Principle 1. Set goals
Yes, one of the main principles in investing is to set goals and the goal should not sound like “make more money”. Although in itself this goal is pretty good.
The goal should be specific and measurable. For example, it is very important in what currency your investment goal is measured. If it is, for example, a big trip abroad, then it makes sense to save and invest in foreign currency. If the purchase is planned in a few years, then you will need to select the appropriate investment. The exact amount of the purchase should be understood in order to know how long it will take you to collect the required amount and choose the right investment instruments.
Setting a goal in investing is one of the important principles to start with. Sometimes our future students are just faced with the fact that they start investing, and then quit just because they did not write down their investment goals correctly.
Do not forget to check your goals against reality, because if you set a goal to grow your income a hundredfold in six months, it is unlikely that you will achieve this goal.
Principle 2. Know your investor profile
Knowing your investor profile is a principle to apply before you start investing. What is an investor profile, or, in other words, a risk profile. This is your risk appetite. All people are different, someone does not even buy a lottery, because they cannot risk their own even small money, and someone calmly withstands the jumps in the deposit in plus or minus $ 10,000 dollars.
But if you are thrown into the cold even by the thought that you will invest your money in some financial instruments other than a deposit, this does not mean that the path to investment is closed for you. It's just that each risk profile has its own investment option and its own financial instruments. For those who are not ready for risk, low-risk and highly liquid financial instruments such as government bonds are chosen, for those for whom a risk is a conscious approach and calculation, like for me, higher-risk financial instruments are possible.
Yes, any business needs a plan. So it is in finance. Especially in personal finance. In the first paragraph, we talked about investment goals. After setting your goals, you must begin your plan. In fact, an investment plan is a path that you must go in order to arrive at your financial goals. This is the choice of instruments, which are described below, and the profile of the investor, and the calculation of the number of investments that you intend to make.
You can keep your whole life in your head, but personal finances must be kept on paper or in a system. The steps of an investment plan are stepping stones to your financial goals. In the investment plan, you can prescribe dates or immediately enter periods. Also, the investment plan should contain the specific amounts that you plan to invest in your investments, as well as a breakdown into low-risk, high-risk and medium-risk investments. Also, your plan should include both steps for the goals that you will accomplish in a year, and those that you will need in 20-30-50 years (school children, moving to a large house, retirement).
How to write an investment plan - you need to apply the decomposition method. It is necessary to decompose the goal from the opposite. For example, you are planning to buy an apartment that costs $ 100,000. From this $ 100,000 you must go out for a period, steps, specific amounts that you must earn on investments and on basic income in order to come to this amount.
Take your investment plan as seriously as possible. Discuss with your spouse, have periodic “family councils” on this topic. Working in a team on such a complex issue as investments is much safer, and joint solutions will only bring you closer together.