I've always dreamed of becoming a professional writer since my college years. I think writing is an excellent profession, but there is a flaw: you can't earn money. At least that's true for most of the writers. A mediocre banker, doctor, carpenter or construction worker can earn enough income to make a living, but this does not apply to a mediocre writer. I do not know the situation in other countries, at least this is true for Turkey. I tried to save money from my 20s to make my writing dream come true. I followed the investment alternatives closely to invest these savings in a correct way. The fact that I have been a banker for over 20 years and I have been good with numbers has been the factors that support my hobby. In this article I would like to share my experiences with you as a former banker and a humble investor.
1. Spend Less Than You Earn
Monetary accumulation essentially consists of two components: the amount of savings and the return of savings. My general observation is that while people focus on the return of savings, they does not give importance to the amount of savings. The amount of savings represents the difference between income and expenditure for an individual. The most guaranteed way to increase income is to work hard in an environment that rewards performance. On the expense side, it is necessary to be able to resist the madness of consumption, which is pumped with advertisements. It may be appropriate to save at least 20% of your monthly earnings, for example.
2. Set Your Investment Goals
Why does one need to save money? He may want to save money to get a car, to get a house, to get married, to get a good education for his child or to travel. In addition to these goals, people can invest in not having financial difficulty in old age days or leaving a heritage for their children. When you determine what you are saving for, you reveal the maturity, which is a very important input of the investment decision
3. Think Long-Term
It would be the dream of every investor to increase his investment in a very short period of time. Those who invested in crypto currencies in 2017 and earlier experienced this enjoyment until January 2018. Unfortunately, such miraculous events do not happen very often. Those with great wealth are indebted to belong to a wealthy family or to benefit from the magic of compound interest. The best thing is to have an installed heritage, but this is not a situation that we can determine. The fact that the elderly are much richer than young people around the world can be explained by the power of compound interest. When we get 5% real returns from our savings annually, our money reaches 3.38 times at the end of 25 years.
4. Invest In Yourself
One of the most important factors determining wealth is how much income you make as I mentioned in the first article. I emphasized the importance of working hard. Of course, it is important to work wisely and efficiently. One of the key variables determining your income is to have in-depth knowledge and experience in a specific area of expertise. The best investment you can make in this context will be investment to yourself. Today, the world is changing so fast that it becomes more important to what extent you have developed yourself after your education life than to which school you have graduated from. Coursera offers opportunities in gold value in this context with open online courses.
5. Learn Your Risk Profile
In the world of finance there is a famous saying: the gain is the brother of risk. The greater the risk, the higher the potential return. Most people don't like risk. There are a lot of investors who see this as the end of the world, if they lose a penny from their main money. Maybe you need to consider it naturally. Losing some of the money earned by labor can be demoralizing. The risk level of a financial asset is measured by its degree of volatility. Assets that experience major ups and downs in a short time are classified as risky. Investment instruments such as crypto coins and stocks are among the high-risk assets. Financial instruments with fixed returns, such as deposits and bonds, are lower at risk. Investing compliant with risk tolerance allows you to sleep comfortably at night.
6. Do Small Financial Tests
The financial world has become very complex as the years went by. No matter how smart, educated an individual is, it is very difficult to understand the matter. Even those who work in finance can't see the whole picture. If you have decide to invest in a financial instrument, I recommend that you try with the smallest possible amount. The best way to learn a subject is to implement it. Thus, you have trained yourself by taking a small risk and you learn the environment. Little financial tests are likened to vaccination. When you do the financial test, the germ enters your body, your body will be able to resist harmful side effects.
7. Timing Is Important
Let us imagine that you have decided to invest in one of the hundreds of promising alternatives in the world of crypto currencies. You've studied well, and you've been convinced that in the future this crypto coin will become much more valuable. If you have a hurried character like me, you may want to implement this decision as soon as possible. The company may be promising a very good future, but are you sure the timing of the investment is correct? Because it is not possible to know the right time exactly, gradual buying will protect you from timing errors to some extent. It would be appropriate to look at the price averages and make a larger purchase as the asset price falls below these averages.
8. Don't Put All Eggs In The Same Basket
Allocating investments to multiple asset classes is one of the most guaranteed ways of hedging. If one or both of your investments do not provide the return you expect for some reason, you can balance this situation with the return of your other investments. Warren Buffett criticizes the concept of portfolio diversification for bringing returns closer to the average. As you diversify your portfolio, of course, your potential for return will be reduced with your risk. Portfolio diversification can also increase the time you spend managing your investments. However, I think it is worth investing in at least 3 different assets.
9. Focus On Net Return
The overall accepted measure for investing in a financial asset is the annual return percentage . However, there are components to be discounted in the annual return. The inflation rate of the relevant currency, the tax rate on return, commissions paid to achieve that yield should be considered. The world economy is growing by about 3.5% annually. It would be appropriate to target annual net return above this rate.
10. Trust Yourself, But Don't Be A Dreamer
Years ago, I invested in a private pension company and got 50% return in a month. I thought I was very smart, I figured out the secrets of the financial system. When I couldn't achieve the same success in my subsequent investments, I realized that success was due to luck. Successful results in the short term are mostly due to luck or positive conjuncture. If you have achieved a large number of successful investments that have spread over a long period of time, you can consider yourself a successful investor. If you are such an investor, please do not forget to share your tips with me
11. Consider Macroeconomic Factors
The price of assets is determined by two basic factors: the amount of liquidity in the market and the extent to which assets are attractive compared to each other. In this context, we can compare the amount of liquidity to water. If there is plenty of water on the market, all the containers belonging to all the asset classes will be filled, everyone will be happy. The amount of liquidity is linked to interest rates determined by the central banks. The higher the interest rates, the lower the liquidity. When the amount of water decreases, the other must be emptied in order to fill a container according to the principle of unified containers. Members of asset classes, such as crypto coins, stocks, bonds and real estate, can act in the opposite direction compared to each other, while they are generally interlinked within themselves. So to predict what will happen in the crypto money world, it is necessary to see the big picture.
12. Create A Strategy And Apply It Consistently
Once you have determined an investment strategy that is suitable for your risk profile and the maturity, you will be able to apply it with determination. Changing the strategy or changing the investment tool very often by being affected by rapid decline or outflow can result in losses, considering brokerage costs.
13. Do Not Make Daily Trading Based On Tips
I don't know anyone who made money by trading daily. I know a lot of people who lose their money when they want to earn a profit in a short time. It takes a great deal of skills to earn income by trading daily. I do not recommend this investment method which is very attractive for intermediaries.
14. Evaluate Investment Alternatives According To The Risk Return Balance
I stated that high-risk investments carry high-yield potential. It would be a good choice to consider the risk as well as the potential return when creating your investment portfolio. It may be a good choice to create a basket of risky and low risk assets. In order to get a return, you need to take risks, but I recommend that you avoid over-risk investments.
15. Give Importance To Information
It will be useful to take a look at the results of the basic and technical analysis of the assets you invest in and watch the news about the company you invest in. While following the news, benefiting from different sources of news will ensure that you do not overlook any information. Investing in companies that operate on your familiar topics will facilitate your follow-up. Of course, you should take advantage of the opinions of experts in this context. If the experts you apply to know are intermediaries for the trading of related assets, make sure that your interest matches the interests of them.
Thanks for reading.
Source :
https://steemit.com/cryptocurrency/@muratkbesiroglu/15-tips-for-successful-long-term-investing-english-turkish
