27th July 2022
Second 3 Investor Principles
Today we will be looking at the next 3 of our 10 Principles that every investor should know when starting out on the investment path.
4) START EARLY AND RE-INVEST INCOME – COMPOUNDING WORKS MIRACLES
i. Compounding is often referred to as the world’s eighth wonder; by starting to invest early and reinvesting your earnings, you can take advantage of compounding to build your wealth over time.
ii. The power of compounding is so great that delaying investing by just a few years, or not reinvesting income, can make a huge difference in your overall returns.
5) RETURNS AND RISKS GENERALLY GO HAND IN HAND, SO BE REALISTIC ABOUT YOUR OBJECTIVES AND WHAT YOU CAN ACHIEVE
i. Of course, you always want to maximise your return while assuming the least amount of risk. However, there is usually a trade-off involved – the greater the potential return, the greater the risk. Likewise, vice versa.
ii. As a result, if you want to aim for a higher rate of return, you must be willing and able to accept larger swings in the value of your investments along the way.
6) VOLATILITY IS NORMAL, SO KEEP YOUR HEAD WHEN ALL ABOUT YOU ARE LOSING THEIRS
i. Volatility is a normal part of the market, so don’t be alarmed – keep your cool when everyone else is losing theirs, and remember that the best time to invest is often when everyone else is panicking.
ii. So, when the markets fall, don’t panic. Instead, remain calm and focused on your long-term objectives.