5 things to keep in mind before you invest

5 things to keep in mind before you invest

1. Know the risk - Ensure that you are fully aware of the risks involved and invest in equity only that portion with which you can take some risk. Many investors fall for the lure of easy returns and develop a bias against equities only to miss out the next rally completely !

2. Have a plan - Have a financial plan ( it should have your needs, current situation and goals for your personal finances) and review it once in a while, investing without having a financial plan first is like driving without knowing where you want to go !

3. Let investments be your first expense- in other words, pay yourself first. Invest as much as possible for a worry free future. This doesnt mean you have to be miserly but just cost conscious. This is what most of the many generations before us did, they either invested in gold or real estate the only two options those days, instead of buying gadgets and cars.

4. Do not speculate - Do not try to make a fast buck be it a multi level marketing scheme or a hot tip from your brother in law. Speculation doesnt work, we only hear about the handful of people who made lot of money but never hear about the millions who lost it and are suffering silently.

5. Do not follow the markets- surprisingly, day to day market movements mean very little about the direction of trend, its better to be invested for the long haul and ignore the experts. No one can predict what can happen tomorrow leave alone the next year. Market prices should be used as a reference to see if there are bargains, thats all.