Friday, May 18, 2012

The Most Efficient Investment Knowing the Least

Everybody is saying that if you want to become an investment pro you have to read tons of books on investing and have many years of experience in the field. And this is true, if you want to become a pro, but do you necessary need that? It is a big question, because sometimes investment professional have worse results that investment amateurs from their investments. 

The thing is that investment professionals are restricted by many rules and pressure by their management and clients while small private investors have all the freedom they need. 

Another important fact is that sometimes investors need to know few simple things and achieve quiet good results from their investments. Well, in fact it is important not to only know those rules but to follow them strictly too. 

Those are the most important rules: 
  • Diversification. All investment portfolios have to be well diversified and that will reduces risks and improve returns from the portfolio. 
  • Don't give up to the panic. Or it may also sound as a 'buy low sell high'. And this is the way to make biggest profits. Of course you will never know when it is the bottom of the stock market or when is it top. All you need is to have some strength to hold your stocks when everybody is selling. 
  • Use fundamental analysis. Fundamentals is the only serious way to analyse stocks and to predict they value. Value is everything and the price is nothing.