should have held onto it. Or, you might get impatient and angry with an investment that has taken too long to show progress and make a rash decision.
Never let yourself get too attached to any investment you make.
It’s important to keep a rational mind and only make decisions when you are feeling calm and collected. Also, diversifying your portfolio can make it easier to take the emotion out of investing. When you have more variety in your investment portfolio, you’ll be less emotionally attached to any of the investments.
Figure Out Your Own Appetite for Risk
There are high-risk investments and low-risk investments - but which ones are right for you?
All types of investments have their pros and cons and of course, no one wants to lose money on an investment. You’ll have to have some tolerance for risk if you are considering getting into investing.
But, some people are naturally more comfortable with risk than others. It’s up to you to determine your own risk appetite level.
There are a couple of factors involved in this.
First of all, there’s your ‘risk capacity’ which is the amount of investment you’re able to take on. This is determined by your financial situation and how much capital you have available to invest.
Then, there’s your ‘risk tolerance’ level which is the amount of risk you feel okay with taking on. So, you might be able to afford an investment, but it makes you feel uneasy and causes your stress.
Remember - generally the lower the risk the lower the expected returns. Higher risk investments usually bring a chance of higher returns.
The perfect investment for you is one that matches your risk tolerance and your capacity for risk.
Think Long Term
Successful investors don’t think in weeks or months, they think in years.
Don’t start investing thinking it’s going to be a ‘get rich quick’ scheme.
Investing is a long-term game. You’ll need to have the patience to watch your investments grow over time. Don’t be swayed by the short term fluctuations of the market. If you stick with good long-term investments and have patience - your efforts will be rewarded in the long run.
Also, investing for the long term will allow you to take advantage of high-return opportunities that might have been shunned by others. Also, investments that are held for longer periods of time generally tend to be less volatile than those that have been held for shorter periods.
Keep Building On Your Knowledge
You probably already know that an important step to getting started in investing is research. It’s crucial to know how the market works, what each different type of investment is and how the value will fluctuate.
However, what usually happens when people get into investing is that they do a lot of research at the beginning - then just stop when they have enough info to feel like they know what they are doing.
However, to be a really successful investor the key is to never stop learning. Keep researching more into different types of investment strategies and continuously tweaking your portfolio. Even if you have been investing for years, there’s always something more to learn.