For this post, detailing why the time to invest is now, I have handed over the reigns to Brian from Tent to Penthouse. For The Twenty Percent’s first guest post, he will be explaining some of the basics of investing and why it’s best to get started as soon as possible.
As many of you will know, I’m very new to investing, so thought it would be best to seek advice from someone with more experience.
I hope you find this post useful and agree that the time to invest is now. As always, please let me know your thoughts in the comments below.
Why the time to invest is now
Whenever you’re ready to start investing is the ideal moment to begin your investing career. Some may think investing is only an old man’s game, but the reality could not be further from the truth.
You only need a small amount of time learning about investing to make massive progress towards your fullest potential. That begins simply by making a point to understand several core principles of the practice.
When you’re investing with any kind of commodity in the world, risk management is the universal law of every aspect of your practice. Every moment of your investing experience is tied to managing what your stand to gain with what you stand to lose.
Even if you aren’t consciously thinking of risk management, the concept still dictates the entirety of what will manifest as your ultimate investing success.
Understanding the truth of risk management is a simple matter of visualising a scale. At one end, you have the weight of what you stand to gain. On the other, you have the weight of what you stand to lose if your investment turns out to fail.
The factors of your ratio of failure to success will always vary. But, your task is to determine whether or not the likelihood of what you stand to gain is much heavier than the risk taken.
Even in a situation where you do stand to gain more profit than the raw capital that would be volunteered to make such a chance possible, ask yourself: “Is my chance of gaining what I stand to profit from here truly worth what I could very well lose permanently?”
Depending on the investors you study, the chances are you’ll take away many perspective on the implications of riskier strategies. Whichever school of thought you subscribe to, your ultimate decision should be one that is based on conviction and accurate data.
You should also only take on a level of risk that you are personally comfortable with.
Emotional control is key
Knowing the basic principles of risk management is key. But, your ability to follow through will come down to how well you’re able to control your emotions.
Some days, you may be so confident that you take on risks that you would never normally considered. On others, you may have a less favourable outlook towards investment prospects, meaning you miss out on opportunities.
Investing without letting your emotions control you is certainly no easy task. This is something that even investing veterans regularly have to put effort into managing.
How to keep your emotions in check
One of the best ways to keep your emotions in check is to write down your thoughts as they appear. Keeping a journal may feel awkward if you don’t have much experience with it, but, if you do it consistently, it can help you channel your emotions healthily.
Fear and greed are the titanic forces that rule the market. All returns on investment are fuelled by the rise and fall of emotional spikes and depressions throughout the economy. As an investor, your power is in your ability to observe this massive flux and not let it control you at a crucial moment.
You cannot control the market, but, you can control the level of awareness you have about what you’re taking on with each and every investment prospect.
Arm yourself with the knowledge surrounding every factor that determines your trade’s risk to benefit ratio. Manage this ratio with impartial objectivity, and you will already be leagues ahead of many other investors.
If you haven’t yet started, thinking about the things that might factor into your “worthiness” to begin your investing career can put you off. This can be the most difficult aspect of your investing career.
You may question how much money you need to begin investing. You may also ask if you should invest in just one commodity or currency or invest in a pre-prepared fund.
What you want to do is come to an objective base of understanding about two things:
- How much can I leverage knowing I may possible lose it during the learning process?
- What concepts do I want learn more about?
The answer to the first question will determine your ideal starting account balance. While the answer to the second question will determine the commodity that you should build your investing career around. Either way, the time to invest is now, so don’t delay any longer if you feel ready.
An engineer and avid outdoors man, Brian is the author of TentToPenthouse.com, a personal finance website dedicated to financial freedom and education. He’d love to collaborate and support others interested in similar topics so drop him a message @TentToPenthouse on Twitter to get in touch!