What should I remember when I want to invest?

Investing appears to many people to be a rather complicated activity. However, it turns out that it does not have to be so, and investing can help us to achieve our dreams and life goals. What is more, it is based on principles, the observance of which ensures a lot of money and a peaceful sleep.

Successful investment is possible above all through careful preparation. Both an action plan and analysis and knowledge of risk management are needed. Patience and the investment idea itself are also necessary. The problem is, above all, that spectacular investments do not happen very often at all. There are many more small and stable companies that pay dividends regularly and thus work for our profits in the long term. It is therefore valuable to know how to choose investments that are not only profitable, but also consistent with our investment style. They are the ones that guarantee us that we will sleep peacefully. Searching for the golden mean will become easier if we learn the golden rules of investing.

First of all, take care of the plan.

Even before we start trading our money, we should be aware of what our investment goals are. It is therefore worth asking ourselves the question of why and why we are investing in the right way. This reflection will make it easier for us to determine what to expect, and the choice of a really attractive investment will no longer be a serious problem for us.

Second, invest in what you understand.

One of the most important principles of today's investors is that you should not invest in products that are not fully understood. Therefore, if we have not adopted the principle of leverage, we have to take into account that both Forex and Futures contracts will be investments with significant risk in our case. Therefore, if any issues are unclear to us, it is not worth risking, because there is no point in incurring losses that we are unable to explain to ourselves.

Thirdly, do not rely on a single investment.

It is difficult to overestimate the importance of diversification. If we invest all our money in one company, we will ask for trouble ourselves. Today, various investment portfolios are included in the price. It is worth betting not only on many companies, but also on various asset classes.

Fourthly, have respect for the market.

The market is growing fast, but you shouldn't be surprised that it also has spectacular declines. It is not worth arguing with, because market losses never occur without a reason.

Fifthly, the market has the ability to discount everything.

Stock exchange prices do not reflect the real value of the shares at all. It is rather a combination of this value and the expectations of analysts and investors. Thus, it may happen that the market reacts with a fall in good news and a rise in unfavourable news. Only the reaction of the market tells us about the expectations of investors.

Sixthly, it's not always worth following the crowd.

If we look at the problem in the short term, investing in companies together with the crowd can bring us considerable benefits. In the long run, however, it is more difficult to be optimistic. Very often it turns out that the majority is not right at all, and fashionable companies record spectacular decreases. Of course, this does not mean that it is always necessary to act in such a way as to be in opposition to the crowd, but it is much better to rely on a single investment authority, even if not all its moves seem understandable to us. The risk of tripping does not disappear, but it is much lower than would otherwise have been the case.

Eighth - avoid believing that the market will work differently this time

We could see how disastrous it was in 2008. Everyone was convinced that there was no way that the prices of real estate could start to fall sharply. It turned out, however, that this conviction had failed. Once again... Markets are changing, but they are still moving in trends, and as a result, we can expect a downturn after every hustle and bustle. The market cannot grow infinitely and its collapse is part of the market specificity.

Ninth - reinvest the dividend

Spending dividends on pleasure is an extremely pleasant experience, but it should be remembered that it has nothing to do with common sense when investing. This reinvestment of dividends offers the greatest potential and this must not be forgotten.

Tenth - value, not price

All these rules make it easier to invest and more profitable. However, the key to success always turns out to be thinking about how much a product is worth, regardless of how it is valued by the market.