Investment is the act of using your money to make more money. It’s one of the games played by the smartest individuals in the world.
If you’re new to investing, this likely to be the best article you could read right now.
It’s an excerpt from Global Crypto Podcast featuring Raoul Pal, the renowned trader, and hedge fund manager at Realvision.
- 1 So what are the 5 Investment lessons every newbie investor must know by Raoul Pal?
- 1.1 1. Don’t invest in what you don’t understand.
- 1.2 2. Don’t invest because someone told you to invest
- 1.3 3. Don’t invest because you want to impress someone
- 1.4 4. You need to understand how volatile something is, so you can understand how to size it.
- 1.5 5. You won’t become rich overnight
So what are the 5 Investment lessons every newbie investor must know by Raoul Pal?
1. Don’t invest in what you don’t understand.
Before you start throwing your hard-earned capital into products, projects, stocks or securities, etc. make sure you’ve done your homework. Do a thorough research of what you’re about to put money into.
According to Robert Kiyosaki, the renowned author of Rich Dad Poor Dad,
“Investment is not what you do, it’s what you know.”
So if you don’t know jack shit about what you’re doing, don’t bother investing in it.
2. Don’t invest because someone told you to invest
This a very common mistake among newbie investors in Nigeria. A friend tells them to buy a particular stock or invest in a scheme, and without doing proper analysis they jump on it.
This can be a very fatal investing mistake, as you can end up losing all your capital.
We do have a lot of front runners in the market who would already purchase the stock you’re buying, and would later dump(sell) it on you.
So be careful. Don’t be the one that buys a basket of something that worth nothing.
Don’t be the greater fool. Don’t let your friends dump on you.
3. Don’t invest because you want to impress someone
A lot of individuals out there enter trades or investment so they can impress their fellow mates. You see them posting all entries and screenshot of their trades online.
This very wrong. In the investing world is either you make money or you impress people.
You can rarely do both.
4. You need to understand how volatile something is, so you can understand how to size it.
Volatility, which is the sharp intense movement in the prices of goods and services is a very cogent factor in every Investment.
The more volatile your market, the more potential profit and loss you can make. Take Bitcoin, for example, it has an average daily volatility of 5%. This means every day you can make up to 5% gain or lose trading it.
In a highly volatile market, what can be done is to manage risk is to size your position properlly. Follow this link to read more about Position Sizing.
5. You won’t become rich overnight
Yes, this very true. It takes time to master the game of investing and eventually become a professional investor.
I will advise you don’t focus on the money you can make at the moment. Instead, focus on following your plan and getting better day after day.
Overestimate the process and underestimate the result. It takes longer than you think to become good at investing. A five-year timeframe could help.
What other investment advice do you think every newbie should know?
Kindly share it in the comments below.