10 golden rules of investing

Golden rules when you start investing

Like any system, private investment is subject to certain laws and regulations. If you really want to become a professional investor and create your own passive income system, and not just play investing money, then they must be followed.

The investment rules are very simple and straightforward. The only thing that is required of you in order to achieve financial independence is to observe them every day.

Although no sure-shot formula has yet been discovered for success in investments, here are ten golden rules which, if followed prudently, may increase your chances of getting a good return:

Investor Rule # 1. Build Investment Capital.

In order to start engaging in private investment, you need to have free funds, which will serve as the basis for creating a passive income system. Investment capital should be a completely separate part of your budget. Money for investment should be taken only from this capital. Its size does not have to be comparable to the budgets of investment companies, but it must be formed.

Investor rule # 2. Invest only as much as you can afford.

This is a very important investment rule. After you start receiving the first passive income from investing, you will definitely have a desire to invest almost all of your free money. This is by no means worth doing. After all, life is multifaceted and consists not only of making money. Determining an acceptable size of investment capital for yourself, an objective reassessment of your own expenses will be a very useful and correct step.

Believe me, you can easily do without a new smartphone, especially if the desire to buy it is a consequence of advertising or considerations “everyone has it, but I don’t have it”. By redirecting such financial flows to private investment, you will achieve a lot as a result.

Investor rule # 3. Pay yourself a salary.

The distribution of any income should begin with paying yourself a kind of bonus for the work done. It is optimal for this to allocate 10-15% of the proceeds and invest them in personal investment capital. This rule, in particular, is especially true for freelancers. After all, working as a freelancer does not imply getting a stable income. Therefore, it makes sense to set aside a certain part of the earned funds to create your own passive income system.

Investor rule # 4. Don't waste everything you earn.

This rule applies to all types of Investments!

Most people think that increasing their income makes them richer. In fact, this is far from the case - a typical habit of a poor person: as soon as additional income appears, this money is instantly spent. At first, it was because of necessity - there was simply not enough money. Later, the habit is carried over to higher earnings.

The phrase “I don’t understand where the money is going” has its legs growing from here. It is very easy to figure out where earnings are disappearing. You just have to keep track of expenses.

The peculiarities of psychology, which are also skillfully spurred by the marketing industry, dictate the following model of behavior to a person: you began to earn more, now you can spend more. As a result, the ratio between income and expenses does not change, and sometimes even worsens. Therefore, it is worth constantly assessing the rationality of your costs.

You just have to keep track of your expenses! Doing this, especially at first, is not at all easy. But having formed such a habit in yourself and applying it on a subconscious level, you will very quickly see how your real income and level of well-being will start to grow.

Investor rule # 5. Invest only your own money.

Another very important investment rule. Under no circumstances should you ever use borrowed capital for private investment. After all, investment is an activity that carries risks by default. The tips for investors, which you can find on our website, will help to minimize them, but the possibility of losing funds cannot be completely ruled out.

As a result, you can find yourself in a debt trap, which will be very difficult to get out of. Indeed, there are examples when people earned very decent amounts by investing borrowed money. But it sounds more like a game of Russian roulette than a smart investment.

Investor rule # 6. Diversification, diversification and more diversification.

This is exactly how, almost in Lenin's way, one of the main rules of investing sounds. No matter how profitable the investment of this or that fund or project may seem, in no case should you be limited to only one direction of investment. The history of scams of even very reliable investment companies clearly demonstrates how private investments end in only one project. The most optimal distribution of investment capital between about 10 companies in order to minimize the risk of its complete loss.

Investor rule # 7. Return on your initial investment first.

One of the main advantages of private investment lies in two things: reinvestment and compounding. Indeed, if you reinvest 100% of your income, you can very quickly increase it tenfold. This is very clearly demonstrated by the theoretical calculations "What will happen to my capital in 5, 10.50 or 100 years", which operate with cosmic figures of capital growth. Do not give in to this illusion.

It is enough to simply ask yourself the question: what is the probability that this investment company will exist in 5 years. Therefore, it is logical and correct to adhere to the following approach: first, return the invested funds, and then engage in the reinvestment of profits. In this case, the maximum losses will be just lost profits and psychological moments.

Investor rule # 8. Reinvest investment income.

When a novice private investor receives the first profits and interest, there is almost always a temptation to spend them right there. The temptation is really great. For example, if you are still working in an office and private investments are a source of additional income for you, there is a desire to make a present to the CEO and thereby slightly facilitate career advancement. Or spend the money you receive on yourself.

But do not give in to such desires. After all, reinvestment and compound interest are doing their job. And letting the profit back into business, you build up your passive income in progression. Even if you spend the profit from investments, it is only in a fixed and predetermined amount.

Investor rule # 9. There is no 100% reliable investment!

This phrase should always be kept in mind. By its very nature, no source of income or economic mechanism can provide a stable profit with a 100% guarantee. It does not matter online business, investments, freelancing, bank deposits, offline business or working as an employee - all these tools do not guarantee absolute reliability. When investing, as in any other activity, the main thing is to correctly and objectively assess the level of risk, comparing it with the potential profit.

Investor rule # 10. Look for new ways to invest.

The search for new sources of investment should be carried out constantly. This will help, on the one hand, to diversify the investment portfolio even more, and on the other hand, it will always allow you to always have several backup options for earning income. Internet investments do not have to be new ways of investing. For example, it can be real estate or plans to create and develop your own offline business.

Agree that these investment rules are very simple, and their observance does not require much effort. If you really want to become a professional Private Investor, then follow them and the results will surely please you.

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