Three (3) Investment Rules You Must Know

By Admin | Published On January 27, 2020

As the year 2019 drew to a close, I am aware you brought out your pen and notepad as you have always done in the years before. I guess you didn’t include a proper financial and investment plan. All that you wrote down was ‘I will make more money in 2020’. This is similar to what you did in late 2018 when you started singing the ‘we go buy Benz’ anthem without a proper plan for it.

 

In your quest to double your earnings or triple your savings, you need a rock solid plan that you can bank on to work at any time.

With this thought in mind, the Thinking School Nigeria team ran a paid master class in Ado Ekiti on investment and I will share the 3 most important lessons I learned from that outing.

The universal 50-30-20 rule is the basic point to start your investment/financial management plan from. This general rule allows you to have a budget for your needs, wants and investment. In many cases, especially for low income earners, you might have to save up to an extent before you can start considering ploughing it back into an investment plan. If you have had to do that, you will realise that you have unconsciously built the discipline and resilience needed to successfully begin your investment journey.

 

Emotions are Needless

Moving away from the basic rule for budgeting/investing, you must steer clear of your emotions while making your investment plans. This is essential especially when you are putting money in a business that you have ties to the owners or managers. Emotions may cloud your judgment if not checked while taking your decisions.

When you are able to do away with your emotions, you will be able to clearly see through the books and plans of the business as this will help to form the foundation for your decision.

 

Be Mindful of Inflation

The primary reason we save/invest is to increase what we have and prepare for the raining days. Inflation does the opposite to your money/wealth. It reduces its value, eats into its usefulness and limits what it can do for you. To make your money work for you, it’s a must that you become mindful of the inflation rate. If you are (mindful of inflation), you would have noticed that keeping all your money in your usual savings account is not helpful.

 

Due Diligence

Investment and investment platforms are not a single way street – there are many operators and many possibilities. For this reason, charlatans have enough ground to play around and prey on all you have, as you kick start this journey, you should not be tired of doing due diligence. It must be said that the safety of your money is based on how well you have done your background checks. In Nigeria today, we have heard series of stories from supposed businesses that scammed their investors of their life savings. It is not a Nigerian thing – but in a country with a judicial system that does little to inspire confidence, you need extra caution.

As you readjust your plans and focus, always remember that if it is too good to be true, it’s probably false.