General rules of Investing

General rules of Investing


Set Aside Fund:Try to set aside five months salary in savings account for emergencies such as Health sickness, Accident or Job loss. One way of making savings a habit is to arrange for an automatic deduction in payroll by the employer. The money you invest can come from discretionary funds, meaning money you do not need to rely on for emergency spending. It's money you may be able to risk, after you've paid your immediate debts and created an emergency fund.


Insure Yourself Adequately:The amount and type of insurance you need depends on your age, health, income and number of dependents, and any coverage you have at work. Most people insure their life, health and property, but don't provide enough protection for one of their most valuable assets: their earning power.
Use Tax Advantaged Savings Plans: There are some plans in which the interest earned on these accounts are Tax-deferred. i.e., no need to pay federal taxes on the interest earned on these accounts until withdrawal.
Determine Your Investment Goals: The goals you set and the time-frame to achieve them are important in determining the amount of risk you can take. Longer-term investors can usually afford to take greater risks, whereas those with shorter-term goals must usually be more conservative.


Investigate Before You Invest:First understand the investement. Then conform whether it is insured? Is the return guaranteed? Is your principal protected? Can you get back your money when needed? So make sure you know what you are investing and what you will be getting back before handing over the money.
Diversify Your Investments:Try to distribute investments among different companies or securities in order to limit losses in the event of a fall in a particular market or industry.


Stagger Maturity Dates: To cushion against interest swings, vary the maturity dates of your time deposits. This will allow you to take advantage of favorable changes in the market, while at the same time providing some protection against rate drops. And you'll have access to your money at regular intervals.



Patience:At last but not least, when you have established your investment goals and strategy, stick with them. Keep an eye on short-term results, but don't lose sight of your long-term objectives. To become a wealthy person we have to wait sometime. No one can become rich by overnight. So patience is very important.