When I think about investing, I often remember the famous saying by Warren Buffett, “Rule Number One: Never Lose Money. Rule Number Two: Never Forget Rule Number One.” Yes, it is, indeed. What a farsighted vision about money when it comes to maximizing returns!I may be wrong.When I predict that the secondary market will exhibit dramatic patterns for bullish or bearish trends, simply because the secondary market is difficult to to predict exactly. To be honest with you, when the market is down, we (investors) should either buy the stocks or simply quit paying attention to it. It’s true: the stock market is the only market where goods go on sale and everyone is too afraid to buy them. This is the reason why, as Buffett once said that, “Be fearful when others are greedy and greedy when others are fearful.”
Similarly, keeping your portfolio diversified is important for reducing risk. Having your portfolio in only one or two stocks is unsafe, no matter how well they’ve performed for you. The good news: diversification can be easy to achieve. If you want to diversify more, you can add a mutual fund or other choices such asbanking, hydropower, microfinance, finance, insurance, hotel and tourismso on and so forth. After all, diversification can help you better weather the stock market’s ups and downs.
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Apart from this, stock pundits routinely advise investors to avoid trying to time the market — that is, trying to buy or sell at the right time. Rather, they routinely reference the saying, “Time in the market is more important than timing the market.” The idea here is that you need to stay invested to get strong returns and avoid jumping in and out of the market time and again. This in and out of the market leads to an empty hand for the good returns. However, whatever you’re investing in, you need to understand how it works. If you’re buying a stock, you need to know why it makes sense to do so and when the stock is likely to profit. If you’re buying mutual fund, you want to understand its track record and costs, and among other things.
Above all, investing should never be viewed as a “get rich quick” scheme. To give your investments the best chance of providing the returns you expect, you should stay invested for at least five years, preferably much longer. Even so, you must be willing to accept the risk of receiving less than you put in. If your investment goals are short-term, such as two or three years, investing is not for you. Therefore, you should prioritize long-term investments over short-term ones.
And lastly, keep 5% of your assets in cash because anything can happen in the stock market, which means you may need to rebalance your portfolio from time to time to ensure you’re still on track to meet your financial goals at the end.
