Rules of money management
Simple rules you need to know before investing your money
Contrary to popular belief, investment doesn’t necessarily require expertise about much.
As a matter of fact, you don’t even need to be rich before you start investing. However, a great many of us fail to get started with the management of our money because we’re either intimidated or we just don’t know where to start.
However, feel free to take the following 3 tips as a guide to help you through navigating the ‘stock market’.
It is emotional
When it comes to money, we usually make most of our choices through emotions such as fear, greed, and nervousness.
To help keep your focus on a long-term investment plan, it is recommended that you don’t check a stock ticker or your account on a daily or weekly basis. There are some sick daily fluctuation when it comes to the markets, and the same applies to individual stocks. To wit, if you will be making a long-term investment, you really don’t need the anxiety of constant updates.
Many investors get caught up in media hype or fear and end up buy or sell investments at the peaks and valleys of the cycle. To make sure that you don’t fall into such a mistake, make sure that you’re ready for that and just keep calm.
Do you have a plan?
When you don’t have a plan, your investment is endless.
When do you want to enter into transaction?
What amount of cash do you plan to invest?
When do you plan to exit?
Make sure that you have these things defined before you put money onto you brokerage account.
You can just as well start from the end and define how much money you will like to get with your investment. From there, calculate how much money you need to put on your investment account every month. Check out 5-step guide on how to invest.
Time is money
The earlier you begin with your investment, the bigger advantage you have.
Time is the biggest asset at our disposal. For nearly every time you spend investing- including retirement savings- there isn’t anything that can make up for the effect of compound interest. Also, if you end up losing money in the market, there will still be enough time for you to make it back before a time comes when you are in need of it.
For instance, if you make an investment of $1k for 5 years, you can have as much as $1.8k or $2k in 6 years, assuming the rate of return is the same. This amounts to a 10% difference if you start investing 1 year later.
Do you honestly think that the 10% difference is worth falling off you investment?
That being said, never use the “it’s too early to start investing” jab as an excuse for keeping your money under the mattress.
It is still much better for you to start late than never.
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