Investing is like a game, it will require you to understand and master the rules to get into success. This is important especially for beginners in investing. For beginners, investing starts with an understanding that every price is determined by supply and demand.
Hence, we should understand that regardless of how young or old you are, learning the basics in anything is very important. Most people take lessons to master the process of doing a certain thing. Unfortunately, most people never learn the simple basics of investing before investing their hard-earned money.
The following rules are the basics which you have to remember about investing.
Basic rule #1. Understand the kind of income you are working for
Most people think is just to make money out of investing. They don’t come to think that there are different kinds of money to work for. There are three kinds of income, and they are as follows:
Ordinary earned income
This is basically and generally the money you get from a job via a paycheck or payslip. It is the highest-taxed income, thus, the hardest to earn and build wealth with.
This is derived from paper assets such as stocks, bonds and mutual funds.
This is derived from real estate, royalties and distributions. Compare to ordinary earned income, it is the lowest-taxed income, with many tax benefits, thus, it is the easiest to earn and build wealth with.
Basic rule #2. Transform ordinary income into passive one
Most people begin their life out by working for ordinary earned income as, of course, an employee. The way to establishing wealth, then begins with understanding or knowing that there are other types of income as resourcefully as possible.
Basic rule #3. The investor is the asset or liability
A lot of people think that investing is a dangerous thing. The reality, however, is that it is the investor who’s dangerous. Understand that the investor is the asset or liability. There are investors who lose money while others are making it. That is, in fact, a good investor love to run behind a dangerous investor because that is where the real investment bargains can be found.
Basic rule #4. Always get prepared
Most people try to anticipate what and when things will happen. But a real investor is always prepared for anything that can happen. If you are not prepared enough with everything around you, a great opportunity will pass you by. Always remember that it is now important to anticipate what will happen. Instead, focus on your own, on what you desire, to keep your eyes open to what is happening, most especially, to respond to every opportunity that passes you by. This can be done through continuously educating yourself and applying your knowledge.
Basic rule #5. Great deals attract money
One of the biggest concerns you might have as a beginner in investing is how would you raise money if you found a great deal. The thing goes with the previous rule. Be prepared, educate yourself and gain experience. With that, you can find a great deal, the money will find you or visa-versa, you will find the money.