| MISTAKES TO AVOID WHILE INVESTING IN FINANCIAL MARKETS |
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Quote of the Week: “There are no mistakes, no coincidences. All events are blessings given to us to learn from” Elisabth Kubler Ross. Investing in financial markets must however be approached in a more systematic and organized manner. Assets such as stocks (shares), unit trust funds, debt instruments such as treasury bills and bonds, among others, can be a great means of building wealth, but only when used correctly. Being a successful investor does not come by sheer luck, or by sheer genius, and the line between succeeding and failing is a very thin one. Successful investing involves making choices that meet your unique needs today and your financial goals for the future. Your personal circumstances will affect your decisions every step of the way. Whether you are saving for a home, retirement, or your child's education, you want a plan that will help your money grow. Mastering basic investing principles can form a fundamental guide to undertaking investments, and enable one to design a unique approach which works for them. For instance, it is important to know yourself first before venturing into any kind of investment. To better understand oneself, an investor must consider their personal risk tolerance, investment knowledge, investment objectives, and investment time horizons, among other factors. We all have different investing goals and different time frames for achieving them. Some are short-term, like saving for education, while others are long-term, like retirement. In addition, every investor has a different comfort level when it comes to investment risk. While risk sounds like something to avoid, there can be an upside - greater risk may offer the opportunity for greater rewards over the long term. Finding a balance between risk and reward that you are comfortable with - and that's appropriate for your investment time frame - is an important first step to successful investing. It is a common mistake for investors to ignore this important step, and too often many end up being led by the rush to invest with expectations of high short term returns. Certainly, the earlier one starts, the better off one would be. However, investing without prior knowledge of these factors tends to do more harm than good. Another common mistake that many investors make is investing without a solid plan. An investor must align his investments with his time horizons. The type of investments one chooses will depend on whether he is saving for long-term or short-term goals. Long term goals include objectives that are 5 or more years away, such as retirement; short term goals include those objectives that are less than 5 years away, for which you'll need a significant amount of money, such as school fees, or planned expenses, among many others. The general rule is to consider long-term, growth-oriented investments for long-term goals, while considering more conservative and easily accessible investments for short-term goals. A written plan and its guidelines will help you adhere to a sound long-term policy, even when current market conditions are unsettling. For the more experienced investors, especially in the stock market, having a good plan and sticking to it is not nearly as exciting as trying to time the market, but it will likely be more profitable in the long term. Bottom line: The most successful investors were not made in one day. Learning the ins and outs of the financial world - and your personality as an investor - takes time and patience, not to mention trial and error. Successful investing is a journey - not a one-time event - and you'll need to prepare yourself as if you were going on a long trip. One must begin by defining his destination, and then plan the investment journey accordingly. “What is your destination? How long will it take you to get there? What resources will you need?’ These are questions you must first ask yourself; and the plan that you come up with will depend on your investment goals. In addition to having a plan, an investor must always be willing to learn, and accept the reality of making mistakes from time to time. Indeed, the financial market is hard to predict but one thing is certain: it will always be volatile. Learning to be a successful investor is a gradual process and the investment journey is typically a long one. At times, the market will prove you wrong - acknowledge it and learn from your mistakes; When you succeed, celebrate. However, never lose sight of your goals, as these will form the main justification that will keep you going no matter how turbulent the market gets. You can send your comments or questions to This e-mail address is being protected from spambots. You need JavaScript enabled to view it , or visit our offices at Ecobank towers, 7th floor, Muindi Mbingu street. You can also follow us on our facebook page- Zimele Asset Management ( Kenya) View Older Weekly Updates Disclaimer
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