THINGS TO REMEMBER BEFORE YOU BUY YOUR FIRST INVESTMENT

#1. Your Money Can Do More For You Than Your Labor

This means that there is more to be earned in investing one’s money than investing their time in someone else’s company. The process of investing is not easy, and it may be tempting to pull out when the stock takes a dive, but is not advisable to switch investments when things are not moving quickly enough.

#2. You Can Tailor Your Investment Plan to Your Personality

There is no “right” answer when it comes to investing. After understanding the basics, you can put together a portfolio that represents who you are as a person. Sometimes investing in industries that one believes is what may keep them invested in it for a longer time enough to earn generous profits long term.

#3. Don’t Invest Money You Can’t Afford to Lose

Don’t ever invest money that you cannot afford to lose. Investing should only be done with your “capital” – that is the money you’ve set aside to grow your wealth long-term. You should never use the money you need to buy stocks, real estate, or anything else. The dangers simply aren’t worth the risk.

FOUR INVESTING MISTAKES TO AVOID

There are four errors made frequently by investors which should be avoided by new investors looking to invest in bonds, stocks, mutual funds and other assets.

Investing Mistake 1: Spreading Your Investments Too Thin

The virtues of diversification  have been emphasizes to many investors, the knowledge that one should not keep all their eggs in one basket is now common-place. However, there is an extent to which one can diversify especially when they are investing mall amounts of money. The adage that one should "dig-a-thousand-holes-and-put-a-dollar-in-each" may not be the best when investing in financial markets. Small investments such as Kshs 1,000 may have a tiny impact on one’s portfolio. Brokerage fees and other transaction cost can eat into the profit made from small investments, drilling it into the minds of every investor within earshot. Everyone from the CEO to the delivery boy knows that you shouldn't keep all your eggs in one basket, but there's much more to it than that. In fact, many people are doing more damage than good in their effort to diversify.

Investing Mistake 2: Not Accounting for Time Horizon

Investments in equity based mutual funds or stocks should be considered as long term and is not ideal for someone who will need that capital within a short time. These types of investments offer a good chance of building wealth in the long term. There are some short term investments in form of bonds or fixed income investments that can be a good option for investors who are in for a short period.

Investing Mistake 3: Frequent Trading

Frequent trading of shares is not ideal for wealth building in the stock market. When one invests, their fortune is tied to the fortune of the company they have invested in. wise investors take their time to choose the ideal companies they want to invest in based on their current and potential performance, and the enroll in programs to reinvest their dividends in the companies. This intelligent decision pays off handsomely ion the long run as the value of their shares appreciates.

Investing Mistake 4: Making Fear-Based Decisions

Decisions made based on fear can be costly. Dumping a stock when the market has hit a bump on the road can erode the gains that would have been made by sticking with the company until its performance starts improving again. It would actually be more advisable to buy more of the shares of the company at this reduced price and increase one’s portfolio. This will bear fruits when the price of the stock starts rising once again.