Whether you are a novice or an experienced investor, there are at least 5 things you must know before investing. Here’s an opportunity to learn, and understand how to invest wisely, add to your future portfolio gains and avoid common investment mistakes.
1. Timing – Thinking that the only time to invest is when you can buy in low and sell shares high is a myth. The truth is there are better times to invest, but it’s never too late, especially if you understand what it takes to invest.
2. Costs – Profitable investing is about controlling and managing the costs of investing. Investors need to understand exactly what the charges are for the investment services be used. It’s in your best interest to ask about the rates, monitoring and understanding why you are being charged or why they have been changed. In some cases these charges can be so high, they will eat away at your portfolio gains or worst reduce your initial investment funds creating a loss.
3. Services – The normal types of fees or rates related to investments are brokerage commissions, which are transaction charges for buying or selling. Advisory services provide guidance to increase your investment gains by suggesting specific types of investments and report taxes made on capital gains.
4. Risks – It’s difficult for anyone to determine what happens in the market. As an investor it’s important to understand how to manage uncertainty. It’s done, by keeping a larger portion of the investment portfolio in conservative investments and deciding the amount of funds you can afford to gamble on the probability of positive gains and potential losses. A forgotten factor is inflation; investments need to earn more than the current rate of inflation to avoid negative losses to the asset.
5. Diversity – Monitoring and managing the investment portfolio recognizes how diversity affects to the investor’s goal. Diversity is having a selection of assets with different timelines for the expected return of the investment. By spreading out the expected payoff, it provides the investor with a more balanced gain expectation of projections and avoids a larger casualty should the market experience a downturn.
At the end of each quarter, performance reports are sent out to the investors. For some these are boring and others simply toss the reports into a pile, never to be seen again. There’s a reason to read and review these statements. They tell the investor how much they were charged for services during the time period. Depending on the activity within the portfolio, these charges can amount to a substantial expense for the investor. The statements also track the change in fees, which may increase or decrease from the previous quarters. These reports represent information of how your money is spent and a possible flag that it’s time to negotiate with your broker or financial advisor.