You have a few dollars in your pocket and are looking to invest it in something that will make you more money. Where do you start? For most people, they go straight to their bank or turn to the financial markets, but they may not be doing themselves any favors by trusting experts who have no idea how their advice will affect their bottom line over time. Instead, they should consider these seven secrets that the experts won’t tell you about investing and money.
1) Invest in Yourself
Investing in your education is always a good idea. If you feel like you don’t have enough time or money, then consider how much your future self will appreciate it. Taking a few online courses might help advance your career and increase your financial stability. The more knowledgeable you are, the better equipped you’ll be to achieve wealth.
2) Location, Location, Location
Location, location, location is one of your top priorities when deciding where to invest. Investing too close to home can cause you to fall victim to local market conditions.
For example, investing in a bank headquartered in your own city may seem like a smart move but it can cause you to lose money if there are corporate problems. When that happens, so does your investment.
3) Think Beyond Diversification
While it’s true that having a diverse investment portfolio can be a smart way to protect yourself against financial risk, research has shown that there is more hidden risk in diversified portfolios than investors are aware of. The reason? As you spread your investments across multiple stocks and/or industries, you may actually be putting too much of your money into companies whose fortunes are highly correlated with one another. While it might seem like you’re reducing risk, in reality you could be increasing it.
4) Do Your Own Research
Read up on what others are saying about a company, product or market trend, but don’t rely solely on their conclusions. Ultimately, you have to do your own research, form your own thoughts and take responsibility for your own investments. If you really want something in life, you have to work hard for it—you can’t just wait around for someone else to give it to you.
5) Don’t Forget About Risk Management
While it is true that investing can make you rich quickly, it’s also important to remember that there is a chance of losing your money too. Don’t forget about risk management when making an investment decision. If you do decide to take a gamble on a stock or bond, leave an exit strategy in place just in case things don’t go as planned.
6) Know When to Sell
How do you know when to sell your stocks? Most investors think they know, but they don’t. Many businesses use a trailing stop as a rule of thumb: When your investment has increased by 10 percent, place a trailing stop loss on it.
That way, when it increases by another 10 percent, you can sell and enjoy your profits. But setting an arbitrary target like that can lead you astray—and also get you really fired if you work in investment management!
7) Ask for Help
A successful investor doesn’t necessarily have an innate sense of when and where to invest, but she certainly has a great deal of experience. Don’t hesitate to seek out wisdom from experienced investors by asking them questions and getting their advice. Many will be eager to talk, especially if you’re starting with small investments that won’t bring them any direct financial benefit.