Investing is the quintessential key to financial planning. No financial plan, short term or long term, can be effective unless there is an investment strategy integrated into the approach. When you actually start investing, you would have to endure a learning curve. Knowing a few of the golden rules of investing can help you through the nascent phase and you can hone your skills, acumen and judgment as an investor.

• As an investor, you must always move promptly. You cannot wait too long to decide to invest. You would miss the bus. You cannot wait too long to make an exit. You may incur losses. Entering and exiting a trade at the right time, buying something at the right time or selling an asset at an opportune moment are the bedrocks of investment.
• While you must have time by your side, don’t obsess about timing. Patience does payoff in the end, provided you are watchful and don’t make poor decisions. No one gets rich overnight. Even those who make windfall gains and apparently seem to become rich in short spans of time have had years of practice or learning. It is very difficult to start with a humble sum of money and churn out a million in no time.
• You should never invest all your money in the same stock or fund. It is considered wise to always contemplate multiple funds. You need not be an expert in all those funds. You can invest more in a fund you understand or stocks you like but do diversify your investments. That is the first step to mitigate risks.
• Always know what you want and when you want it. Don’t wait for unprecedented profits. If you have attained your target, quit the trade or exit the investment. Have a deadline in mind. You can exceed the deadline if there is a good enough reason. Else, it is time to shift your focus on other investment opportunities.
• Understand that every financial market undergoes a cycle. There will be appreciation and depreciation, troughs or lulls. Try to ride the cycle or the waves to your benefit. But don’t try to emulate what everyone else is doing without really understanding why. Others may have different goals or agendas.
• Investment is neither about buying and holding nor about buying and selling. You have to combine a bit of both. Buy, sell, hold, wait or just dispose of an asset, depending on the circumstances. Don’t be inflexible with your approach.

 

Be a dedicated investor, check your investments, study and review your strategies.

Dividends are a part of the profits that a company make in a financial year and decide to share with all its shareholders. Every share or stock has a certain dividend value which is announced at the annual general meeting or the meeting with shareholders. Usually, it is an executive decision with the entire board of directors having a vote. Companies can be generous and announce handsome dividends after a great year. They can announce no dividends for years if there isn’t enough profit or if they are incurring losses. Let us explore the dynamic concept of dividends.

• Companies have different approaches to deciding on dividends. You must understand these differences if you are to pick the most rewarding stocks. There are growth oriented companies that would hold onto the profits to finance expansion and scaling. This prevents them from paying handsome dividends. They may not pay any dividend at all, despite churning a profit. There are yield companies that have done fairly well for years, if not decades, and don’t need more funds to expand. They would happily share the spoils with the investors who have stood by them, dividends.
• As a smart investor, you must learn a bit more about dividends than just the amount being announced for a given year. There’s dividend yield ratio which is essentially the number of dividends divided by the present share price. You would typically get to know the dividend yield ratio from the press release and you can calculate the earnings you would have depending on the number of shares you own.
• Dividends aren’t necessarily paid once a year. Many large-cap companies will pay dividends once every six months, there can be interim dividends and a final dividend at the end of the financial year. Listed funds can pay quarterly and small companies usually don’t pay any dividends till they grow and amass a certain ready capital. Companies can always choose to pay special dividends to motivate investors or to retain shareholders. They can also pay special dividends when there are windfall gains. There’s another type of dividend known as franked dividends, which are essentially paid by companies after they have filed their taxes. Once the taxes on profits are paid, companies may choose to announce a certain dividend, which will also allow shareholders or investors to get a credit on the tax paid.
• Get accustomed with a few important terms, like ex-dividend date, record date, payment date and dividend reinvestment plan.