“Three Rules to Smart Investing”

                                                                            

(By Adrian B) Investing is a scary word to the average person. To many it means risking life and limb for a possible positive outcome. However, that does not have to be the case. There are some simple rules to follow when choosing an investment. We will be discussing a few of those rules or guidelines to help you invest your money wisely. I hope you will feel a little more confident about investing for your future after reading these tips.

            The first rule of investing is the simplest of all: don't invest any money you can't afford to lose. It is also wise not to invest money you might need in the near future. Unfortunately, many eager investors have invested funds banking on their investments to pay off quickly. When they didn't they were forced to pull their money out- at a loss. This type of experience would definitely give anyone a depressing feeling and they would likely hesitate investing in the future. Other worse stories include those who invested all their savings and retirement funds on a stock or property which later bombed and they lost everything, their whole future. Contrary to popular belief, there is no investment that is a "sure thing". Companies like Enron were supposedly a "sure thing" and many people lost everything. Investing always involves some sort of risk; some bigger than others. No matter what investment you are considering, always assume that the money may be tied up for an indefinite period of time and that it is possible that you may lose it all. However, don’t let this discourage you from ever investing.

The second rule takes some research on the investor's part: understand what you're investing in. That sounds like a no-brainer but so many investors invest because someone else said something was an easy win...fast cash. Unfortunately "fast cash" brings people out of the wood-works and it usually ends up bad for them. Research...blah...but it is a necessary evil for those who are looking to make money on their investments and minimize the risks. Whether you are investing in real estate or in the stock market, good research will help you know the risks. For instance, if you’re thinking of investing in the real estate market, like buying a house to flip, you will need to research a few things. Things such as how much capital it will take to fix the foreclosure you’re buying, also whether or not the neighborhood is a dying community. If other homes for sale have sat vacant in that same neighborhood for over a year the odds are that yours might do the same. If you want to invest in a stock, the same thing goes for that as well. It all comes down to knowing before you act. “Do your homework.” That’s what your parents kept telling you when you were in school.

            The third rule is hard for some investors to heed: don’t get greedy. The curse of investors is often greed. They see dollars and cents, and they just can’t stop. Real estate investors trying to flip houses set the prices too high and they sit on the market for too long. Sadly, it often ends in foreclosure. Stock holders try to hold out too long, wanting to make one more dollar, but the stock collapses before they can sell. Greed usually rears its ugly head when an investment is going well and the investor begins to envision massive wealth, fancy cars and immediate retirement. Investing is not supposed to be like playing the lottery; it isn’t supposed to be a get-rich-quick scheme. If you have no idea what you’re doing then that’s all it is…just gambling.

            If you are planning to invest in the near future, be smart about it and don’t throw your money around carelessly…do your homework. And remember; don’t let your success turn into greed. Investing can be a great thing for wise investors.