DIY investing: What you should know and understand

DIY Investing: Top 3 Things You Should Know

Do-it-yourself investing requires careful planning and a lot of research, from understanding the basics to knowing when to consult a professional financial planner. If you are thinking of starting investing, you should remember to follow some basic rules that will help you become a successful investor. Here are top three things you should know before investing.

1. Diversify

Never put all your eggs in one basket. When creating your investment strategy, make sure that you invest into a variety of assets, such as stocks, gold, bonds, and perhaps even a Real Estate Investment Trust (REIT). Remember that you need to have at least four different types of assets to protect your money.

Diversifying also means that you should own assets that you expect to grow in value along different time lines. That way you will not lose everything because of a single market crash.

2. Know Your Costs

The biggest mistake of many newbie investors is that they pay too much to invest. Before you start investing your money, research things like brokerage commissions, taxes you will have to pay from any profits, and inflation – the ultimate investment killer. If you are having trouble calculating your costs, it’s best to not invest at all.

3. Don’t Buy “Hot Stocks of the Year”

Every year financial magazines around the world publish a list of “hot stocks”. A lot of DIY investors read these lists and start buying these assets in hope to make millions. Well, don’t bother even looking at those lists, because by the time you purchase the assets, it will not be worth it – the publicity will make their price go sky-high and there might be no return. Instead of that, use your own analysis and intuition to find the best assets to buy.

These three simple investing tips will help you avoid the most common investing mistakes. In order to be successful, remember to keep cool, be diverse, and use the best financial adviser in the world – your common sense.