One of the best investment tips for beginners is: Know thyself
In order words to be a smart investor, you need to be someone who invests money with little risk to capital.
This means as a beginner investor must know how to make smart choices that will lead to wealth creation.
You see the truth about investing is that you are as good as the choices you make with your money.
Therefore If you are ever going to profit from investing and become wealthy -you must know yourself
What does it take to know thyself?
The answer is easy. The first thing you’ll need to do is ask yourself key questions.
The answers to the questions will help you make smart investing choices.
why? Because to make smart decisions about your money you need to know:
• Your financial position
• Your financial goals
• And how much money you can afford to risk investing
Let’s look at the critical questions you need to answer so you can have a a road map to wealth…
Question # 1: What’s your financial position?
Imagine that for you are a rookie driver who wants to drive from New York City to Orlando for the first time .
Would you not plan your journey before you start the journey ? I guess your answer will be yes.
Just as you’ll plan, your journey before you start the trip from New York to Orlando… you’ll also need know your financial status before you start investingin the market.
Why? Because not knowing your financial status before you start investing…is like driving on the road in the fog without headlamps.
You need to know what are your assets, liabilities, and how much savings you have. Because they are the indicators of your financial health…and they’ll affect your investing plan.
The most important measure of your financial health is your net worth.
Your net worth is the difference between your total assets minus your total liabilities.
You see, when you know your net worth, then you will have clarity about your financial status…and where you want to be in future.
It is only then you can decide how much you want to be worth in the future.
This simple yet powerful question is what I urge all beginner investors to answer… before you start to invest money .
Question # 2. What are your financial goals?
Once you know your net worth what you need to do next is to make a choice about your future net worth.
You need to make a choice whether you want to maintain your net worth remain …or decide by how much you’ll want to increase your net worth.
In order, to move ahead in your investing, you need to set goals, so as to make the best use of your money. So, you can accomplish your dreams of becoming wealthy.
You can read more about my thoughts on goal setting in my previous post. In simple terms, a goal is a dream with a deadline.
If you have a dream to become wealthy investing. Setting goals will help you accomplish them.
The rules for success with goal setting are:
• Your goals must be specific
• Your goal must be Measurable. You must be able to track them
• Achievable… it must be a goal you can accomplish
• Realistic. Your goal must be realistic. For example, you should not set goals to be a millionaire in one year when you are in debt and unemployed
• Timely. You must set specific deadlines for each goal you have set
Question #3. What is your risk tolerance ?
You need to know how much risk you can take because the act of investing money is an emotional one for many beginner investors.
Why? Because when it comes to investing-most people think about the upside of investing. They never think about the prospect of losing all their money.
The truth is that a smart investor also thinks about the downside risk to investing money
Now if, you are starting out as a beginner investor… or even if you are a professional investor -you must always make sure you think through …and have a plan to curtail your losses in the event you made the wrong assumptions.
How do you reduce your risk when investing? The answer is easy. You need to have an entry and exit strategy before you invest your money.
This last statement is worth repeating until it sinks in your mind
For example… a smart investor will spend time researching an area of a city before investing in rental real estate
In the same manner, you should never put all your money on one stock. For every stock you invest, you should have an exit strategy in place.
The bottom line to being an intelligent investor is you need to know your limits, strengths and weakness .
That means you know your net worth… you know what you want to accomplish … you know how much risk you can take before you put money into any investment opportunity.
To your success
Akin Osho