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Twelve (Irrefutable) Principles of Investing

Financial literacy is not something that’s taught in school. Thus, most of us simply learn proper money management from our parents, family, and friends. However, those are sometimes not enough to help us become financially successful and eventually to become financially free and independent.

Let me share with you the 12 Irrefutable Principles of Investing, and why it’s important to remember them especially during this uncertain times.

An investment is a commitment of funds made with an expectation of a positive rate of return.

Simply put, an investment will make you money. This seems common sense, but I’ve met people buying condominiums where they don’t have plans of selling for profit, nor do they have plans of having it rented out.

Those purchases are not investments, they are simply assets.

Start early.

sliced mangoes served on white ceramic plate

Time is on your side and it becomes your ally when you start investing early. Just read this story of Mr. Invest Now, Mr. Catch Up and Mr. Wait Longer.

There is no such thing as “the best investment instrument”.

Just like musical instruments, it’s silly to compare each one and say which one is the best. That would always depend on the person and their musical preferrence.

In investing, every person has their own financial goals, and the best investment instrument for them will be the one that will help them achieve those personal goals; and what’s best for them may not be the best for you or me.

The higher the risk, the higher the return and vice versa.

It pays to know this principle because it will help you avoid investment scams. When someone is offering you a low-risk investment with high returns, it would be prudent to turn around and walk away from them.

Do not invest in anything you don’t understand.

A car, a motorcycle, an airplane, a tractor — you will not drive or operate these unless you know how. Or else, you risk getting into an accident or worse, dying.

Investments are also called “investment vehicles” and it’s the same — don’t put your money on something that you don’t understand, or you risk making a mistake and losing money.

History always repeats itself. People seldom learn.

Human behavior and emotions play a big factor in moving markets and economies. While each individual is different, we collectively exhibit repetitive behaviors and reactions to things that happen around us.

This results to market patterns that repeat over time. That’s why it’s important to learn from the past, if we are to prepare for the future.

Prices will inevitably follow value.

Companies in the stock market are businesses. And successful businesses are those who consistently bring value to their customers.

Stock prices may go up and down, but if the business behind it continuously makes money, then people will want to be part of it, even if it means buying up to purchase their shares.

The majority is more often wrong than right.

Just because a lot of people are saying it, doesn’t mean it’s immediately true or valid. It’s always more important to check the credibility of the source and the objective validity of the information.

This is the reason why fake news proliferate in social media, because people assume an article is true just because a lot of people are sharing it, so they immediately treat it as truth and share it themselves.

No one ever lost money by selling at a profit.

Imagine that you bought a company at 10 per share. And you’re hoping to sell the stock when it reached your target price of 50.

After a year, the stock suddenly went up and reached 45 per share. And people are saying that it will continue to go up and reach 60 per share. But there’s also some people who are now saying that the price would soon eventually start to go down.

What would you do? Are you going to hold and wait for 50? Or are you going to sell now and take profits?

The principle says that you should sell. Because markets are unpredictable, and getting 90% of your target is already a good win for your portfolio. What’s important is you made money now, because you can always find another opportunity to earn the remaining 10%.

If you always focus on the bad decisions you’ve already made, you will never be happy.

We all make mistakes, and what’s important is we learn from them. Whatever money that you lose in investing, think of it as the tuition you paid to learn how to properly do it next time.

Accepting your mistakes and moving forward, while equipped with new learnings, is a good way to find success and happiness in the future.

Volatility can be your friend if you know what you are doing.

smartphone on brown wooden surface

There will always be hard times and good times. Prices will always go up and down. And if you know how to navigate through the volatility, then you will certainly make money.

You don’t even have to know much about timing the market, as there are strategies like peso cost averaging, that can help increase your profits after periods of recession and depression.

You can never control the weather, but you can control the ship.

ship helm

We don’t have control over the global economy nor the national economy. However, we do have control over our personal economy. So it’s best to focus on what you can control.

Instead of worrying about the recession or being afraid of the falling stock prices; use your time and focus your energy on managing your investments, creating multiple sources of income, and increasing your financial literacy.

About the author

Bitshares Labs contributes content pertaining to various topics and development updates about the Bitshares Ecosystem and Blockchain Technology.

Comments

    1. Twelve Great Principle of Investing which I will need to read over and over again and still though they seem very sound, I realize there are so many nuances that could hang us up. Thus, one lesson I have learned over the years, is to never be afraid to ask for help, and now I am the Queen of doing so, haha This is a huge task (investing) and is not something readily available to the average person from my generation. So for me, very happy to be with a group of people who care for each other and want everyone to be successful – those are the type of people, I feel we can learn from!

  1. Great information for us to keep in mind as we grow as Compumatrix members. It is definitely information that we should pay attention to!

    1. I like this one: The majority is more often wrong than right.

      It is not always smart to always just do what most of what eveyone else is doing. The majority is not always right. It is always smart to KNOW ENOUGH so that you can acces kis the data appropriately, or go to someone who has a good success rate for advice. Failing to do either or both of these can result in the investor loosing their shirt.

      Of course,most do not learn this lesson until they already have lost $$$!

  2. Very good information, most average people invest for short term gains, long term goals need to be set and take some short term gains as well if required. Don’t invest with your emotions guiding you, knowledge is king and it minimizes the risks.

    1. Short term investments to become millionaires do not work. We, each one of us has to look at a long term investment. Small withdrawals along the way, whilst leaving the bulk to accumulate.

  3. Some profit is better than no profit. Try not to be moved by the market but by the the time You have put in to learn about the investment. Take the Time to educate yourself to feel confident In moving forward in the investment and just go for it.

  4. This is great advice, especially for younger people to get started investing now for their retirement. I, for one, made the mistake of having the mindset that I would start investing “later.” I kept putting it off for way too long. Looking back I realize that I should have forced myself to make some sound investments. Just a little from each paycheck would have built up to something meaningful in the long run. But I was too focused on immediate satisfaction instead of looking ahead.

    I hope that others who read this valuable information really take it to heart. Your future is something that you need to take care of now, not later.

  5. It’s important to understand the fundamentals of the correct way to invest and how to approach this area in our lives. The 12 points outlined in this blog gives sound advice of what we should all look for and understand when it comes to the various types of investments available to us. The story for the 3 friends and how they approached the same investment and when they entered and how long they stayed, is a good lesson of how important compounding works and making sound decisions when making the commitment to invest. Compumatrix is a platform that will provide a number of avenues for investing and participating and working within the system and will give us all a sound grounding for our financial futures.

  6. the 12 points of investing makes very good reading. and I have read it a couple of times
    you have to do your own research and never be led by someone elses word of mouth alone
    This time in history is so uncertain as far as investing is concerned,
    But I do believe we at compumatrix moving forward
    have the best program and members and the right people at the helm
    and after that it is up to all of us as individuals how we succeed.

  7. Great advice and lots of good information!
    I would also like to add that quality businesses earn high returns and increase in value over time.
    Time is a friend of the business.
    Fundamentals can take years to impact a stock’s price, and only patient investors will be rewarded.

  8. Sound advice. Advice I wish I had access to 10 years ago. I tried the long term investing and the short term and I lost my boots in both. Even with the help of so called skilled investor help I landed up losing my life savings. So yeah. No more putting all my eggs in one basket!

  9. I really liked this post, but I believe that everything should follow a cycle as if it were a PDCA (Plan, Do, Check and Act). Before deciding to study a technique for investing, it is necessary to define a plan in detail.

    This planning deals with internal aspects, that is, what are your current financial conditions, your behavioral profile to deal with the market and helps to identify points for improvement.

    It is estimated that an Investor who uses well-structured financial planning before making his decisions will be able to increase the yields of his investments by at least 30%.

    So, before Do, Check and Act, invest a lot of time in Plan and build a solid base to support your decisions.

  10. This is such a great read, and really easy for those new to this. So looking forward to using this great advise.

  11. If only we were taught the value of how to use our money from a very young age, the world would look very different today. Yet with new decentralized ecosystems like Compumatrix, leading the way, we get a chance for a do over. Let’s teach our children, our families/friends, and our communities well this time. It’s time to level the playing field for all.

    1. I agree, I wish there were more sound classes being taught about money, finances and investing in high schools and are required classes to graduate. I believe it would help them feel more confident going into the new world since they would already have a base understanding. They would be able to maybe advance their careers with the knowledge that was taught early on.

  12. Investments are the best way to to about, earning safely. Only if these are done very carefully. We are in difficult times now and this kind of PASSIVE INCOME would be the best option, without any doubt. Spreading the risk by investing into several places, would give us more security as well.

  13. Great information and very good advice.
    Longtime investments are always good and more solid then short term.

  14. I compare this post on the 5G with the industrial revolution and the beginning of many positive changes for society, including amazing medical improvements, and many military and social benefits.The company that created the semiconductor holds the key to success with this product in my opinion. I understand the 5G at present is only “line of sight” without this semiconductor, meaning that if you step inside a building you will loose the benefits of 5G. If you had to build towers across the planet it would not only take years, but cost billions of dollars. This product will not only allow for greater advances in communication, but many many other real life benefits for society in health a safety.Looking forward to being a part of this new revolution in technology. A gigantic thank you to our engineers and scientist.

  15. Twelve (irrefutable) principles of investing defines what is investment. It also tells us the difference between investment and assets. This blog by CBN staff also shows how an investment makes money while an asset may not earn you any money to pay your bills. It also shows how if the returns are higher so are the risks.

  16. Investments are a way to begin to earn in a somewhat passive manner. Put your money up and wait (hope) the asset gains in value. Higher returns the better the reward. Some very good ideas on this post.

    Many people could stand to incorporate the points above into their investment procedure.

  17. Investing usually has two approaches: 1. Investing with self judgement and 2. Taking professional help for investing. Both approaches of investing leads to one goal, and that is highest Return On Investment (ROI). There are many areas where one can invest and gain or lose their investment. My personal choice on investment is on Real Estate, where the prices have not reached the saturation stage. When I intend to invest, as it is going to be my money, I would prefer to invest as per my choice. The ROI on Real Estate is much more than any other investment.

  18. Investment is an art that has to be learned. There are those who find investing or trading comes naturally to them. Other,like myself struggle with both. I agree that it would be better to take the 90% and search for the other 10% in another area. I have lost at both trading and investing, and never seem to be able to “cashout” at the right moment. For this reason, I prefer to do neither but keep my cash safe in a bank. No profit, but no loss.

  19. I like the information in this post and I will read it over again a few times later, so it can sink in better for me. I laughed when I read “No one ever lost money by selling at a profit.” That is so true though and is right up there with the old adage referring to a sure way to make money, “Buy low and sell high”.

  20. Oh, if only I was mindful about the value of savings and investments, or was constantly around people who were into this undertaking when I was in the prime of my life, I would have been financially secure even before I availed myself of early retirement. I learned my lessons the hard way. This is a very good read I intend to share this to my children.

  21. I really enjoyed this Blog. These 12 Principles will be posted in my notes.
    Compumatrix has taught me a lot over the past decade. Undoubtable Patience is one of thee Best
    qualities I’ve learned. In the Act of being patience I have had the opportunity to watch and learn some
    about how the markets fluctuates, which with patiences can/has offer a nice profit return on my Investments.

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