Smart Investment Tips

I have spent several hours for the last few weeks to compile some smart investment tips from some books, articles, blogs and my own experiences. It may not be a complete set of investment tips or rules but I believe they are essential for your successful investing. To grow our wealth and be prepared for inflation, it is important to have a great investment plan. We must make sure our money work harder for us and one way to increase wealth is to invest. There are basic rules and tips that are generally accepted to lower your risk of losing money. I would like to emphasize that by following the investment tips outlined below, there is no guarantee that you will always get a positive return. The below recommendations are just for your references.

Smart Investment Tips

Smart Investment Tips

Net Worth Mentality

Net Worth Mentality instead of Paycheck mentality, people with paycheck mentality spend all their net incomes and nothing left at the end of the month for investment. People with net worth mentality focus on building net worth over a long term. The keyword here is Net Worth, it is simply how much a person is worth, minus the liability from the total assets. Even if you have a big monthly paycheck, your net worth will still be zero if you spend every cent of your net incomes. We are recommended to change our mindset from paycheck mentality to net worth mentality.

Start Early and Invest Regularly

Start early and invest regularly, saving is the key to wealth and it is the starting point of making an investment. Save money to invest. Due to the power of accumulating or compounding, starting early makes a huge difference. Money needs time to grow and it is always recommended to start as soon as possible. So, why wait? Start injecting your savings for investment.

Diversify Your Portfolio

Smart Investment Tips

Diversify your portfolio, the old saying, “don’t put all eggs in one basket”. One should try to find investments that move in the different directions (risk). That means to try to mix the stocks and bonds with different risk levels, spread your property investments in different locations, spread the business investment across different customers and use different affiliate programs, and an advertisement associated programs on website monetization.

Review Your Portfolio Regularly

Review your portfolio regularly, some asset classes perform better than the other at a certain time. For example, during a stock booms, equity funds normally perform better. When it happens, sell some equity investment fund and allocate the money in other asset classes that are not performing as good as stocks. This is the fundamental rule of “Buy low, sell high“. That’s exactly what smart investors always do. By doing this, you simply rebalance control risk and it may reward you with higher returns.

Good Track Record Does Not Guarantee Positive Return

Good track record does not guarantee a positive return, “I never have the faintest idea what the stock market is going to do in the next six months, or the next year, or the next two. Warren Buffett”. Past record provides you a reference, but it does not guarantee positive gain. A logical alternative is to structure a long-term asset allocation plan and stay the course.

Do not Get Trapped by Announcement

Do not get trapped by an announcement, market analyst or stock experts publish critics and even forecast about the market even there is no big drama going on. Don’t forget they are paid to write something. Do not believe 100% what has been written and make your own research. Whenever there is a major news announced, we are probably too late to act on it. So believe your own research and don’t get the market sentiment affects decision making.

Forget about Shortcut

Smart Investment Tips

Forget about the shortcut, don’t fall into those traps that promise you to be rich in a week time. This is what we call it – gambling. Invest and gamble are two different things and don’t get mixed up. Most often the attempts to make a quick money lead to losing a lot.

Buy and Hold Strategy

Buy and hold strategy. Buy and hold investing only works for certain stocks. It might be true in real estate investment (in some countries), as long as you bought the right properties from the right developers at the right locations. Always use tip no. 4 (Review Your Portfolio Regularly) as an investment strategy.

Reward to Risk Ratio

Reward to Risk ratio at a minimum of 2:1, an active investor or trader uses this rule very often. Let me give you an example on how this mathematical expression works. Someone purchases 10 units of share at $10 and places a stop-loss order at $5. That also means that he or she believes that the price of a unit will reach $20 in the near future. The trader is willing to risk $5 per unit share to make an expected return of $10 per share. That simply means the trader has a 2:1 (reward to risk) ratio on that particular trade.

Do not Borrow Money to Invest

Do not borrow money to invest, it is a big no no. This does not differ from gambling. Refer to tip No.2 and avoid borrow money to invest. One should save money to invest.

Property Investment

Property investment, smart investors buy property with lowest down payment and use leverage power to own more properties and making sure that there is always a tenant to serve the loan installment. I have currently two properties that I have tenants serves the loan installments. One of the properties was valued at $ 220,000 5 years ago, and the value of the property is now valued at $340,000 in the market. That also means I have made approximately 55% gain in my property investment.

Learn from Mistakes

The mistake had to be small, but you learn from it. Some investment mistakes can be significant and change your life. We all learn from mistakes every day and one should start with a smaller investment. Learn from the small mistakes so that we know what to do when making a major investment decision.

Compound Your Return

Compound your return, do not spend your return from the investment. I have started investing in unit trust 8 years ago when I was still studying. I began with $150 per month and I have managed to increase my total gain and capital to $83,000 today. I simply applied tips n0.1, 2 3 and 4. Then injected the returns again into different assets when they were low in my unit trust portfolio.

Find opportunities to invest

Find opportunities to invest, although I have been doing some investment in unit trust and properties, it is always better to look for other opportunities to diversify my investment portfolio as one does not know what will happen to both “baskets” tomorrow. Read more and keep yourselves up-to-date with what is happening every now and then in the world. For instance, online business (e.g. affiliate marketing) is now the most popular way to earn extra money and that is why I “invest” my time to blog. Read my previous posts on online business.

Pay Off Your Debt Before You Invest

Pay off your debt before you invest. especially for those who are new, there is no guarantee that your investment will make a positive gain at the end of the day. So, clear off the “bad” debt before you make further investment. Read this post to identify which are bad and good debts

Be patient

Be patient, just like any other successes that you have seen, success is all about trying, patient and failure. Never give up easily and keep trying.

I hope the above Smart Investment Tips are useful for those who are or going to invest.

Regards,

Alex

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14 Responses

  1. Bill808 says:

    Good. Advise up to point. Don’t mess with the stock market unless you understand technical trading. Know, understand and have access to current indicators. Long term traders use different indicators than day traders but IMO it makers no sense to hold during a market crash.

    As a investment, your own busines makes the most sence. An Internet business is the best business model for most people for a lot of people. And yes I agree that multiple affiliates make sence. Start with one learn the business and then expand. WA is the best palace to start because the training is great and you can build a business by promoting WA.

    • Alex Y says:

      Dear Bill,

      Thanks for giving your opinion. I agree that internet business is a great business model, especially for people with minimum capital. It is not only a great model but also a great and easy start for all of us. Indeed, Wealth Affiliate is a great platform for people who wants to start online business and earn residual income. Thanks for the suggestion.

  2. mahmood adds says:

    Very well written
    I couldn’t agree more
    I wish I had these words few years back. It would have saved me lots of time.
    At the bright side I am doing as you mentioned. It’s always better to take advantage of time and don’t waste.
    Find a good investment and give it a go now before tomorrow.

    • Alex Y says:

      Great thanks. I am glad that you are doing some of what I have mentioned here in the post. Procrastination is a disease. Action now 🙂

      Regards,
      Alex

  3. Bruce says:

    Hello Alexy, You have given some great investment tips.This is a subject that should be taught in schools. Unfortunately most people go through life without knowledge of the fundamentals of investment. I tell people the secret to making money is simple.
    Work to earn an income
    Save some of your income regularly
    spend less than you earn
    Grow your savings .When the passive income generated by your savings supports your lifestyle you are financially free.

    • Alex Y says:

      Dear Bruce, thanks for dropping by.
      There are books at stores teaching how we should manage our finance and most people today don’t spend their money and time on books anymore.
      I hope this post reaches out and gives some insights to the readers online.
      Totally agree with your comments. Generate, Save and Spend Less. That is a great start for everyone 🙂

      Cheers,
      Alex

  4. Diondre says:

    Hey Alexy, these are some great tips for smart investing. I was aware of a few but learned a whole lot more in the process. I was contemplating borrowing money to invest but you pointed out a great reason why I shouldn’t cause it really is like gambling. This was a great pleasure to read and I look forward to seeing more posts like these. Keep up the good work.

    • Alex Y says:

      Dear Diondre,

      I am glad you are reading this post. Don’t borrow money to invest, it is a big NO NO. You could always start small and little. Let time grows your money, and compound your return.

      Thanks for dropping by and will keep you posted on my next article.

      Cheers,
      Alex

  5. Claudia says:

    Great tips! Thanks for taking the time to compile these for us! It does show that you put some work into it and did quite a bit of research. I appreciate!

  6. Gina Gonzalez says:

    Hi Alex, This is such a good and helpful article. Thank you for your time spent writing it. I like your 1st point about have a Net Worth Mentality. You are right on. Gina

  7. Sarah says:

    Wow Alex I can’t even imagine the amount of work this article has cost you! Well done and thank you for sharing it! It was very detailed and informative ; I didn’t know half the advice on how to invest your money O.O… What I did know and can confirm, is that diversity in your investments makes a really big difference!
    Anyway, you have a knack for making things sound easy and obvious and a really good vibe !!
    Best wishes!
    Sarah

    • Alex Y says:

      Thank you Sarah!

      I am glad that my post gives you some useful and informative tips on investment. I have spent some hours and even days to look through some information. At the same time, compiling them together with my investment experience. I hope this serves as a good and simple reference who don’t speak economic and finance like me. I have tried to put them in layman terms so that people could digest it.

      Thanks for dropping by, read my post and leave me some comments here!

      I wish you all the best too!

      Take care,
      Alex

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