Wednesday, April 17, 2013

6 Words of Advice on Investing

Over the course of my reading and analysis of different financial techniques, I've found 6 easy pieces of advice that will convey the heart of investment wisdom.  They are as follows:

On Earnings: Never depend on a single income source.  Make investments to create a second source.

This is the concept of diversifying.  You increase your potential returns while also reducing your overall risk.

On Spending: If you buy things you do not need, soon you will have to sell things you do need.

Keep a budget, and stick to it.  Do not go over your means.  This is the fundamental step towards wealth accumulation.

On Savings: Do not save what is left after spending, but spend what is left after saving.

In other words, pay yourself before you pay the bills.  If you make a habit of saving first, your expenses will fall in line.

On Taking Risk: Never test the depth of a river with both feet.

This concept has you understanding how much risk is involved with an investment.  Don't go all in, and if you are investing in new territory, consider testing the waters before committing.

On Investment: Do not put all your eggs in one basket.

Once again, this is all about diversifying your investment across asset classes and also within asset classes.

On Expectations: Honesty is a very expensive gift.  Do not expect it from cheap people.

One could interpret this along the lines of you pay for what you get. 

What bits of advice could you provide a future investor?  Often times when you think about it in terms of you teaching someone, you'll better understand your own deficiencies.

Wonderful Moment of the Day:  I'll leave you with this bit of wisdom "At the end of the game, the King and Pawn are placed in the same box".

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