Investing


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"We go to school to learn to work hard for money. I write books and create products that teach people how to have money work hard for them."

The above quote is from financial teacher and world famous author Robert Kiyosaki.  You probably work hard for you money and so you should want your money to work hard for you.  You do that by learning how to invest.

All of us invest time, effort or money into different things at different times of our lives.  Investing simply means putting something in to get something of value out.  From a monetary point of view, to invest means to put money to use, by purchase or expenditure, in something offering potential profitable returns, as interest, income, or appreciation in value.

There are many things you can do to get a return on your money and most of these are covered in the markets section of the learning zone.  A question you are probably asking is "how can I become a successful investor?".  Let's first look at the ingredients of becoming a successful investor:

  1. Psychology - developing the right mindset
  2. Capital - you need to have the money to invest
  3. Knowledge - you need to understand trends, markets and investment vehicles
  4. Tools & Resources - for example a trading account and good sources of information
  5. Time

Let's look at each of the above in a little more detail.

Investing Psychology

There are two factors that drive investors: desire for gain and fear of loss.  In fact, these are the two key emotional drivers of all human behaviour.  From a psychological perspective, the key to successful investing is to learn how to control emotional urges that spring from desire and fear.

Arguably the world's most successful investor, Warren Buffett once remarked, "Success in investing doesn't correlate with I.Q. once you're above the level of 25. Once you have ordinary intelligence, what you need is the temperament to control the urges that get other people into trouble in investing."

Successful investing should be backed by a plan, a clear strategy and logic - not emotion.

Capital

Capital is any form of wealth employed or capable of being employed in the production of more wealth.  The liquidity of capital is how quickly an asset (e.g. property, company shares) can be converted to cash.  Cash is the most liquid asset and it can be used as a means of exchange to quickly purchase something.

The key to successful investing and wealth generation is to invest in the right things, in the right amount at the right time.  Investing in the right things comes down to knowledge.  Investing the right amount comes down to knowledge and capital.  Investing at the right times comes down to knowledge and liquidity of capital.  You might have wealth tied up in assets, but if you can't release the wealth for new investments, the investment opportunity may have passed by the time you get the cash.

So it's a big advantage of you have enough liquid capital to invest with when you need it!  Make sure that all your wealth isn't tied up in illiquid assets.

Knowledge

Successful investing requires knowledge of trends, markets and investment vehicles.  The four factors that influence how well and investment will perform are: the investment vehicle; market timing; market direction and; market strength.  Market direction and market strength are both influenced by supply and demand so are largely out of your control, so to become a successful investor, you must learn about choosing the right investment vehicles at the right time.

It's impossible for one person to become an expert in all areas of investing and most investors specialise in one area e.g. property, stocks and shares or a particular business or industry sector.  Although we recommend that you invest in more than one asset class, you will succeed faster by becoming knowledgeable in one area , rather than trying to spread yourself too thin.

When you're deciding which area you would like to concentrate most of your efforts on, think about what your current experience is and what you enjoy.  Following your heart and using your strengths is paramount to your long term success.  If you don't want to spend the time specialising in investing, then you will need to find yourself a good financial adviser who you can trust and who has proven results.

Tools & Resources

Albert Einstein once said "The secret to creativity is knowing how to hide your sources".  All successful people have great sources of information.  Investing is no different.  Top investors read the right books, listen to the right audios, subscribe to the right websites and surround themselves with the best people.

>>> Recommended books and audios on investing

As well as gaining knowledge, you need the right tools to help make the job of investing as productive and efficient as possible.  Can you think of what 'tools' you might need?  Here's some ideas:

What about people?  Here's some ideas:

Don't neglect the time and effort it requires to find the right sources of information and the right people to help you on your journey to success and financial freedom.  Use the links above to help and gradually build up the very best 'support team'.

Time

Anything worth having is worth working for and if your goal is financial freedom, it will take time.  Depending on your starting point and which route you take, we would say a minimum of 5 - 10 years.

Remember that the hardest part is making a start and generating momentum.  The learning curve is steepest when you begin.  Most of the mistakes you make and frustration you feel will be during the time when your learning curve is steep.  Acknowledge and accept this and you will be more equipped to deal with the inevitable temporary disappointments you will encounter as you move forward.  The main thing is to keep learning and maintain focus on your goals.

Conclusion

Successful investing is about moving capital to the right investment vehicles at the right time.  This requires the right mindset, enough liquid capital, knowledge, tools and resources and finally, time.

Decide what you want, set your goals, make a plan and then do what it takes.

Useful Links

>>> Learn how to develop a winning investors mindset
>>> Learn how you can increase your income
>>> Learn about different financing options
>>> Learn about markets
>>> Learn about how to build a successful business
>>> Find an expert to add to your team
>>> Find out more about online trading accounts
>>> Find a good financial adviser
>>> Recommended books and audios on investing

 

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