Earning a small profit within a short term is not considered an investment. When we do investment, we look at the long term and the amount of profit must be reasonably good.
To do this, we must know the value before making a decision to buy it. These few points may be of help to you.
1. Do I have the money or spare cash to put into any investment? If the answer is yes, then congratulations, you have taken the first step to grow your spare cash. If the answer is no, then you must start saving a sum of money from your income every month. You will eventually have enough to start the first step.
2. When we talk about investment, we do not want to over leverage. It is not necessary take on huge loans to make an investment.
For example, if you are thinking of buying shares of a company, you must have the sum of money ready before you are ready to buy and hold for at least 3 to 5 years. If you intend to buy Cerebos, which is now trading at about $5.02, you must have in your hand, at least $5,050 to buy 1000 shares (minimum) of Cerebos. If you do not have that sum of money, you will have to work harder to save more, or look for another alternative company that you can afford to buy.
If you intend to buy a property, make sure that you do not overstretch yourself in housing loan. My wife and I were contemplating whether to do an extension to our house, which will cost about $400,000. Or should we just do an interior renovation, and make it look brand new, for only $100,000. If we choose a former, we will have to take a new loan from the bank, on top of the current housing loan. Isn't it overstretched? Therefore, we have decided to choose the latter.
3. Investment is all about patience. We do not buy stocks or properties, just because we are afraid of "MISSING THE BOAT". We must really do our homework to know the value of the things we buy before we act on it. Patience is the root to every success. When we do an investment, we look at long term of at least 3 to 5 years. We wait for a golden opportunity to strike. We wait for the value of our investment to rise past our target selling price, then we sell it.
4. We must have the power to bargain. In property investment, when we cannot reach a good price, "OUR PRICE", I would rather let it go and look for another valuable one. If you are able to buy the property at a "DISCOUNTED" price, that it, price that is about 8 to 10 percent of neighboring estates, that will put us in a very good position of RULE#1.
RULE#1 - DO NOT LOSE MONEY.
When we buy at a discount, we are actually giving ourselves some leeway for errors that we cannot control like, people's emotion.
Hope the few points can be a starting guide for a novice investor, especially the young ones.
Happy Investing!
Cheers.
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