My investment rules
I believe that each investor needs to have at least 3 or 4 key personal “Rules of Investing” . Once established, these “Rules of Investing” should act at the guide for the investor when identifying future investment opportunities. Before investing, the investor reviews each investment decision whether the investment opportunity is meeting these Rules.
To be successful in investing requires discipline and to stay away from any type of emotional investment decisions. Above all, successful investors never break their own investment rules, even if it sometimes means going against the public opinion.
each investor should have at least 3 or 4 personal rules investing
In this blog, I will share with you my personal investment rules. These work very well for me and I hope you can use these to your advantage as well.
Rule#1 – SWAN “Sleep Well At Night”
My first rule is that I only invest money that I am able to afford to lose. If things turn out really bad, “the worst-case scenario” and if I would have to absorb losses in my investments portfolio it should not keep me awake. What this really means is that I am only investing money that I do not need to pay my monthly bills and is not needed by me in the near-term.
If I would have to absorb significant losses in my investment portfolio it should not keep me awake
So, when the next crisis comes along, I will be able to keep my current standard of living, I will be able to live through the crisis and can let my portfolio recover until better times will return again. And, as history has proven, better times will always return.
This first rule, I call, SWAN “Sleep Well At Night”.
Rule#2 – “Diversification ” is key
My second investment rule is closely aligned to my first investment “SWAN” investment rule and means that with each new investment opportunity decision I am taking, I carefully review the overall impact on the diversification of my investments in my total investments portfolio Most investment professionals agree that, although it does not guarantee against loss, diversification is the most important component of reaching long-range financial goals while minimizing risk.
for each new investment opportunity, I carefully review the overall impact to the investment diversification of my total portfolio
The key corner stones of my diversification strategy include the following:
- First, while this site is only about crowdfunding investing, I still only invest a limited part of my total investment portfolio into my crowdfunding investment portfolio;
- Second, I have applied a maximum amount, in my case €1,000, that I would invest in any opportunity;
- Third, I am diversifying my total crowdfunding investment portfolio into the 3 main types of investment areas (real-estate & property loans, peer-to-peer consumer lending and business loans & equity);
- Fourth, I diversify my investments across different investment platforms;
- Fifth, on top of the above diversification rules, I further diversify my portfolio, as much as possible, across the different european markets, cities and countries.
So, my second rule I refer to as; “Diversification is key”
Rule#3 – Take full benefit of the power of “Compound Interest”
My third rule is a rather simple, but extremely powerful one. Considering that I have a long-term investment horizon, I am systematically reinvesting all of my income and earnings as soon as these become available in new investment opportunities.
The great scientist, Albert Einstein made a well-know quote about compound interest;
Compound interest is the eight wonder of the world. He who understands it, earns it. He who doesn’t, pays it.
In practice this means that I always look for investment opportunities that allow me to easily and preferable automatically reinvest my dividends and other income earned on my investments.
So, my third rule is to take full benefit of the power of “compound interest”
I hope you enjoyed reading this blog and that I maybe inspired you to think about defining your own “Rules of Investing”, if you do not have them already.
you will be able to find a lot of information about this topic on the web
Again, like I wrote earlier, there is a lot of information that could be found about this topic on the web so if you got interested in reading more about this topic I urge you to do so.