We will hand you a few useful tips that can help you become a better investor. Private investors tend to make many mistakes when investing. Everyone makes mistakes, it is important to learn those mistakes and avoid making them yourself.
The fact that an investment has proven to be profitable in the past does not mean it will continue to be profitable in the future. It is useless to look at the past and project this onto the future. Although it is important to consider the past, one should never base an investment on it. There is an exception to this notion though. Because diamond prices have a stable development, an investment in diamonds has a high profitability. When you invest in diamond, an added advantage you get is that you can physically hold the diamonds in your hands, whereas the value of your shares for example is represented by a mere piece of paper or a virtual promise.
High vs. Low risk
High profitability usually means a higher risk. Do not be tempted by quick financial gain. If a certain share has a volatility of 30%, it means the price can both go up or down.
Think long-term investment
Long-term investments are better than short-term investments. Active investors make a large number of transactions and try to buy and sell at the appropriate moment. To invest passively means to get a good long-term profitability and to disregard short-term fluctuations. As a starting investor, do not go trading right away. For a lot of people this seems challenging and exciting, but there is a good chance you will lose money. Even most professional traders have a hard time trying to beat the market. We often hear announcements about making great profits, but people are much less keen about communicating about losses, which occurs equally often.
You can win half the battle by starting young. Starting to invest at a young age is very important. The longer the investment horizon, the higher your profit will be. Young investors can afford to take bigger risks. There is a connection between your investment horizon and the amount of risks you are allowed to take.
Make wise decisions
Emotions and investments do not mix well together. Do not let your emotions cloud your judgment and never make a decisions based on emotions. The mistake a lot of investors make is to keep a company they like for personal reasons in their portfolio for too long, even if prospects evolve in a negative direction.
Take the loss
Do not be afraid to take a loss. A lot of investors want to get a good profitability on every position and want to sell at a higher price than the purchase price. However it does not work like that. Shares that do not make a high enough profit are kept in the portfolio for too long this way because it can take a long time to achieve the desired result. Do not be afraid sell your shares if prospects are not good, even if this would mean you make a loss or do not make enough profit. Replace your shares or securities by diamonds for example, which will yield a higher and more stable profit. The long-term goal is to keep the most profitable positions only and to replace the less profitable ones by alternatives. At Baunat Diamonds we are happy to advise you objectively on this matter.