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Posts Tagged ‘Rules’

This is not about an epic saga about to unfold, but rather a piece of basic investment advise for a friend.

There are three ground rules to investments and mangaging your money.  These are for your own protection as well as your sanity.

  1. Invest only your excess cash or other people’s money.  So that means if you have more than 6 months of salary sitting idle in your bank, invest the excess!  Similarly, if you managed to insure a million dollars on your pet, and it recently got rolled over by a truck (which incidentally made you filthy rich), invest it!  Anything beyond your 6 months of your needs should not be left idling in your bank drawing zero point something of a percentage in the bank.  Also, excess cash means money more than you need for necessities
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  3. If you are turly serious about investment, learn to think long term.  That means think in terms of years instead of days.  Stop looking at the stock market ticker!  Any serious investor should realise that good companies should not fluctuate in values of millions in the course of a single day.  For example, these value fluctuations in the stock markets are implying that the world woke up one day and significant percentage of the customers decided not to drink Coke for some apparent reason…yikes!  The good news is that everything stablises across a period of time.
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  5. Never tell your parents what you are doing with the money.  They can ask, but you need not answer.  Most well intentioned comments from parents are usually negative.  Dun ask me why.  If they had understood how to invest and taught you how to, you would not be reading this article.  You would have inherited a fortune and enjoying coconut juice on some tropical island that you own.
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So the list is not exhaustive, but it is a start for most folks.

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