Investments 101

You have some money saved, and you’d like to invest—what do you do? Countless volumes of information and entire TV shows are dedicated to this, instead, there a few basic guidelines to consider before making an investment.

1. Only invest what you can afford to lose: the average American household isn’t overly capitalized. Often, the money that is invested is money that is also earmarked for other necessities like food. This is a mistake. Investing is gambling so don’t gamble with must-have money like the mortgage payment. Be aware of the potential for investments to take a turn for the worse. You don’t want your investments to sap your money and leave you financially strapped  and risk facing foreclosure.  Ask yourself if the investment is worth skipping vacation for if it doesn’t pan out?
2. There is no substitute for research: Occasionally someone stumbles onto a Microsoft type company by accident. The rest of the time, good investments are made by thoroughly researching the prospect. Don’t rely on the words of others. Take them into consideration but do your own research and analysis. Learn about the company, product, or person before sinking hard earned money into it.
3. Patience is key: Investment is like working out at the gym—do the right things and the right things will begin to happen for you eventually. Investors should be very suspicious of any investment that little risk, huge reward and in a very short time. Investing requires smart money management.
4. Test the waters: start small. Don’t go all in with every dollar you have to start out with. Get a feel for your style and develop some sort of track record.
5. Stay diverse: look to other markets to research and learn about. Times change, technology changes, business changes. Don’t be left behind. Successful investment in the long term requires that the investor see the market shifts so he can be a trailblazer and not a “me too.”