Five Cardinal Principles Of Investment That Every Person Should Follow
Updated on January 11, 2023 | by Joseph Williams
Many people believe that by investing money you can earn by sitting at home. Though the statement is not wrong much depends upon how you invest, where you invest, and what key principles you follow while investing especially in cryptocurrency. Warren Buffet, the big American businessman, is still regarded as the most sought-after investor and his ideals are sometimes considered as guiding principles for young investors looking for investment opportunities. But he also had certain principles which he learned from his master and teacher Benjamin Graham. So let us discuss the teachings of Benjamin Graham that allowed Warren Buffet to succeed in his business and the best ways to store bitcoin.
Do Not Forget to Know Your Safety Margin
Since investing involves a considerable amount of risk, it is advised to invest in something which not only gives you opportunities but also allows you to take minimum risk in case the situation tilts against you. In simple language, one must try to reduce the risk associated with potential investment and then take major steps in that investing opportunity. Investors must not forget to buy assets at a lower cost since the lower the cost even if that means investing in stocks whose liquid value is much more than the whole market cap. It is to be kept in mind that investing gives you varied options to explore and book profits and in a long run help you evaluate the risk. This can only be done if you buy a business well below the price. However, at what price a person is ready to take a risk is very subjective and depends upon the individual’s power to digest the quantum loss.
Normal to Expect Fluctuations, Key is to Book Profit
Many people are scared of frequent market fluctuations and tend to withdraw their money when the market goes down. This is not a good strategy. The key lesson is that one must develop his understanding of the market based on facts rather than believing in what others say. Sometimes people would lure you into investing money but sometimes they would not. This is to buffet a way to trick your mind into their behavior. One should not fall for this trap. Nothing is permanent, neither a downward trend nor an upward trend. One must book profits when the market is very high and invest wisely when the market is at its lowest.
Try to Rationalise Your Portfolio
To many people, the Stock Market or financial ecosystem is only to invest in stocks and earn profits. That being said, according to Benjamin Graham an investor must always first try to create a good shield around his capital and then try to grow it. So, it is important to invest in Bonds as well as Stocks. The exact ratio of investment should be 25:75 in bonds and stock respectively. This means that the investor would not only crave to reap the benefits of investing in stocks but also be sure that some capital is still preserved.
Are You a Speculator or an Investor?
Many people in the Stock market are not investors. They are speculators who try to play expensive on papers with no clear idea of what value they are earning. But for an investor, a stock is the business and the stockholder is the person who is the owner of that business. He knows how to handle his business and when to sell it. Taking investment, in the 21st century, it is important to invest in new opportunities like Bitcoin.
Remember Your Style of Investing
Always know your style of investing. In the investment market, there are various types of investors. Some are active investors and some are passive investors. However, there are two other types of investors i.e., enterprising investors and defensive investors. The amount to expect as the return is directly proportional to how much work you put in. In the words of Benjamin Work is equal to return. Second thing is to have a serious goal and mindset towards your investment. This brings us to the question: is it really easy to say that investing in the stock market means earning by sitting at home, now we can agree that it is not the case. A lot of background work is required and a constant vigil is required for reaching the optimum level. If you aren’t ready for this then be a passive investor and invest in low-risk stocks.
Next, can consider reading: Why Has Blockchain Technology Conquered the World and How to Make Your Investment in Crypto?