Learn to invest money

learn to invest money

understand your goals

Before embarking on any investment strategy it is absolutely crucial to fully understand your goals. Whether you just want to protect your savings from inflation over a ten year period or you want to attempt to double your money in 24 months you will need to fully understand what you are trying to achieve in order to have a chance of meeting your targets.



what resources do you have?

Next you'll need to decide what resources you have to invest. The three main assets you'll likely have are time, money and expertise. Unfortunately none of us are blessed with huge amounts of all three so you'll need to adjust your investment strategies to accommodate your available resources. For example if you want to invest in the stock market but have no great investment knowledge or the time available to learn dedicate to resource and learn the required skills you should opt to invest in a fully managed fund or fully managed broker service where you effectively pay an expert to manage your investments for you

set your investment goals

Every successful investor (even those that focus on very short term trades such as day traders) has a long term investment plan or strategy. Set yourself a target annual return (say for example 12%). If you have a firm target you'll be more motivated to achieve your goal. Monitor your portfolio on a regular basis so that you know if you are on target to meet your goals. By assessing your performance against these targets, you will see if you need to adjust your strategy in order to acheive them.

be a consistent investor

In order to suceed as an investor you need to make investing a habit. You should try and be consistent at all times. THis means making regular contributions to your investment fund. Whether you are just putting $20 per month into a savings deposit account or are investing regularly into an investment trust make sure you do it regularly. In addition to making additions to your investment fund regularly you should also aim for a consistent approach to assessing potential investments. Investment selection, be it smart stock investing or commodities trading, is all bout consistency. If you do not use a consistent approach when asessing potential investments you have a much lower chance of picking the best investment. Try to develop your own strategy and methodology.

control your risks

Risk management is a concept that many investors ignore - often with disasterous results. There are an almost infinite number of risks you can come up with that will need managing. The risks will change depending on each individual investment. Below is a list of things you should consider:

• Downside risk
- Can you limit your pootential losses by setting stop loss limits with your stoick broker?
• Upside risk
- Remember you haven't made any money until you sell an investment. Can you set profit taking limits?
• Counterparty risk
- Is the party that you've invested your money in reliable and not likely to disappear or go bust?
• Exit risk
- Can you easily sell your investment or retrieve your invested funds at short notice?
• Correlation risk
- Is the performance of your investment linked to other investments in your portfolio?
• Operational risk
- Do you fully understand how the investment product works and all of it's features?