Things every investor needs to know

When it comes to trading, there are lots of things that investors need to know. The idea of jumping straight into using your own capital, assuming you are going to get everything right, is a little misguided. Like other investing strategies.

FX trading takes planning and careful decision-making, along with lots of research and learning. Here are some of the top things we believe you need to know before making any kind of investment.

Never Invest in a Vacuum

My life has been filled with helping people through these issues on countless occasions. Assess how your investing results affect your future goals and how those goals influence them. Doing well or wishing to retire comfortably is not a good reason to invest. The ambiguity and room for error in such plans are too great. Choosing a portfolio that reflects your goals, risk tolerance, and time horizon is essential. Consider yourself to be on a journey. Unless you know where you are going, how can you tell if you have arrived?

Well-Established Companies Don’t Always Make Good Stock

Investing in a well-established, well-known company does not seem to be an automatic right choice. The best of companies, even those with the greatest reputations, can and do falter. It is common for well-established companies to grow stale and have difficulty expanding beyond their traditional boundaries. Your portfolio may suffer if exposed to too many of these giants.

Be Cautious of What You Read or Watch

Put down the latest investment periodical and turn off the talking heads on television. These formats are informative if used lightly and in the right amounts, but they are more focused on selling subscriptions than providing quality advice. A television or print media advisor’s advice is not always in the best interests of investors. Sadly, good news rarely sells because it only gets our attention when it gets our attention.

Have an Emergency Fund

Smart investors will always have a lifeline or emergency fund to cover any costs that haven’t been factored in or have come as a surprise. A great way to create this safety net is ensuring you have a sufficient amount of funds in a savings account so that you know it is right there if it is ever needed.

You Have Advantages Compared to Professionals

In order to make money, professional money managers must beat the market month after month and quarter after quarter. With it being their profession, they are judged on their performances, meaning they are more inclined to take bigger risks if they need to beat their peers or previous indexes. Professionals also do not have the luxury of buying more or holding when particular securities start to diminish. Focusing on the long term is a good advantage, so sit back, relax and watch your investment grow.

Asset Allocation is One of the Most Important Areas of Investing

According to certain studies, asset allocation defines over 91% of your total portfolio performance. Choosing a strong mix of classes will create the perfect framework for your portfolio’s overall performance.

Do Not Allow Tax Issues to Drive Portfolio Decisions

Tax decisions have a significant impact on the overall return of your portfolio, but making investments based on these decisions can have seriously damaging results. Some investors have seen big depletions while holding onto investments when they don’t want to pay capital gains. This holding can create a much larger deficit if the asset in question has a price fall. Make your decisions using sound logic rather than the emotion of paying taxes.

The 72 Rule

The rule of 72 is one of the basic ideas for quick calculations of the return. The principal is to take the rate of your return and divide 72 by that rate, creating the approximate time frame you have to double your investment. Say if you had a 12% return rate. Divide 72 by 12, which leaves you with 6. This means you have around 6 years to wait for your investment to double in value. For those who are looking for their investments to increase at a faster pace, they will have to find something with a higher return rate percentage.

Higher Rate Return is usually Higher Risk

If you’re looking for a higher return rate, you must take more risks, but understand that taking higher risks doesn’t always equate to higher rewards. Some portfolios and holdings are high risks because they are unlikely ever to create a substantial return. The losses of taking these higher risks are likely to be much greater, something that a lot of investors are not particularly comfortable with.