SECRETS TO SUCCESS

SIX TIPS FOR A SUCCESSFUL INVESTMENT

Investing can be hard if you don't know where to start.

10.01.2022
BY JACKSON KEEFE
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Successful investing is about making the best decisions that align with your long-term goals. Whether you are planning on buying a new car, home, or retirement, you will need a plan that will allow you to reach those goals.

Investing has been a proven method to achieve financial freedom. Warren Buffett bought his first stock when he was 11 years old. Now, Buffet's net worth is approximately US$109.5 billion. The point is, the sooner you start investing, the better it is. 

With that in mind, here are a few investing principles that can be useful.

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1. Understand your needs and investment profile
People are different. Some have short-term goals, while others have long-term goals. Understanding these goals will help you make informed decisions about your investments.

Even though it may seem like avoiding risk is a daunting task, managing it is a critical aspect of investing. It can help you achieve your goals and minimize possible losses. The bigger the risk, the reward should also be more significant. 

You will need to learn how to manage various risks and make informed decisions about investing. In managing risk, you need to balance what you can afford to lose with the gross annual income, investment goals, financing, approximate net worth, and how long the investment will take. 

2. Start early and utilize the compound return
Compounding is a strategy that allows you to take advantage of the increasing returns of money. If you put Rp 50,000 every month in an instrument that constantly yields a 7 percent annual return, after 25 years, you will have Rp 37,949,423.

In contrast, if you only save Rp 50,000 monthly for 25 years, you will end up with only Rp 1,250,000. 

3. Invest small but regularly
A regular investment plan is a better alternative to waiting for a large sum of money to invest in one market. It allows you to make small allocations to various types of investments.

Some bank services provide auto-debit from your balance to allocate it into an investment account. You can also start investing in mutual funds with lower prices. This method allows you to reduce expenses by buying more when prices are low. 

To illustrate, in January, Stock A cost Rp 1,000 per share. You put Rp 5,000 down to buy it, so you get five shares. Then, in February, its price sits at Rp 500 per share. You put another Rp 5,000 and get ten shares. In March, the price of share A might increase dramatically to Rp 10,000, multiplying your initial "small" investments. 

4. Diversify and monitor your portfolio
One strategy that can help minimize risk is by diversifying your investments. Having a mixture of different types of investments can help you minimize the effects of a market decline.

It is also essential to keep track of what's happening in your portfolio at least once a year. Doing so can help minimize volatility and provide you with a better understanding of the markets.

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5. Align your investment timeframe with your goal
Each investor has different goals for their investments. It may be long-term goals for some, and for others, it may be short-term goals.

For long-term goals, it's important to invest in stocks and bonds geared toward growth. For short-term goals, it's crucial to invest in conservative and accessible such as P2P lending or a Certificate of Deposit.

6. Find a mentor
Ask someone who is successful and has values and beliefs that align with yours to mentor you. This person will help you improve your financial management skills and navigate your path to a successful investment.