Timeless Investment Maxims and Principles
The economy changes. Investment options change. Investment methods change. Investors change. In the midst of change, there are investment principles that are timeless in nature. When these fundamental understandings are applied to investing pursuits, the likelihood of profitability is exponentially increased.
Protect Your Capital
“Rule No.1 is never lose money. Rule No.2 is never forget rule number one.” – Warren Buffett
See infographic on Warren Buffett investment tips
Never lose money. Is it that simple?
Money often controls people when people should be controlling their money. When someone is using their money instead of their money using them, they can decide whether or not they will risk money. In the current information-filled culture, with a million view points about a million different subjects, it is easy to complicate the simple. Rule No.1 is never lose money.
It is easier to lose money than make money. This is why specifying risk management in investment planning is critical.
Planning is Essential
“He who fails to plan is planning to fail” – Winston Churchill
If there is no plan for success, by default, there is a plan for failure. Whether the lack of planning comes from ignorance or arrogance, the result will likely be failure. There are multiple aspects of financial planning, such as: your goals, vision, and trading strategy (risk parameters, entry methods, trade management). If one is not a retail trader, not all of these rules apply.
Planning is an exciting opportunity. When one establishes 1, 2, and 5 year goals, it will help them keep focused. With vision and goals, they can keep on moving forward even in a losing streak. When a 3-month period is unprofitable, one can look up and see their vision, and keep on going.
It’s possible to have a plan and not execute it. Therefore, discipline and consistency is key to actually seeing your goals come to pass.
Perception: Investment Mindset vs. Lottery Mindset
How one views investing is how they are going to treat investing. If someone view investing a get-rich-quick method (which has been ever-popular in the last 10 years) then they will treat it like a casino or lottery ticket. If someone views investing as a long term process of building wealth, they will operate in patience.
Patience is a need attribute for investing. If you move in and out of positions every time there is a minute movement in the market, you can count on having troubles.
Most gamblers lose money. If someone treats investing as if it is gambling, they are likely to lose money. Investing is not a sophisticated lottery mechanism.
When attempting to get-rich-quick, one will likely get-poor-quick. Discipline, research, and hard work are required to be successful in long-term investing. Approaching investing as a career instead of a casino positions people for success.
Investing is not limited to stocks, options, mutual funds, and forex trading. There are hundreds of ways to Invest money. In every method, these fundamental principles remain the same. The timeless principles of investing have lead many investors to success throughout history and will continue to prove themselves effective to those who use them today.