- Formulate your investment goal:
At the initial stage of any investment, it is necessary to immediately determine what you want to get from your investments, what goals you are pursuing and why you are doing this at all.
It is because the entire subsequent investment strategy depends on this. A well-defined goal, not just the desire to receive as much passive income as possible, will lead you to the desired results.
- Define your approach to investing:
To be successful in the world of investment, you need to understand how to get there. Therefore, at the very beginning of the investment path, as a rule, the means to achieve the goal are outlined. To do this, you need to answer two basic questions:
- What annual return are you expecting?
- What percentage of the money invested are you willing to lose?
This way you will understand which investment path suits you best and how to make it the least thorny. Here it is worthwhile to immediately make a reservation that you cannot earn 100% annually, but at the same time expose only 10% of the amount to risk. So be realistic.
For example, you can take such a formula – multiply by 2 the income that you would like to receive. If you want 10% annually – be prepared that at some point your investment may decrease by 20%.
If you are not so ready, lower the bar. Of course, this is not an exact formula, but this approach can provide insight into how risk is related to return.
- Never invest borrowed and credit funds:
Investments involve risk in one way or another. And its one thing to risk your own money and it’s another to risk borrowed money that doesn’t belong to you.
Investing borrowed or credit money can lead to very disastrous consequences that are directly related to your financial situation. Avoid this dubious path and invest only your own funds.