Investing is the best way to make money because it takes the least amount of effort. Yes, you do have to choose where to put your money, but after that it keeps paying with just a bit of maintenance. If you want to be a smart investor, take a look at these four tips to keep you on the right track.
Don’t Live a Lavish Lifestyle
Warren Buffet lives in a modest house and he hasn’t been known to have a lavish wardrobe. As an investor, you should try to imitate this. Some investors make the mistake of thinking they can buy a huge house, drive a new car every couple of years, and just spend money like crazy. The problem with this is that it uses up all the hard work you put into creating your nest egg.
Money and possessions can offer you some happiness in life, but you can’t buy everything. The richest people in the world don’t go out of their way to spend money — they do the opposite. It’s fun to splurge every once in a while, but don’t make it a lifestyle because that will kill your investments faster than anything.
Don’t Manage Your Own Portfolio
If your portfolio is over six figures, you shouldn’t manage it yourself. However, even people with smaller portfolios benefit from the help of a savvy investment firm. Just be careful not to get ripped off. Some investment firms take too much of your money if you don’t carefully read their terms. You can avoid this by choosing someone with a lot of experience and a proven track record of success. For instance, the Principal Pete Briger used to be a partner for Goldman Sachs before joining Fortress. Look for someone like him.
Don’t Put All Your Money in One Place
Even if you get the help of an investment firm, you still may want to have some say in where your money goes. However, don’t make the mistake of putting it all in the same place, even if it seems pretty safe to you. You never know when the market is going to turn and you could lose that money. Remember how many people lost money in the ENRON scandal? You don’t want that to happen to you.
Don’t Take Huge Investment Risks
It’s true that the riskiest investments have the best payouts, but you need to have some balance in your investment portfolio or you could lose it all at once. Many people make the mistake of taking large chunks of money and putting it in an investment they heard would pay off. The problem is that there are too many factors to ever know an investment is a sure win. You need to use your common sense and only invest a small part of your investment budget. Diversification is the key to a strong investment portfolio. You may want to consult with a professional investment team or a team like Selby Associates if you are thinking of investing with your company
Following these tips will help prevent you from losing too much money. Do you have any other advice for investors? Leave a comment below.
Image via Flickr by Jeff McNeill