Advertising
Advertising

7 Important Investing Tips You Need to Follow

7 Important Investing Tips You Need to Follow

The world of investment is a constantly changing entity, one that continues to evolve according to global economy shifts, political events, and social upheaval. This has been particularly true in recent times, as there have been a number of significant trend investment reversals within both developed and emerging markets.

Despite this changeable and unpredictable nature, however, there are a series of fundamental rules that all investors must abide by if they are to succeed. These are based on the philosophic principle of determinism, which dictates that investors must adhere to their philosophy at all times and understand the underlying laws that govern change.

Advertising

With this in mind, what are the key tips that investors should follow when looking to commit their capital in 2014? Consider the following:

Advertising

American_Cash

    1. Never invest more than you are prepared to lose

    As a starting point, you should never commit more than you are prepared to lose when investing capital. It is therefore important to fully appraise your financial circumstances before making a commitment, paying careful attention to: the chosen vehicle for investment, your disposable income levels, and any potential returns. Failing to adhere to this rule will create a debilitating cycle of debt and loss, and may eventually force you to take ill-advised risks in the quest to recoup your capital.

    2. Build a contingency fund

    On a similar note, the most experienced investors tend to operate within their financial means while also developing a viable contingency fund. This is a must for anyone with an appreciation of risk management, as this capital can be used to offset losses, balance your trading account, and provide security in the event of an economic downturn. A contingency fund can serve alternative purposes that suit your exact need, and generally afford you flexibility in the quest to maximize your profitability.

    Advertising

    3. Develop your investment portfolio over time

    Another fundamental rule of successful investment revolves around timing, as you need to pace yourself and develop your portfolio over time. Whether you wish to deal predominantly in derivatives, such as currency, or if you want to invest in physical commodities, such as shares or property, you must start slowly and look to expand your portfolio in line with the return that it generates. Patience is the key to accessing long-term gains, especially in a volatile or unpredictable economic climate.

    4. Diversify your portfolio

    As your financial returns begin to grow, you should look to diversify your portfolio and invest in a wider range of market sectors. This not only helps to offset the potential risk posed by economic decline and sudden market shifts, but it also affords you the opportunity to maximize your earnings over a prolonged period of time. Diversification also brings great responsibility, however, as you must adopt a proactive approach towards managing your portfolio and changing it to suit prevailing economic trends.

    Advertising

    5. Automate your investments and offset risk

    One of the ways through which you can streamline the diversification process is to automate your accounts, using online trading platforms and software to implement risk management measures. Online trading accounts feature a host of automated tools that have been designed to minimize your risk as an investor, including stop losses. You could even take this principle further by embracing the concept of automated trading, which uses predetermined algorithms to execute trades in real-time across a range of financial markets.

    6. Take advantage of tax-free growth and investment options

    From bank accounts to financial markets and derivatives, there are numerous investment options that remain free from capital gains tax. In terms of the former, you should consider investing your idle capital into cash ISAs. Any interest that you accumulate on these accounts is completely tax free in the current economy. With regards to the latter, there are also tax-free stocks and share ISAs, which are far higher risk but also capable of delivering inflated returns over time.

    7. Look to reinvest any interest that you generate from your income

    It is extremely difficult to maximize your financial returns without encountering risk, so it is important to strike a balance between being risk-averse and conscientious as an investor. One of the best ways of achieving this is by looking to reinvest any interest that you generate from the income that you have invested, whether it is withdrawn from a standard savings account or an online trading portfolio. This enables you to invest more into your portfolio without placing existing capital at risk, while it is also an excellent way of maximizing both your short and long-term returns.

    More by this author

    10 Reasons A Long-Distance Relationship Will Work 12 iPhone 6 Tricks You Probably Don’t Know But Should We Are Often Confused Empathy With Sympathy but What’s The Difference Actually? To Make Wise Decisions, Ask Yourself These Questions Every Time No Matter What You Say, the First Thing People Pay Attention to Is Only How You Say It

    Trending in Money

    1 How to Use Credit Cards While Staying Out of Debt 2 How to Use Debt Snowball to Get out from a Financial Avalanche 3 How Personal Finance Software Helps You Get More Out of Your Money 4 The Best Ways to Save Money Even Impulsive Spenders Can Get Behind 5 How to Answer the Tough Question: What are Your Salary Requirements?

    Read Next

    Advertising
    Advertising
    Advertising

    Last Updated on March 4, 2019

    How to Use Credit Cards While Staying Out of Debt

    How to Use Credit Cards While Staying Out of Debt

    Many people will suggest that the best thing to do with your credit cards during these tough economic times is to cut them up with a pair of scissors. Indeed, if you are already in huge debt, you probably should stop using them and begin a payback strategy immediately. However, if you are not currently in trouble with your credit cards, there are wise ways to use them.

    I happen to really love my credit cards so I will share with you my approach to how I use mine without getting into deep financial trouble.

    Ever since about 1983 when I got my first Visa card, I continue to charge as many of my purchases as possible on credit. Everything from gas, groceries and monthly payments for services like my cable and home security monitoring are charged on credit. Despite my heavy usage, I have maintained the joy of never paying any interest fees at all on any of my credit cards.

    Advertising

    Here are some tips on how best to use your credit cards without falling into the trap of paying those nasty double-digit interest fees.

    Do Not Treat Credit Cards as Your Funding Sources

    Too many people treat their credit cards as funding sources for major purchases. Do not do this if you want to stay out of trouble. I use my credit cards as convenient financial instruments so I do not have to carry around much cash. In fact, I hate carrying cash, especially coins. When you buy things on credit, the purchases are clean and you will not get annoying coins back as change.

    I do not rely on my Visa, MasterCard or American Express to fund any of my purchases, large or small. This brings me to my golden rule when it comes to whether I will pull out any of my credit cards either at a retail or online store.

    Advertising

    I never purchase anything with my credit cards if I do not have the actual cash on hand in my bank account.

    If I really cannot pay for the item or service with cash that I already have at the bank, then I simply will not make the purchase. Remember, my credit cards are not used as funding sources. They are just convenient alternatives to actual cash in my pocket.

    Make Sure to Always Pay Off Balances in Full Each Month

    The next very important part of my overall strategy is to make absolutely sure that I pay the balances in full each and every month no matter how large they are. This should never be a problem if the cash has been budgeted for my purchases and secured in the bank. I have always paid my full balances each month ever since my very first credit card and this is why I never pay interest charges.

    Advertising

    Using Credit Cards with Rewards

    Most of my credit cards are of the “no annual fees” type, including one MasterCard on a separate account I keep at home as a spare in case I lose my wallet or incur any fraudulent charges. However, I do use a main Visa card which does have an annual fee because all purchases on that card reward me with airline frequent flyer points. For me, the annual fee is worth it since I do travel and I get enough points to redeem many free flights.

    You have to decide for yourself if you will charge enough purchases on credit each year without paying interest charges to warrant a credit card that rewards you with airline points (or other rewards). In my case, the answer is “yes” but that might not be the case for you.

    I occasionally use a MasterCard or American Express card on small purchases just to keep those accounts active. Also, I have been to the odd retailer that accepted only a certain type of credit card, so I find that having one from each major company is quite handy. Aside from my main Visa card which earns the airline points, the rest of my cards are of the “no annual fees” variety.

    Advertising

    So this is how I use my credit cards without getting into any financial trouble with them. This strategy is recommended only if you are not in debt, of course. In fact, it is worth keeping in mind once you’re out of debt so that you can keep your credit cards active and treat them responsibly.

    What are your credit card usage strategies? Let me know in the comments — I’d love to hear what methods you use.

    Featured photo credit: Artem Bali via unsplash.com

    Read Next