Investing Cheat Sheet: 20 Rules For Successful Investing

Investing Cheat Sheet: 30 rules for successful investing

This is a cheat sheet with 20 of the most important rules for successful investing. The rules come with short explanations and tips. If you have anything you like to add, don't hesitate to let me know.


Saving is a mandatory investment

No matter who you are, or what you do. If you want to invest your money. You first have to learn to save money. The most important reason for this is that you need money to invest. The second reason, if you cannot keep your money, then investing is not for you. Later more about saving money.

Dividend-paying stocks

If you want to get rewarded for being an investor, you could invest in dividend-paying stocks. What are they? They are basically stocks from which the company pays its shareholders. These payments are mostly quarterly paid out and depend on how many shares the investor owns. 

Dividends can be seen as a "thank you" from the company to its shareholders. These dividends mostly have nothing to do with the company's profits. Even when a company isn't profitable, it might still pay out dividends to its shareholders.

Some dividend-paying stocks are: 
  • Gaming and Leisure Properties Inc. (GLPI) with a 6.15% yield
  • ONEOK Inc. (OKE) with a 5.86% yield
  • Universal Corp. (UVV) with a 5.75% yield
These are just a few, there are many more, a simple google search would reveal them.

Compound investing

If you get a recurring interest from assets that you own, for example from dividend stocks. Then you can reinvest those earnings. We call this compound investing, this kind of investment strategy can create a snowball effect. The more you invest, the more dividends you earn, and so on.


Be realistic about expected returns

You have to understand that if you start to invest, you won't get rich overnight. If you invest in a relatively low-risk stock, yearly returns between 5% and 10% are to be expected. 

It happens that stocks grow very fast, but it's rare. More important is to bet on the right stock, and hope that the company will grow over time. 

And if the company is doing well, you can expect to make some good profits. This can take a while though, so understand that investing is for the long term. 10, 20, or more years is very common.

Think long term

Like I said before, the best strategy is to bet on companies that have long-term visions. Most people that successfully invest in the stock market will tell you to always think long term. So before you invest, do research and make sure that the company you want to invest in is sustainable. Do you think it will still be there in 10 or 20 years?

Take calculated risks

Investments are never without risks. You have to understand this. Anybody who tells you otherwise is either lying or has no idea what he is talking about. Nobody can predict the future, and nobody knows what happens next. The only thing you can do is educate yourself as well as possible, and take good and well-calculated risks before you invest.

Diversify

Like I tell everybody that wants to start investing, diversify your portfolio as much as possible. Or, as the old saying goes: “Don't put all your eggs in one basket.” 

The more you diversify the more chances you have of making a profit. And if somehow one company fails, others are still standing. 


Invest in Index funds

As an alternative to diversifying your stock investments, you can invest in index funds, like the S&P 500. An index fund like this is basically a mix of 500 to the top stocks on the market. Basically, you invest a little bit in each of them.

Famous YouTuber Ali Abdaal likes to invest in the S&P 500 as well. So, if you are not sure, and you are new to investing, this is a good sock to start with. 

It has a yearly return of around 5%. And it is a relatively low-risk investment. Yes, it has some dips now and then, but generally speaking it's only going up.

yahoo SP500

Don't invest too much in speculative stocks

Stocks can be divided into high-risk stocks, which often tend to have higher returns. And low-risk stocks, which have smaller returns. And of course everything in between. It's up to you what you choose. But know this: High-risk stocks seem to be more volatile, which means they can go up fast, or fast down.

Look at the big picture first

Maybe you have your eyes on a stock already, and maybe it's only been going up for the past few months. And you think “wow!, this must be a good investment!”. 

Before you buy though. Did you take a closer look at the bigger picture? Before you invest in any stock, you have to know what the stock's history is. Take a look at 5, 10, or more years from the past, Is it still in an upward trend?


Research before you invest

Always, but always, first do a good amount of research before you invest any money. If you don't, your money is gone before you know it.  

Keep an eye on taxes

You have to understand that in many countries you have to pay taxes on your investments. So before you invest, know exactly when and how much you would have to pay.

Where possible, minimize fees

There are many ways to invest, in this article we mainly talk about stocks. Stocks can be bought and sold on stock exchange websites or with your bank. But keep in mind that buying and selling often comes with fees. 

Before you make any investments, calculate these fees and know what your final profits are.

Don't panic just because the market is going down

Stock prices go up and down all the time, just because the price falls a little lower, doesn't mean that it won't go up again. So don't sell your stocks out of fear. It's normal that stocks to go up and down.


Demand and supply

Understand that the prices of your investment are heavily influenced by demand and supply. It is people that buy and sell stocks. If everybody suddenly starts selling their shares, prices tend to go down. If there are more buyers than sellers, on the other hand, prices tend to go up. It's important to understand this before you start investing.

Hire advisors carefully

If you want you can hire professionals, but be aware, especially on the internet, there are hundreds of fraudulent and scummy people, waiting for new investors to prey on. Always make sure that the advisor is trustworthy and well respected!


A dip in the market is an investment opportunity

If the market is in a downward trend, you might think it's a bad moment to invest. But if you did your research, and you know there is a good chance the price will go up again. Then buying when the market prices are low is actually the best moment to buy stocks.

A dip in the market is an investment opportunity

You are what you read and listen to.

The more you know about an investment, the more chances you have of making a profit. If you want to invest in a company but you don't know anything about them or you are not up to date on the latest news regarding this company. Then you might make a huge mistake investing in them. Always follow the news and know what you invest in.  


The 20% rule  

From all your monthly earnings, you should always invest 20% or more. It doesn't matter how much money you make. If you have a low-paying job or not, you should always take a portion of your income and invest it!

Make money, Save money, Invest money

One of the best rules that I learned when it comes to investing are these 6 simple but powerful words.

Make money, Save money, Invest money. First, you have to earn money because without money you cannot invest. Then you have to learn how to save your money, don't overspend, live a simple life, and keep as much money as possible. 

And at last, you have to invest your money wisely. You can simply start with 10 or 20% of what you earn. You can start small, and grow over time.

Conclusion

There are many rules, and I'm sure there are some that I left out. But I think that these 20 are enough to get you started. Not all rules have to be followed through, sometimes you can invest by following your heart. But, like I said before, the best investments are those that are well calculated and researched.

Note.

But bear in mind, none of the “rules'' is financial advice. I am no financial advisor so you always have to do your own due diligence before you invest your money. These tips and rules are my personal opinions and are what I learned from my own experience. You might have different opinions and rules you use when investing.

But I do hope you learn something from these rules and tips. And I wish you good luck and fun investing.


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Ron Hoekstra is the founder of The Liberty OnDemand. With his many years of experience in the field of graphic design and self taught knowledge about business, digital marketing and leveraging wealth. He can give you valuable insights and content to help you grow and become more successful!


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