4 principles to guide every investment decision you make

By cheryl | Education

Sep 25

Perhaps you have known someone close to you – a family member, a sibling, a close friend, who has completely wiped out their entire savings.

How? Through bad financial decisions and planning.

Perhaps you’ve heard these stories of struggles. Stories about not having enough…

  • Money for retirement
  • Salary to beat inflation and the rising costs of living
  • Liquid funds after being hit with a major medical bill

Sometimes, it isn’t their fault. They didn’t know better. But you, on the other hand, actually have a choice…

…Especially if you follow these 4 principles:

Don’t Lose Money

The best investors are obsessed with avoiding losses. Why? Because they understand a simple but profound fact: the more money you lose, the harder it is to get back to where you started.

Warren Buffett is often quoted saying, “Rule No. 1: Never lose money. Rule No. 2: Don’t forget rule No. 1”

Low Risk/High Return

The best investors don’t fall for the high-risk, high-return myth. Instead, they hunt for investment opportunities that offer what they call asymmetric risk/reward: which simply means that the rewards should vastly outweigh the risks.

Tax Efficiency

Taxes can easily wipe out 30% or more of your investment returns if you’re not careful. Yet mutual fund companies love to promote their pre-tax returns, concealing the reality that there’s only one number that truly matters: The amount that you actually get to keep.

Diversification

Don’t put all your eggs in one basket. Minimize your risk of loss – if one investment performs poorly over a certain period, other investments may perform better over that same period, reducing the potential losses of your investment portfolio from concentrating all your capital on only one type of investment.

These are guidelines that you can always depend on – no matter where you are right now in your financial journey.

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