There is no one route to becoming a successful investor. In fact most investors will tell you different stories containing contrasting investment strategies, multiple inspiration and different risk appetites. It makes you wonder why
Start Investing Early
Sometimes I wish I had started investing as early I was 18. I knew about stocks at the time but just thought it was for those who had money. If at the age of 25 I had invested N8,000 every month at an interest rate of 10% without withdrawals by the time I get to age 65 I will be worth N50million. In fact if you save N5million today at an interest rate of 10% per annum without withdrawals you will be worth about N226million in 40 years. Such is the effect time and compounding interest have on investing. Warren is said to have made his billions when he turned 60.
Diversify your portfolio
Portfolio diversification is a model a lot of investors use in building their world. This simply means avoiding putting all your eggs in one basket. You should invest In a portfolio of investments including bonds, treasury bills, stocks and other Fixed Income securities. That way you create a balance and a hedge against risk.
Seek A Cash Cow
I have observed one of the most important factors that determine wealth creation and sustenance is having a steady source of cash flow. It is no coincidence many successful investors utilize investment vehicles such as Insurance Companies, Mutual Funds, Pension Funds to create wealth. The good news is that you do not need to start with such a large vehicle. A constant source of income such as your salary or rental income can be your cash cow.
Stick to a principle
Its hard to remain focused as an investor, however that is one of the key pillars of a successful investor. Whether you decide to be a growth investor or a value investor or a hybrid of both just stick to that and remain consistent. I particularly like being a value investor because I hate to speculate and will rather invest after analyzing fundamentals of the investment.
Choose the right bird(s)
Birds of the same feather they say flocks together. This applies strongly in investing and it is important you select the right partners that can help you invest your investment goal. If you are starting out as a young investor, it is advisable that you surround yourself with friends that share similar interest with you. This helps improve your investing knowledge and broadens your mindset
Make Information Your number one asset
Information is one of the most important tools you need to be a successful investor. With good information decision making becomes easier. You should try as much a possible to research, read and obtain every available information you can possibly lay your hands on before making that tough decision.
Don’t be afraid to accept failure
People say when you fail you should try, try and try again but that doesn’t apply at all scenarios. Investing off course is one of such. When you make a mistake that leads you to a bad investment decision do not be afraid to accept your faith and move on. During the stock market crash of 2009 most people lost money when they actually knew the market was tanking. They held on thinking things will turn out better when they should have sold off and count their losses.
Save Cost and live modest
You can’t be a successful investor and be running up cost without any form of control. No matter how much you make containing cost is key to a successful investment life. It takes a lot be conservative but it is worth all the efforts
Successful businessmen undertake thorough feasibility studies before taking business decisions. They do this to avoid failure due that could result from lack of basic understanding of the business they are to into. Investors should also approach the same model. If you have decided to invest in stocks then you must analyses the financial statements of the company, its trends as well as any information you can get regarding the stock.
Always Seek A Bargain
Warren Buffet is well known for buying quality stocks at a fair price. He goes in when others are afraid to go because he has analyzed the company very well and identified possible entry points for acquisition of shares. By seeking a bargain your potential upside is nearly assured as the market will eventually see what you have seen ages go and reward you with capital appreciation.
This article was originally published by Nairametrics on January 17, 2014