Strategies for Successful Investment
In human history, there are many miraculous successes in various fields like music, sports and others. It is true that some lucky people really know a few shortcuts to success that could help you earn a lot in a short time. But only the true great persons share the fundamental principles they hold and the steps to obtain the same success in a certain field. What we should do is to learn from these people.
No matter golf players, public speakers or pianists, the best always master the basics. We are going to talk about the basic principles in investing properties, stocks, options, new enterprises or antiques. These core principles can make your investment strategies safe ones.
The fundamental principles are vital. If you are seasoned investor who has a lot of investment experiences, you should still revisit these rules. They would improve what you are doing. You can understand more thoroughly about the whole game and increase your chance of winning. If you are a newbie, in no way should you skip studying the principles in depth. After establishing a strong foundation and clear concepts of the right way to invest, you can adapt it to your own preference and style.
The number one principle you should learn is how to protect your assets. If you want to protect your assets in your investment items, you must understand the substance of risk and the relationship between risk and return. Also, when the market is moving to an adverse direction, you should have a reliable retreat strategy.
Before you enter into any new investment transactions, you should have your safety fallback. You should never commit yourself into a new investment before you know where to escape. The point we think it is the largest amount of loss we are willing to take and we should stop the game and leave the table is called the stop loss point. This is to prevent losing more than you can handle in case of storm.
When you spot a sound investment opportunity, before rushing into it you must decide your cut loss point. We have the privilege to work with many brilliant investors. What we observed is that, every successful investor who wins in the long term decides a safe cut loss point before they enter into any investment transactions. When you talk about profit with them, they would immediately check out the risk first. A good reference is the return to risk ratio, if it is not good enough, the chance is not a chance no matter how large the potential return is.
An average investor we see every day in bank branches are not like that. They do the opposite. They are easily persuaded to believe in certain kind of make money opportunity. They missed the potential risk factor and have not even heard of the return to risk ratio.
Look at the advertisement about investment opportunities in your mail box. They always stress the attractive return but seldom mention what you can do to prevent loss in case of adverse situations. Hence, you must shift your paradigm from “the maximum profit” (return first) to “protect my money at any cost”. In other words, to keep on winning in the long term.
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