Easy investing is possibly too easy. At the beginning of your investment career you'll want to curb your natural impulses and avoid the perils of over-investment. Here's why.
Investing in properties, company shares, or technologies can be simple, once you get the hang of it. In fact, it can be too simple. Once you've mastered the principles of investment, there's a serious temptation to use those principles too often and to over-invest. That's what you have to avoid in order to make a success of your early investing career.
Over-diversifying your investment portfolio can be a good way to hedge your bets, but in the early stages of your investment career, you're probably not working with a huge amount of investment capital.
By over-investing, you're spreading that capital even more thinly than it would otherwise be spread. You'll see returns more consistently, but not on all of your investments, which means that you're not using your capital as wisely as you could be.
The bottom line rule of investment is to know what you're investing in. For example, if you're interested in real estate ...
Do background research on the company you're buying a piece of, and understand the pricing trends of the neighbourhood in which you're buying and renting apartments.
When you diversify your investments too much at an early stage, there's a psychological temptation to avoid this necessary research. If one investment fails - or even if half your investments fail - you can still recover some or even most of your initial capital. The risk of failure is lowered, so you're not as motivated to do the research that helps you avoid failure outright.
For experienced investors, easy investing practices - diversifying your investments - can be a good policy in order to protect yourself.
For beginning investors, diversifying might give you less of a return than you could otherwise receive - and can encourage really bad investment habits, like not understanding the background reality of your investments.
Before you get in over your head with easy investing ...
Do a little bit of hard work,
Confine your early investments to a few properties or stocks, and put as much of your capital as you can into those few properties.
You'll see the dividends - and with that solid background underneath you, you'll be able to spread your funds a little bit further in the future, confident that you know what you're doing and that you'll keep doing well!
