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7 Golden rules to invest smartly

7 Golden Rules to Invest Smartly

“Invest smartly to get maximum returns” should be the motto of person taking investment decisions. Every Individual wishes to invest their money in some profitable venture. To fulfill this desire, he is required to do detailed research & take the decision after considering the pros & cons of every investment. A person can design an investment strategy in which a portfolio of investment can be created which will compensate the loss from one investment with the profit from other investment.

There are some golden rules that must be followed by every individual while making investment decisions.

  1. Gather full Knowledge

The first rule is gather full details of the security or asset in which individual is going to invest. The knowledge must be gathered from authentic source so that any wrong decision can be avoided. The investor should use his own judgement while making decision rather than blindly trusting on the advice of expert.

  1. Do not take influenced decision

The investment decision should not be influenced by anyone. There is general mentality among the individuals to take investment decisions after getting influenced by their friends, colleagues, etc. The person can collect information from their friends but authenticity of that information must be checked.

  1. Invest systematically

A person should follow disciplined investment approach & should invest patiently after considering all aspects of the investment. A portfolio can be created containing all types of investments; risky as well as non-risky. This will keep the investor in safe position. He should also monitor his portfolio regularly so that necessary changes can be made as per current circumstances.

  1. Avoid emotions & sentiments

Do not take investment decisions emotionally & attach any sentiments with the investments. The fear & greed are the emotions which can persuade the investor to make a wrong decision. The investments should not be purchased just because the persons have sentiments attached to it; like his friend is buying it so he also wants to buy for the sake of his friend’s happiness.

  1. Make real Assumptions

The assumptions made regarding investments must be real. The person should not dream of becoming a millionaire overnight. Moreover the financial advisor chosen for guidance must be right. Investment decision may get fail due to wrong choice of financial advisor.

  1. Use surplus funds for risky investments

If a person is willing to take risk in his investment, then it would be better if he invest surplus funds which are affordable to lose. Moreover the customer should not invest larger amounts in risky investments in the greed of higher returns. A sharper correction may lead to more amount of bleeding.

  1. Have Patience

Do not rush towards selling the securities if market drops. Consult an expert and act accordingly. The person should act patiently in such situations rather than getting panic. The investor should avoid checking the price of securities which are already sold by him. The grass in other’s garden always looks greener.

Even if world is changing day by day, these rules if followed rightly will result into effective decisions & investor can earn higher returns keeping a limit on risks.

About Prateek Agarwal

I am Chartered Accountant by profession, practicing in Jaipur. I have interest in accounting and taxation field.

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