Investing Rules to Help You Make Smarter Investment Decisions

Investing is an important way to grow wealth and achieve financial goals. However, it can also be intimidating and confusing. Thankfully, there are some thumb rules to follow that can help you make smarter investment decisions.

The Rule of 72 – When investing, try to leave yourself an exit strategy that you can follow should things not work out as planned. It’s a simple rule that can be used to determine how long it will take for your initial investment to double in value. This can be especially helpful when you are considering high-risk investments that could have a much larger payoff but require more time to reach that point.

Warren Buffett – When analyzing potential investments, always focus on the downside first. This means looking at a company’s financial position, debt to equity ratio, profit margins, and whether it has a unique product or service. It’s a rule that Buffett lives by and is one of the keys to his legendary investing success.

100 minus your age – When determining asset allocation, it’s helpful to use the “100 minus your age” rule to find out how much you should invest in stocks and how much you should allocate to other assets like bonds. This is a general rule of thumb that can be adjusted based on your own individual circumstances.

3 to 6 months of living expenses in emergency savings – Before investing, it’s a good idea to have 3-6 months of living expenses saved in an emergency fund that is separate from your other investments. This can help you avoid dipping into your savings or taking on debt to meet unexpected expenses.

Resist the urge to follow the herd – It can be tempting to jump on the bandwagon when something is popular or everyone seems to be on board with an investment. However, this can often lead to poor investment decisions. Instead, it’s a good idea to do your own research and make decisions based on facts, not emotions.

Start investing early – Investing your hard-earned money is an excellent way to build wealth, but it takes courage to do so. It’s important to begin saving and investing as soon as possible, because it will give your money more time to grow.

Investing can be intimidating, but with a little guidance you can start building your portfolio and working toward your financial goals. These investment rules can help you make wiser decisions, protect your assets, and increase your chances of financial success.