Have you ever heard someone talking about a great investment opportunity?
Have you ever gotten a tip?
Can I share a tip with you regarding investing?
Since you are still listening, I’ll go.
Never take a tip from anyone, that is a tip
But if you do take a tip, do your own research
Why? If someone knows something you don’t know, why not trust them?
Here are the reasons why you should do your own research.
First of all, would they invest in the opportunity themselves?
What is their success rate?
Secondly, what is their motivation? I am not saying they try to trick you. The point is what motivation do they have for investing their money? Are they focused on preserving their capital, or do they chase the price? The question is do they have proper risk management?
It doesn’t really matter, because you need to ask yourself if the investment fits into your portfolio?
What market is it in?
Is the investment appropriate according to your strategy and rules?
Investing is not entering things blindly because you were told to, or because you feel it is right. It is a skill to practice with certain rules
For example, I need to make sure the company matches my criteria for fundamental analysis. That means I look into key numbers of the company’s finances, and I get an understanding of what is going on.
The good news is that I have tools accessible, freely available, that you too can use to this quite effectively. It is possible to get this understanding within a few minutes.
What I do is I apply risk management to preserve my capital. Because if I am able to preserve it, I have money to invest and the opportunities I get into, will most likely give me profits.
Lastly, you need patience. Until the market presents the right opportunity, you should sit on your hands. Keep your hands away from the computer so your emotions don’t turn your fingers into ten, small and greedy monsters.