Investing your money can be one of the greatest ways to use your capital to turn a profit–if you do things the right way. Plenty of now wealthy people all over the world made their fortune by making smart investments in stocks, other markets, and even growing businesses. Using your assets as a means to generate more income is the best way to truly become your own boss. However, those who make foolish investments can end up with perfectly opposite results. The failure tales of investing are just as common as the success stories. Avoid falling into the trap by staying away from the most foolish investment paths.
First of all, don’t jump into significant investments in a market that you’re not familiar with. This is one of the classic blunders. Recently many experienced stock market traders have tried their hands at ForEx, or foreign exchange trading. Assuming that one market works the same way as another will most certainly put you on the path to loss. Every market has its own unique trends, and if you don’t have the experience and intuition needed to make accurate assessments of the market, then you have no business investing in it.
At the same time, it is equally foolish to put all of your eggs in one basket. Investors who funnel all of their capital into one stock or one sector of a market open themselves up to two possibilities. The stock will either increase in value, or it will decrease in value. If the stock goes up, you’re in for great profits. However, if the stock goes down, you run the risk of losing your entire bankroll and going broke. Failure to diversify is a potentially fatal mistake that lots of young investors make when they get too greedy. Don’t be blinded by the dollar signs–play it safe.
Investing in businesses directly is a very popular and time-tested way to put your money to work. In return for a monetary investment, business owners will typically offer royalties or a certain percentage of stake in their company. In the best cases, this can become a reliable long-term source of income. However, for rookie investors, investing in businesses can be a foolish mistake. Until you’ve gained a good deal of experience in the various markets you won’t be able to read the potential of a business or its owner to generate returns. Pouring money into a failing business or an unreliable proprietor is a surefire way to lose money fast.
The most foolish way to invest your money, in general, is to do so without experience. Try your hand at a virtual stock market game or spend some time with a mentor before you begin seriously investing to get a feel for how things work. If you prepare yourself in advance, you’ll be able to walk into the world of investing confidently and use your capital to build an impressive portfolio that will keep you comfortable for years to come.