Explain Investing And Finance

Explain Investing and Finance, Follow 5 Simple Rules For Both Investing and Finance

Topics on Tap Inside Explain Investing and Finance:

  1. Investing and Finance Rule Number 1
  2. Finance and Investing Rule Number 2
  3. Investing and Finance Rule Number 3
  4. Finance and Investing Rule Number 4
  5. Investing and Finance Rule Number 5

Explain Investing And Finance

The two words investing and finance may send some people into a tail spin. But, for a relentless and determined mind, investing and finance can be mastered with relative ease. I firmly believe if you follow these 5 rules, or “general principles” if you will, you can become an instant expert.

Let me toss my experience into the ring so you know where I am coming from. I have actively practiced as a stock broker, real estate broker and mortgage banker. And, I also had an active seminar program in which I taught investing and finance.

I only tell you about my experience to let you know learning these fields can be done if it’s a genuine desire to learn. Never will I share my experience just for bragging purpose. I mentioned 5 general principles because in my opinion these principles should be applied to all investing and finance arenas. 

In order to make them work for you, all you need to do is add discipline to the mix. And that’s the discipline to put them in place and the discipline to follow them by exercising them at the correct times.

Subsequently, if you ask me, the first rule is blatantly obvious. So let’s get right into the thick of it.

Investing and Finance Rule Number 1

Pick a Strategy and Follow It

No one strategy will always be inherently better than any other. The reason no one strategy will always be better is because of the changing market dynamics. There are many ways to be successful in your investment arena. Different people will obviously use different methods to pick stocks.

For example, and all of these people will believe their method will successfully fulfill their investing goals.

Pick any other investing media and the same will hold true. Real estate, collectibles, automobiles, whatever, all require you to pick a strategy. Generally speaking, once you find your style, you probably want to stick with it for awhile. 

The second rule only sounds complicated. It actually becomes easier to do as you gain more confidence and experience in your investing method and style. And, the sooner you can master it, the sooner you will always have a profitable portfolio.

Finance and Investing Rule Number 2

You Should Always Sell the Losers and Let Winners Ride Out Their Course

And now it’s time for a quick explanation. However, I’m willing to bet you caught on to this one right away. Even though it comes across self explanatory I’ll give it a quick run down.

You’re going to sell the losers to preserve capital. You don’t want the asset to depreciate to zero. On the other side of the coin, you let the winners ride to as high a price as you believe it will go. Should you sell before it reaches the top NEVER, and I mean NEVER, bemoan the few dollars you let get away.
The road named the “Guaranteed Profit” road is paved by selling appreciated investments. Appreciated means they are worth more than you paid.

Which makes it obvious for once some appreciation isn’t a setup!

This just might be a real good thing after all!Your investment choice really doesn’t make any difference. For example, they could be stocks, homes, baseball cards or even collectibles. All of which have a value that goes up and down. Every investment has an up and down cycle. Your money is made when you sell high and buy low. And I’m willing to bet that’s another one you’ve heard before. 

Good thing I didn’t put it on this list, ey?

Investing and Finance Rule Number 3

Never, Never Ever Chase a Hot Tip

Number 3 is what I obviously decided to call the “hot tip” rule. The rule says to never, never ever chase a hot tip. Hot tips are another name for hot air in my personal opinion. Which in all fairness does come from a fair number of years experience. I believe a person should have more respect for their money. 

Another name for hot tip is insider secret. When stripped to the bone, both are shadows. Nobody ever caught a shadow.

Like other areas of your life, you have reasons, objectives and goals. Investing is no different, and should be treated no differently. It is important you know the reasons for doing so. As much as you possibly can, do your own research and analysis. This way you will feel more comfortable before you even consider making the investment. 

You probably have heard someone say, “Don’t sweat the small stuff.”  And, as it turns out, not only were they right, it’s also my next rule.

Finance and Investing Rule Number 4

Don’t Sweat The Small Stuff

When it comes to investing or your finance, don’t sweat the small stuff. And when I say don’t I mean Never. Stick to Rule Number 4 like glue. It will never do you wrong. And, just so you know, by “small stuff’ I mean regular and expected types of activity.

Stuff like; the ups and downs every market experiences from time to time, the short term side way swings or even a large block of stock hitting the market, etc. 

Even government treasuries have their ups and downs. In other words, don’t step over dollars to pick up dimes. You’ll be at least .90 cents poorer every time and it’ll be lucky if that’s all you lose replacing dollars with dimes. The next rule, rule number 5 is a little trickier than the first our. But just hang in there, I’ll make some sense out of this one. And if you’re real lucky after I make sense out of it, you’ll turn it into more than cents. 

Rule Number 5 

Focus on The Future and Adopt a Long-Term Perspective

Rule 5 could almost be coupled with rule number 4. This rule says to keep your focus on the future and adopt a long-term perspective. If you keep in mind that investing is really about trying to make informed decisions based on things that have yet to happen, you will maintain not only a sharp focus but a properly framed perspective.

Investing and finance have tendency to use past data as an indication of things to come. This isn’t always what happens but if you remember that what happens in the future is what matters most.

Successful investors base their decisions on future potential rather than on what has already happened in the past. The past serves merely as a guide post of the possibilities of the future, if these possibilities materialize.

I initially mentioned 5 general principles or rules as I like to call them. But after zipping right through the first 5 rules I’m feeling a little generous. I’m feeling like an extra rule is in order for you fine readers!

However, it’s not an actual rule per se, It’s more of what I like to call a “general principle”. And as a quick side note, Number 6 is pretty darn easy to say, but pretty darn hard to do. At least I always see the ladies and gentlemen new to investing have the hardest time with it. I have a theory why that is, but I’ll bore you with that another day. 

So Get Ready, Set, and Away We Go! 

Here comes the next rule which we’ll know as “General Principle 6”, and since I like to truncate things GP, 6!!

General Principle 6

A Person Should Always Keep an Open-Mind and a Short Memory

At least for the actual success of any given call, put or trade. Whether the last trade was a winner or a loser it doesn’t necessarily tell you anything about the next one. 

Remember, all markets, like I said above, have ups and downs. All markets have cycles. Keep an open mind and you will be able to maintain your focus and perspective.

Apply the 6 principles and you should be successful at avoiding becoming narrow minded and focused solely in one arena. There is potential in every market and every cycle. Maximize profits, minimize losses and investing and finance become extremely easy.

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