10 Rules of Investing

1. Do not risk money that you can not afford to lose

It may seem obvious, but when you have necessary capital to withstand highs and lows of the trend, it is better to move towards safer options, such as bonds and cash.

2. Do not trade with money that you will need

This applies to instruments with maturity, such as bonds,  which will have to be liquidated in order to have access to money.

3. Understand and study what you buy

If you do not understand a product, do not buy or seek advice from professional advisers. Many complex instruments have high exposures.

4. Do not make your investment decision based on rumors  or on top of the trend

This condition does not apply for perfect timing for entry  positions, but too many investors have come on top of the trend and suffered heavy loss.

5. Invest, do not speculate

In fast-moving markets, the risks are very high and investors need to be constantly aware and to be careful,  especially in short-term investments. Longer-term ones reduce risk and accumulate higher returns.

6. Do not sell in panic

If the market goes into opposite direction or suffers a collapse, selling on low levels will only bring you loss. Often, the best solution is to wait for the reversal and market stabilization.

7. Do not be sentimental

Do not you hold one share or investment because of the  “loyalty” to it. If the company is not doing so well as it used to do, do not follow it blindly , sell it.

8. Stay diversified as far as you can

Be sure that you have a well-diversified portfolio as in equities, bonds, commodities, real estate, etc. Compensate the level of risk that you take.

9. Do not trade with the “herd”

Sometimes, the biggest profits are made when you avoid mass purchases or sales.

10. Take advantage of tax breaks