Markets fluctuate as it witness up and down. It doesn’t matter what asset we’re investing in: bonds, stocks, real estate, gold, currency and fine art or exotic vehicles. There are periods when the market is going to boom and times when it’ll go bust. In a market that is booming, it’s simple to invest and earn money, even if you are not an expert in investment or asset strategies. But, it’s when markets drop or even shake up , that they can be a nightmare for investors who aren’t well-informed and well-organized. However, the reality is that there are risks to both market cycles, both up and down.
Because of this, dedicated investors who have been in the game for the long haul don’t just fly around by at the whim of their own pants. They don’t just follow the latest trends, or rush onto the latest trend that they hear the “gurus” are touting each week.
Instead, those who succeed in the long run have a set of rules and principles that they follow when they make their investment decisions. They establish and adhere to the best investing practices. This article does not intend to dictate what your investment guidelines should be. It’s a separate article, or perhaps an entire series of articles. This is more to highlight that it’s important to put in place investment policies in place. Principles are the set of guidelines or standards that guide and guide our choices and actions. They are derived from many sources, including our personal values, our own personal knowledge and experiences, as well as the experience and knowledge of others. There are certain rules that we adhere to in different aspects of our lives, regardless of whether we’ve clarified them as such or not.
As investors, it’s essential to establish clear guidelines which guide our choices about the way, what and why we invest in the way we do. Principle that act as the primary criteria to gauge our thinking and make decisions regarding the investment process, in bad and good times.
One example is that among Warren Buffett’s infamous guidelines is to never invest in a company that you don’t know about. If you’re an expert in investing or not, it is an excellent idea. How do you create an efficient strategy to make money from a business when you’re not aware of the basic principles of how a company operates?
One example of a sensible Real Estate Investing premise is that, when you take loans, make sure you secure the loan over a long period of time with an LTV of less than 80. This means, you should get an investment loan that has a longer time frame than your anticipated exit date and with a Loan to Value ratio that will allow you to at a minimum break even in the event that the value of your property or the market as a whole would decline by 20 percent. In the absence of this, it was a significant factor which led to the collapse of a lot of real property investors during this financial recession of 2008.
Investors need to have clear rules that govern all aspects of the investing process. These are the rules to buy into an investment and managing the investment and then exiting the investment. I’ve seen many articles written about investment rules for when and how to purchase or join an investment. This is not surprising, considering that much of the investment’s success can be traced back to the circumstances under the circumstances it’s purchased. The old adage “you earn money when you purchase …” is full of evidence-based merit. But if the past is a lesson, it’s that we should be guided by clear rules to manage our investments over the time of holding and, crucially, the time and method we end our investment. Even with a smart purchase of an investment, bad management and a quick departure can totally negate profits that should have been made.
The archives of investing are full of tales of investors who have been unable to recover their losses due to having become agitated during a downturn, and then sold their shares at the lows of the market. In these circumstances, it is essential for us as investors to have good guidelines that guide us in what we buy, as well as how we manage and the way we leave. In the end, even though the principles we apply to investing should remain constant and consistent, it is equally important to be aware that we should constantly be seeking out lessons from achievements as well as setbacks and mistakes and the experiences of others.
While doing this, it is important to review Vairt Investment Plans and Principles as we grow and learn and be aware of when adjustments need to be made to help guide our investment performance.