A lot of us have seen the iconic films based on investing, The Wolf Of Wall Street, Glengarry Glen Ross, The Big Short to name but a few. Beyond the quick wins, apparently lavish lifestyles and fast paced life on the street, let’s take a step back and see the stock market for what it is – an exchange.
At any given time, thousands of individuals are selling or buying corporate securities on one of the stock exchanges or the NASDAQ. Some are wildly successful while some make a decent living.
Others get too emotionally involved, panic and lose everything! but the application of a few simple principles derived from the experiences of millions of investors over countless stock market cycles.
Having a few key indicators to look for when considering a stock investment is a more solid approach than just betting on luck! Below are a few tips to help you make wiser decisions about your stock market investments:
What are your reasons for wanting to invest in stocks? Where will you be in a year or three years from now? Will you need to call on your cash? Are you hoping to build a nest egg for your retirement? Maybe you want to build an estate to leave your family.
Before you invest, be grounded in your reasons for investing and consider the most likely future date when you may need the funds. The stock market is volatile, so if you might need your funds in the short term, consider another investment option.
Psychologically, your risk tolerance is the trait that’s genetically based but is positively influenced by education, your income, and obviously your wealth. There’s a positive correlation between increases in these to increases in your risk tolerance while conversely there’s a negative correlation to increases in age (as you get older, your risk tolerance goes down).
Basically, your risk tolerance could be summed up as this: your general feelings and the degree of anxiety when you are faced with a risk. As an example, if you had $100 to invest now, for the opportunity to potentially make $500, how would you feel about it?
When stocks are going up and down and potential gains or losses are being watched by an investor, their biggest challenge lies in controlling their emotions, while thinking rationally to make informed decisions.
In the short-term, company share prices reflect the collective emotions of an entire investment community.
For example, if the majority of investors have concerns over a company, chances are that the particular company stock price will decline or when they feel positive towards a company’s future, then its stock price tends to increase.
The stock market is a somewhat level playing field, due to its transparency, regulatory authorities and high liquidity, meaning the investor is more informed at all times.
Historically, this has led to significantly better returns that other investment vehicles. The younger you are when you start investing, the greater your end results will be. But remember, do your homework, be patient and don’t risk too much capital!
For those of you just starting off in real estate investments, then you will find a lot to learn if you want to make gains and grow your wealth. Believe it or not, investments in real estate are more complex than stock market investments, due to financial, legal, and detailed due diligence required to make a solid judgment.
So, arming yourself with the correct knowledge, tips and looking at some properties that might be similar to the ones you are looking at investing in will give you a good foundation before making any first-time property purchase.
So, before you grab your money and call to you nearest real estate agent, have a read through these five tips below on the basics to real estate investing:
It might sound a bit cliched but location does matter. Before handing over a bunch of money for a property down payment, do make sure that its location is good.
Additional tip: Go to the best street and find the worst house. That is a general rule of thumb for real estate investments.
The general area or neighborhood is good but the house just needs some work, so this presents the opportunity. Often, real estate investors call this fixing and flipping, where they repair and enhance the house only to sell it for a profit.
Look for the best deal. The Warren Buffett principle is to buy at rock bottom prices when everyone else is selling, so you have lots of headroom to turn the investment around, as it will go up again at some stage.
You should avoid paying the asking price for properties. Instead, so-called “wholesale properties” offered at a steep discount are a diamond to invest in. While they might need some work, calculate if the investment is worth the number should you go to sell later.
It’s not uncommon to triple your investment on a property like this.
The government encourages private real estate investors to provide housing for people. In this way, they aren’t left with the responsibility of it.
So this that in mind, it’s good to know that the government will offer significant tax breaks to real estate investors. You can even write off depreciation, so when you buy a property as an investment, the depreciation of that building could be tax deductible.
Consult your tax adviser for the specifics of your property and overall tax position.
You’ll more often than not require some financing to invest in property. So, you will need to check your credit history prior to any real estate investing.
If your credit report shows up any problems that appear to be mistakes, you should get them resolved as soon as possible. Alternatively, you may need to improve your credit rating.
Great returns can be made from real estate investing. Do your homework and have a solid credit rating before you get started!