The secrets of investing

The secrets of investing:

    This is one of the common question most people ask. Are there any secrets in investing ?  what are the mantras that successful investors must know, well in this article I will share my experiences and thoughts. 

Respect the money:

     Without compromising your lifestyle you could save money, you will have to choose your spending wisely. Buying luxuries such as expensive cars, jewelry, costly clothes on credit cards or loan eventually is going to create problems financially later.  Instead use that money to generate assets such as shares, real estate so you could buy those luxuries with your money down the line.

Once you have enough money to invest,  it is time to find the right investment so that money can work for you.  Opportunity is everything. 

Don't invest money alone:

         More often than not, most people invest their money because they have seen someone investing and they do not want to fall behind. Just alone buying a property or shares in a company is not investing. It is gambling !!. You could loose or win and as with any gambling the odds of loosing is more.   

    "Invest time and money.  More time and less money"

Sam,  John both earn $3,000 a month from 9-5 job, saves approximately $500 a month after  expenses. 

Sam left all his savings in the same bank account without any research and with the assumption that it is small savings anyway.  On the hand, John spent an hour in finding a bank with high interest rates and at the end of it, he found a bank that is offering 1% higher interest rate and he opened an account in that bank and started using for his savings. At the end of the six months, 

Sam with his current bank interest rate 4% 

Investment amount = 6*500 = $3000

Interest earned = $35

John with his current savings bank interest rate 5% 

Investment amount = 6*500 = $3000

Interest earned = $43.87

So, John has paid himself $13.87 for his 1 hour research over period of 6 months.  This may not be big amount but guess what it's real money and it is only over 6 months period with a savings of $500 a month. This will have compound affects on his wealth over a time period. 

Another example with capital risk which is where research is more important to minimize the odds in investing.

Sam,  John both earn $3,000 a month from 9-5 job, saves approximately $500 a month after  expenses. 

Sam started investing his savings into share market at the end of the each month, he invested in companies that are doing well in the current market conditions. He did not take into account market cycles and company fundamentals. 

John also wanted to invest in share market at the end of each month but he could not find the right companies to invest in every month so only he ended up investing 3 times $500 each for the 6 months period. At the end of 6 months, 

Sam, out of his 6 investments 

4 companies contributed to profits of 10% of each = $200

2 companies contributed to loss of 10% of each = -$100 

So, Sam's total profits  = $100

John, out of his 3 investments 

3 companies contributed to profits of 10% of each = $150, and he has potentially earned interest on the remaining money on his higher savings interest rate account.

So, John's total profits  = $150+

Your research and time has double benefits they will not only help you make profits but at times helps you limit losses.   

Here is another article that I wrote about Investing : Investing Strategies