Successful investing is a journey and not a one-time event. Which is why it is apt to say that the most successful investors were not made in a day. Learning the ins and outs of the financial world and your personality as an investor takes time and patience, not to mention trial and error. If you are looking at succeeding in the massive world of financial investing, here’s a guide to help you get started.
Know what works in the market
To start off, read books or take an investment course that deals with modern financial ideas. It is important to know that those who came up with theories such as portfolio optimisation, diversification, and market efficiency did so for a reason. Investing is a combination of financial fundamentals and qualitative factors. Once you know what works in the market, you can come up with simple rules that work for you. For example, Warren Buffett, one of the most successful investors ever, has always said that his investment style is to keep things simple - Never invest in a business you cannot understand, he had said.
Know your investment strategy
As nobody knows you and your situation better than you do, it is time you realise that you may be the most qualified person to do your own investing, and all you need is a bit of help. Experts say you can do so if you identify the personality traits that will assist you or prevent you from investing successfully, and manage them accordingly. Remember, the best investment results tend to be realized by an individualist, or someone who exhibits analytical behavior and confidence and has a good eye for value (https://www.investopedia.com/investing/steps-successful-investment-journey/). However, if you determine that your personality traits resemble those of an adventurer, you can still achieve investment success if you adjust your strategy accordingly. In other words, regardless of which group you fit into, you should manage your core assets in a systematic and disciplined way.
Take things slow
As an investor, you must most definitely not be in a hurry to see your investments grow. Like all good things, investments take time to show results too. Understand that investing is a process, and not a journey towards building an X amount of retirement corpus, but a journey to achieve financial independence. The sooner you achieve it, the better. Also, not all investments will pay off and worrying over every investment and why it went right or wrong will only make you miserable. So, make the right choices and stay patient for them to reap the desired results.
Diversify your investments
Different asset classes may respond to the same market conditions in opposite ways. This happens because if the value of one investment class decreases, the value of another sometimes increases. Therefore, allocating your money among a variety of investment types - stocks, bonds, cash - may help you moderate your risk. By investing in more than one asset category, you'll reduce the risk that you'll lose money and your portfolio's overall investment returns will have a smoother ride. If one asset category's investment return falls, you'll be in a position to counteract your losses in that asset category with better investment returns in another asset category. Diversifying your investments to include asset classes with different holdings, management styles, and risk factors will help reduce your exposure to any single investment type and potentially yield more consistent returns over time.
Consider rebalancing your portfolio occasionally
The term rebalancing refers to bringing your portfolio back to your original asset allocation mix. By doing so, you will ensure that your portfolio does not overemphasize one or more asset categories, and you'll return your portfolio to a comfortable level of risk. You can do this based either on the calendar or on your investments, states the U.S. Securities and Exchange Commission. Many financial experts recommend that investors rebalance their portfolios on a regular time interval, such as every six or twelve months. The advantage of this method is that the calendar is a reminder of when you should consider rebalancing. Others recommend rebalancing only when the relative weight of an asset class increases or decreases more than a certain percentage that you've identified in advance. The advantage of this method is that your investments tell you when to rebalance. In either case, rebalancing tends to work best when done on a relatively infrequent basis.