Tips for Young Investors

Every investor eyes the maximum possible returns but the future may be uncertain.

As a young investor you should be guided by simple strategies that can keep you away from pitfalls that may wipe your investment as watch.

-The first strategy is to chart a clear course in your financial affairs, because if you don’t you’ll face rough waters in your voyage.

-In case you have no clue on how to invest in the financial markets, you should identify a mentor who can show you the way. You may be surprised how much others can actually affect your investments in a positive manner.

-Start your financial planning by creating a personal investment profile. By keeping it simple, the profile should highlight your risk tolerance, expected returns, time horizon and you tax obligations.

-Always put all your financial plans in writing and keep them at arm’s reach at all times. Make notes from day to day and reflect, then decide if you need to make adjustments.

-Keep track of your investment and determine if you should increase it, time, or both in order to get a positive return. If you don’t do this you may let yourself down yet you are in control of your investment. The time you expect your investment to make returns is crucial in your strategy because it keeps you on track to achieving your objective.

-Your time horizon directly affects your ability to reduce risks. For example, bear in mind that stock prices may fluctuate greatly over the short term. This is the reason why diversification is important for investors. Your time horizon should be determined by if you are investing for the short-term, middle-term or long-term. Short-term is used to refer to when you want your money anytime between one month and two years. Middle-term is within two to five years while long-term is more than five years.

-Investing in one class of asset (or commonly phrased: putting all your eggs in one basket) is a risk worth not taking. Money should be spread across several assets or markets (such as stock bond or treasury) to cushion your money against any jolts.

-You should invest your money in a market or asset where you understand the risk. To assess your risk tolerances ask yourself how much you can afford to lose in case of price fluctuation. If you know your risk tolerance, you don’t need to stay awake all night. As a rule, no investment should keep your awake all night. If it does and appears to be risky one, sell and enjoy your sleep!

-Consult or dig out information of those who have made it, then see where you can make changes that can help you avoid pitfalls.

-You should always keep your ears open for any news emerging from where your money is invested to enable you know if you are likely to lose or increase your investment.

-You can also form an investment club comprised of your family, friends or co-workers so that you can exchange ideas and take full control of your financial future.