- March 16, 2020
- |Legal Moneylender
- 0
Sir Benjamin Franklin had rightly quoted, “An investment in knowledge pays the best interest.” Always invest your time first to learn about what you are investing in and then go ahead and invest the money. Having prior information about where you are investing plays a significant role in understanding the risk and chances of profit or loss that it involves. Whether it is the stock market, mutual funds, real estate, or gold, you need to first plan a financial strategy. Along with your research and chalking out your plan of action, you will also have to spend time assessing financial strategy from the top investors in the world. Doing this will give you a clear picture about what the investment gurus have to say about a particular type of investment.
“Do not put all the eggs in one basket”- Warren Buffett
This quote by Warren Buffett is a strategy of many top investment gurus of the world. In a general sense, it provides a little guidance on the practical implications that role diversification plays in a portfolio. By the term diversification, top investment gurus mean that you must invest in different asset classes such as real estates, bonds, and mutual funds to name a few. Diversifying investments does not really provide any guarantee against losses, but it certainly minimizes the risk involved. Investing your money in different asset classes helps you navigate the risk of market volatility and plays a vital role in achieving your long time financial goals. Also, effective diversification across asset classes aids the allocation of investments across different countries that help you to insulate your portfolio from local market crises.
“Never invest in any idea you can’t illustrate with a crayon.”- Peter Lynch
Peter Lynch is among the top investors of the world. He suggests that you must never invest in an idea you don’t fully understand. Invest in an idea or buy a share of a business that you thoroughly understand to be aware of the risks, future aspects and growth probabilities it involves. Every investment you make has a long-term goal attached to it. If you can’t understand the idea or business, you cannot foresee what that fruits the investment will bear in the future. You will also not know whether that investment can help you reach your long-term financial goals. Having little or no knowledge about an idea or business may not help you achieve your goals any may instead result in the loss of money that you have invested.
“In investing, what is comfortable is rarely profitable.”- Robert Arnott
Renowned investor Robert Arnott believes that investments made in your comfort zone have fewer chances of profits. To earn profits, you have to step out of your comfort zone and take risks to understand the significance of gains. Start with stepping out of your comfort in small doses and take calculated risks. Top investors of the world recommended taking risks to earn profits. This practice will help you understand what works for the market and what doesn’t. Along with providing little understanding about the market, taking risks will also help you know what works well for you and what doesn’t. The best investment strategy is the one that works for you and to realize this, you have to perform self-analysis along with market analysis.
“How many people do you know who have become wealthy by investing in savings account? I rest my case.” – Robert G Allen
If you think a savings account will help you earn profits better than the investments in various asset classes, think again. Robert G Allen, one of the top investors of the world, believes you cannot become wealthy by investing in savings accounts. Investing is savings accounts a reliable option for small emergency funds but not for creating wealth. Though savings accounts involve low risks, they bear minimal gain, given the meager interest rates. For instance, if you compare savings accounts with liquid funds such as equity stocks or mutual funds, you will realize that savings accounts are not trades and are least affected by market fluctuations or interest rates. On the other hand, liquid funds are most affected by market fluctuations; but these can be partially offset if you invest in instruments with a high credit rating from top rated companies.
“The four most dangerous words in investing are: this time it is different.” – Sir John Templeton
This quote by Sir John Templeton is a financial strategy for investment for many thriving investors. It means before you make any investment in any asset class you must always follow market trends and analyze the history before you go ahead and invest. Analyzing the performance of a particular asset class over the past five years gives you a clear idea of what can you expect in return. You must never speculate that it will be “different this time.” Market trends follow a specific pattern. If you analyze thoroughly, you will be able to predict whether the market is about to fall or rise. This practice will help you avoid the mistakes done in the past by many investors and help you make an informed decision about your investments.
“Smart investing doesn’t consist of buying good assets but of buying assets well. This is a very, very important distinction that very, very few people understand.” – Howard Marks
Howards Marks, one of the top investors of the world, suggests to investors that smart investing is not just buying good assets. You must also understand their performance in the market. This understanding is what differentiates a good investor from an average one. Along with understanding the worth of a particular asset class, you must also consider the market scenario when you are investing.
In the end, making financial strategies for investments is all about understanding fluctuations of the market, proper research about the instruments and asset classes you are investing in and wise words by top investment gurus of the world.
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