This page contains pieces of investment wisdom. There are a few tips and some basics that can be used for reference.
These are the vary basics of investment. Each deserves a decent chapter or a book on its own.
These are some general investment tips. They are to be kept in mind when making investment decisions. Click the links to read more about those aspects of investing.
The major point in investment is risk mitigation. All the other listed points are included in that one.
The first practical lesson of risk management is "don't put all your eggs in one basket". This is diversification. So, the first couple of points mean the same thing. Diversification means investing into instruments that are not correlated - i.e. the instruments do not go up or down at the same time. If they are correlated then, if one fails, they will all fail. That is not diversification.
In line with the above, if investing in index funds then add investments that do not correlate to index funds.
Use Dollar-cost averaging. By investing the same amount at different times you will average the purchase price over the investment period. You end up buying more units/stocks when the price is low and less when the price is high.
Rebalancing is a form of risk control. It is similar to Dollar-cost averaging. Value of different asset classes, and therefore the percentage within your portfolio, will change over time. Stick to the original asset allocation will lead to selling the excess value in the asset classes that grew in recent period and buying those that underperformed in the same period. This will result in selling assets that are overpriced, and cashing a profit, and buying assets that are underpriced, creating a potential for future earnings.
Some additional tips by Prof.Burton Malkiel:
Links: Investor Education at 2020.
Buy on dips, when price reaches 10% of the known bottom. Buy in instalments, smaller portions over a period of time, not in one go.
Read more in the post - here.
The most basic rules for building wealth are:
Some additional tips: