The Ground Rules For Successful Investment
Exploring the "Total Plan" approach and the ground rules for successful investing.
- How does Knowledge give you the Ground Rules for Successful Investing?
- The "Total Plan" Approach for Real Wealth Creation
- The Seven Ground Rules for Successful Investing
How does Knowledge give you the Ground Rules for Successful Investing?
Today's rapid pace of change has created a new world of investing and a new chance to gain knowledge about how to invest. One result is more choice. Another result is that there are more chances for the informed investor to profit. But with the increase in information sources comes the task of sifting out the good information from the bad. Is the advice given true and unbiased or is it supplied in order to support a vested interest?
However, now more than ever, the key to successful investing is having uncompromised knowledge. It is knowing the "tricks of the trade" and how this new world of money works that is the key that leads to successful investing.
But from where is this knowledge obtained?
As mentioned in a previous article, you were not taught this in the educational establishments you attended. The printed media relies on Financial Institutions for their income and therefore supply compromised information, as they have a vested interest in presenting the information in a particular way. Similarly, most information presented on the Internet is there because the writer has a vested interest. The author is presenting the view of his employer - as an affiliate, an employee, a marketer, a salesman. Very few locations of information are there through altruistic motives. For instance, these articles are here so that I can make money. Be aware! Be careful! Be vigilant! Ask yourself whether the information you have found is the best information upon which to make considered decisions. I hope you make the decision that, although I will be making money out of it, the information contained in these articles has merit.
The set of articles I will be presenting should give you a step-by-step guide as to how to make the decisions to obtain good knowledge and produce good strategies for your personal investment plan. Hopefully, you will learn that it is surprisingly easy to invest successfully if all the jargon is stripped away and that creating your own financial strategy is just a matter of utilising simple principles to their best advantage.
The "Total Plan" Approach for Real Wealth Creation
Once you have gained the knowledge and understand how to employ that knowledge you will be ready to create financial success. Invariably, this comes from both mastering the stock markets and applying the new found skills and knowledge to deploy your assets and income.
Retirement planning, tax strategies, property investment, banking relationships, insurance and life insurance products and even "alternative" investments such as art, antiques, commodities, options, futures and precious metals, all have a place in a well-organised and well-researched investment strategy.
Each individual has a unique personal profile that only they know about. This profile is not static but changes daily due to both personal and external factors. Any strategy you put together must reflect this and be flexible enough to be able to be changed and to take advantage of those changes.
It is the objective of my articles to give you the information for you to sort out the confusion by assisting you to define and then act on that information for your highly personal plan for financial success. You should learn how to exploit your own personal strengths and knowledge and to set a timetable for success based only on what is right for you and you alone (read family here for those not having a "single" focus).
The only way to communicate the information you need to achieve these goals is to start with the basics and progress from there to more sophisticated strategies. I will explain first how to protect your income, assets, wealth and profits and to minimise the risks, downside and losses. Then I will give you information to allow you to pyramid profits to build wealth even faster (do not confuse this statement with "pyramid schemes" - which I will most definitely not be suggesting you employ).
Underpinning all successful investing, however, are certain basic principles - the ground rules that apply to both the simple and the complex strategies you decide to employ. A review of these follows:
The Seven Ground Rules for Successful Investing
1. Be your own Investment Manager.
No advisor or broker can do it for you! Even if they employ KYC - the legal obligation for them to "Know Your Client". Only you know your own real needs and temperament. Only you know what motivates you. Only you are there all the time to understand current issues in your life and to know what needs to be done at that moment in time. You are not motivated by the chance of earning a commission, an affiliate payment or an in-house sale for your company. Only you can act according to the circumstances surrounding your life.
2. Don't wait for "things to get better"!
Start investing as soon as you feel comfortable that the investment you make will form part of a considered overall strategy for your own investment success. If the market is filled with gloom, assess the mood, as it may be the time to buy bargains. It has never been truer than to say that the time to get going is now! Regular investment is always the best policy no matter what the market conditions are. In doing this you will take advantage of the mathematical phenomenon known as "pound cost averaging" or "variable ratio averaging" for those not familiar with Pounds. This will be explained in a future article.
3. At all times exploit the effect of compounding.
This creates a powerful money-building strategy and is probably the single most effective key to the creation of real wealth.
4. Good quality shares should be at the core of any investment strategy.
How do you choose them? By following the time-tested rule of "value investing". This also will be explained in a future article.
5. Diversification or "asset allocation" should be used to reduce risk.
This will keep your money safe as well as ensuring growth of your wealth.
6. Become a contrarian.
Do not follow the flock, be one of those that turns the market. History shows us that the public is emotional and usually WRONG! Observe what the herd is doing. Then do the opposite - but at the right time.
7. Finally, be tax-efficient.
Remember, it is your money, not the tax man's. You are not obligated to pay the tax man the maximum amount you could. Rather it is your obligation to do what business owners do, whether they are SME's (Small & Medium Enterprises) or "big" business and corporations, which is to minimise tax liabilities. Use any legal tax-avoidance schemes and strategies to their maximum in order to keep as much of your wealth as possible. Train yourself always to think in terms of after-tax return. But do not let this strategy cloud your overall investment strategy. Start by thinking as an entrepreneur.