The Ten Commandments you have heard since childhood are laws used as standards that deal with man’s relationship to God and man’s relationship to his fellow human beings. These act like a manual for people on how to live a better life. Hence, these are like guidelines which help people to keep themselves out of trouble.
This article will teach you the counterpart of the Ten Commandments compressed into Five Commandments, to guide you in the world of investing and to keep your money in safe hands.
Is investing hard?
For the less knowledgeable, yes, investment is a hard concept and field to grasp; but for those who continue to enrich their knowledge, investing will come easy as it seems. Knowing the right principles and being able to adhere to these religiously can lead you to the path of investment success.
The Five Commandments of Investing
- Thou shalt be clear with your goals and avoid gambling.
What separates investors from gamblers is that investors follow a mathematical formula and concrete strategies to be able to profit from their move. Gamblers are not fond of such. They bet their money on unknown and uncertain outcomes.
Do not just invest for the thrill or fun, rather invest for profit. In order to do this, having the discipline is essential to reach financial security and consistent profits. Growing wealth has a science behind it. As a perfect analogy for this one, you should have a particular destination in mind so you would not be lost when you are already at the sea.
- Thou shalt ensure that thy financial house is in regulation.
One of the top responsibilities of an investor is to keep his or her personal finances in order first before jumping in the investing activity. Investing when you have debts scattered all around such as drowning in credit card bills and overdue fees can get you into serious problems sooner or later. Take care of your debts first before taking the plunge in the investing world.
- Thou shalt need to exercise due diligence.
Exercising due diligence in investing means that you invest within the scope of your understanding. If you do not understand something, it is not advisable to take the risk and invest. When exercising due diligence, it also means that you avoid rushing into making an investment decision. You need to study all positions first before putting in your money.
You need to increase your understanding to be able to come up to an informed decision. Exercising due diligence also means that you know what risk management strategies you need to apply to protect your capital from permanent loss.
- Thou shalt avoid jumping on the bandwagon.
This can be considered as having herd mentality (a well-known descriptor of human behavior since people learned to socialize) or the way people are being influenced by their peers to adopt some behaviors. This one applies greatly to the stock market. There is a difference between passive investing and passive investor. When you are a passive investor, you tend to digest all information presented to you and failing to thinking about it critically.
In the field of investing, you have to see things on your own in order to realize the true value of a stock.
- Thou shalt continue to invest in thyself.
As your portfolio and money grows, so your financial intelligence must increase as well. The level of your investment skills and knowledge reflects your investment results. If you want to improve your profits, you have to improve your financial intelligence.
Moreover, the best investment you can have is YOURSELF. As the good old saying goes, nobody can take away your learning and it can double, triple or even multiply your dividends a number of times for the rest of your life.
The above-mentioned guidelines can greatly help you with your investing career. Keep yourselves out of difficulties by observing these proven guiding principles.
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