Some people seem to think that investing is just a way to “get rich quick.”
And while there are those few success stories that make it seem possible, investing is like any other means of making money: It takes time, planning, and an ongoing effort to be successful.
So, if you’re going to be investing your money, here are 4 fundamental principles to focus on.
1. Know What You’re Good At
You might think that anyone who is investing has to be a financial expert. That’s just not true. While you do need a basic financial literacy to invest successfully, what really counts is recognizing the things that you’re good at and focusing your efforts in those areas.
For example, maybe you’re really knowledgeable about the tech world. Focus your investments on tech-based stocks. You’ll be more likely to recognize the trends in this area, because you’re tuned into what’s happening. Maybe you’re a guru at real estate spaces. Then consider making real estate investments instead of stock market investments. You could invest in rental properties or flip and resell houses.
Know what your talents are, and use them to guide you in making investments that are smart for you. And remember these words from investment expert Tai Lopez: “If you try to be good at everything, you will be good at nothing.”
2. Consider Micro Investments
You don’t need to invest in major stocks to make a major profit. While it may be tempting to listen to all that chatter about what stocks are “hot” right now, try to put that aside and look for small investments that you can be passionate about. Consider, as an example, Warren Buffet’s (the billionaire CEO of Berkshire Hathaway) investment in two small piece of real estate—a Nebraska farm and a retail property near NYU.
Buffet said of these investments: “I thought only of what the properties would produce and care not at all about their daily valuations. Games are won by players who focus on the playing field—not by those whose eyes are glued to the scoreboard.”
He didn’t focus on what the real estate market told him would be profitable when choosing what and where to buy. He knew that Nebraska would continue to need corn, and that students would continue to go to NYU, so he invested in what he believed would provide small, daily profits for him.
Buffet also argues that “listening to the macro or market predictions of others is a waste of time” because the stock market is irrational and unpredictable. So if you’re starting out with investing, start with micro investments that can provide you with small, consistent wins over time.
3. Never Stop Learning
Continuing education is the key to your success. Do everything you can to learn as much as you can, as often as you can. Take a course on investing in the stock market, even if you think you know what you’re doing. Talk to someone who’s been successful in the type of investment that you’ve chosen.
The more you learn, the more likely you are to be successful in your investments. Make it a goal to learn something new about your business or investment every day.
4. Understand There Are Risks
There is nobody on this planet who has made it big with every investment they’ve ever made. Whether you invest in something that is a huge failure, or you miss out on investing in something that becomes a huge success, don’t let it affect your long-term goals.
When you enter the world of investing, you need to do so with the knowledge that there are risks, and you will experience some losses. If you want guaranteed returns, you should stick to CDs and other steady investments. Entering the stock market can offer you significantly higher returns than options like CDs, but be aware that it’s because they come with a significantly higher risk.
If you follow these 7 tips for investing, you won’t be a millionaire overnight. But you will make smarter investments that work better for you and your goals, and you’ll quickly learn how to grow your portfolio over time.