Precursors to all investments

The rise of the cryptocurrencies and the automated trading systems like Ethereum Code has fascinated investors and everybody has got on the bandwagon to become rich. It is crucial that you find out more about all these quick rich schemes before you start investing in them heavily. They are relatively new fields and nobody is sure how the pendulum will swing. It is better to be safe than sorry.

Here are a few ground rules that you must adhere to before you invest in anything.

  1. The trap words: People often fall victims to Ponzi schemes based on the keywords these perpetrators use in their marketing strategies. Words like “get rich quick,” “guaranteed results” etc are sure giveaways. Till date, there is no investment that can assure 100% profit except for FDIC insured savings accounts or the US treasury bonds that too if you hold it till its maturity. Even these are not free from risk. Steer clear of schemes with these words.
  2. Do not invest in what you don’t understand: The common mistake most people make is to trust the person selling you a scheme and part with hard earned money only to burn your fingers when things go wrong. If you do not understand how a particular investment works do not put your money in it.
  3. Assess your net worth: Probably this is the first step you must take before you even think of investments. Calculating your net worth will give you an idea of how much you can invest comfortably without feeling a pinch.
  4. Invest in known areas: The lure of easy money from alternative investments is no doubt hard to resist but like already stated unless you know what you are getting into, desist from investing in unknown assets. It is always safe to stick to real estate, bonds and publicly traded stocks which are easy to follow. If you must invest in other areas limit it to 10% of your net worth.
  5. Do not take a loan for an investment: The glitter of the cryptocurrency and easy money had blinded many an investor who took loans to invest in them but once the prices started plunging they have been left high and dry. It is foolhardy to lose not only your net worth but everything you owe when you take a loan and your gamble doesn’t pay.

By taking some basic precautions most of us can remain risk-free to a large extent with all our investments.