Learning how to invest may seem daunting at first. Many young working professionals who have just begun their careers may find it difficult to begin investing because of a lack of financial literacy.
Financial literacy comes with time and discipline. Here’s five basic rules that one must always keep in mind, before starting out as an investor:
The secret to creating wealth is to begin investing early. This is because staying invested for a longer period allows your money to grow, by getting a return on your returns, which is also known as compounding.
Invest for the long term
As young investors, we may want to get rich quickly. However, investments are not a 20-20 game, but a test match. The longer you stay invested, the more time your money gets to grow.
Diversify your risk
Remember to never put all your eggs in the same basket. Diversify your investments across asset classes such as stocks, mutual funds, bonds, fixed deposits, gold and other assets.
Don’t blindly follow the herd
Following the herd and engaging in FOMO buying/selling can lead to rash decision-making and losses. Instead, stick to your financial goals and investment plan. Don’t get swayed by emotions during extreme market movements, especially if you are investing in 2021 following the rollercoaster ride that was 2020. Learn to be calm even while others go helter-skelter.
Keep yourself updated about markets and the economy:
Ensure that you are updated on local and global events that may affect your investments. Do not rely on “tips” from random sources. Instead, rely on your own knowledge and research. Do not hesitate to take advice from a financial advisor if you need to.
Regardless of whether you are a newbie or experienced investor, investing in 2021 will need to be done the right way. With our new investment literacy series, learn investing with MProfit to get better at managing your investments the right way.