The 8 rule of Investing | How to earn money online in India

How many years do you need to become a billionaire?

Some people did it in 10 years while others in 50, it highly depends on the person and the circumstances, but one person outperformed everyone else.

When Facebook was still an idea, Eduardo Saverin decided to invest in it 15 thousand dollars.

He stayed in Facebook for less than a year since he had a terrible relationship with Mark Zuckerberg, but that little investment and a year in Facebook turned him into a billionaire.

 His net worth today is over 11.

3 billion dollars.

But not everyone gets such an opportunity.

Quite often, people have to build their wealth from scratch step by step.

However, one of the ways you can reach your financial goals faster is by investing.

But the problem is that investing isn't easy, its complicated, competitive and cruel and if you don't know the rules, you will probably just lose all of your money that you worked so hard to earn.

  So, if you want to be one of the few people who actually make money by investing, master the rules first.

number one - hope is not a strategy There are three types of companies you should invest in.

One, it's a stable company, it has a great product, excellent leadership, and good financial statements.

So the company would probably keep growing and your investment if you decide to invest in this company.

Secondly, its a great company, but the stock price is undervalued regardless of the reason.

Maybe it received some negative press recently due to some minor issues, but the stock will definitely rise back to its true value.

  Thirdly, the company isn't making money now, let's say its a start-up, but it has great potential.

It might be a brand new industry, or they are developing breakthrough technology, and in the long run, they could be making huge profits.

But to invest in such a company, you need to have a deep understanding of that industry and the business overall.

You can't simply choose a company based on how cool its name sounds and hope that it will grow.

 Can you get lucky?

Maybe, but that hope is not a strategy.

So invest only in companies you understand.

2.

secondly, Time is more valuable than money The problem with investing is that, if you want to earn a reasonable amount, you have to invest quite a sum of money.

Your thousand dollars will earn you 80 bucks at best annually, assuming an 8 percent rate of return.

But if you invest 1 million dollars, with the same rate of return, you would be making 80 thousand dollars, which can provide you with a good quality of living.

But earning that million dollars is the problematic part.

You can't save all of your paychecks.

You have to put food on the table and keep a roof over your head.

And that's where the magic of compound interest comes into the picture.

Even with as little as a few thousand dollars, you can reach to millions if you take advantage out of time.

Let's say you just graduated from high school and you have saved 2000 dollars from the pocket money you have been given in the last few years.

That's a lot of money of course, but not that much, you decide to invest it.

 You enroll in college and get a part-time job, but you decide to live frugally and invest another 200 bucks every month by saving up a bit on unnecessary expenses such as Starbucks coffees.

At first glance, it seems like you can't save that much, and you are right.

Even if you increase your savings with the rate of inflation (3 percent), you will save $182,969.

48 over the course of 40 years.

 But because you have been investing it and reinvesting the interest and not merely saving it, it turns to 1.

6 million dollars ($1,607,320).

In fact, in the first 20 years, you won't cross 200K, but in the last 20 years, you will earn 1.

4 million dollars.

why?

 Because of - time.

Of course, no one wants to wait 40 years before they can turn millionaires, but the message is, the earlier you start, the bigger the advantage you would have.

3.

 thirdly, Buy When There's Blood in the Streets Baron Rothschild, an 18th-century British nobleman and member of the Rothschild banking family, once said: "the time to buy is when there's blood in the streets.

" This rule does not only applies to the stock market but to any kind of investment.

Because humans are too emotional and are driven by their feelings.

Instead of making rational decisions that are based on data and facts, most people would go with their guts.

 For instance, a bank would go bankrupt.

All the people who kept their savings in that bank would lose their savings, other people would see that and would rush to their banks to withdraw all of their savings being afraid that their bank might go bankrupt as well, but because everyone has withdrawn their savings, the bank goes bankrupt, and that will push other people to do the same slowly bankrupting every bank in the country and crushing the entire economy.

The panic destroyed the entire economy, but that's just in theory, in practice, well-established companies or banks survive such panics but lose a lot of their value.

In times like ours, the uncertainty has created a panic in the market, which led a lot of investors to sell their investments and scared off other investors from buying which resulted in a significant crash in the market.

However, once the panic fades away, businesses will get back to normal, and all of these companies will gain back their value.

That's why when there is chaos or panic in the street, that's the best time to invest since a lot of great companies would be undervalued.

4.

Next, Don’t let greed destroy you In 2003, Warren Buffet invested 488 million dollars in PetroChina at around a US$37 billion valuation.

At that time, it didn't seem like a good investment.

A couple of years later, oil prices have soared, and china's economy wasn't showing any signs of slowing down, and with a series of good fundamental earnings reports, PetroChina's stock jumped significantly to the point where Petro China crossed a trillion-dollar valuation.

 Buffett could have made 13 billion dollars out of this deal, but as the company reached a valuation of around 300 billion dollars, Buffett sold his entire stake and made only 3.

5 billion dollars.

The lesson is, don't be too greedy because your greed can end up losing you more money than you could possibly earn.

  He could have waited longer, but how could he possibly know when it will crash.

Petrochina is now trading at a 150 billion dollar valuation.

5.

Number 5, Diversification is nonsense How many stocks should you own on average?

What do you think?

Some people say 10, other experts suggest 20 to 30 in order to diversify your portfolio enough.

But here is the question.

Let's say you have a great company in front of you, it has great products, its financial statements are strong, the company has an excellent management and leadership.

The question is, why would you invest in any other company if you have the opportunity to invest in this company.

And that's why diversification isn't really a great strategy.

But you might say, there aren't many such companies.

Fair enough, you are right!

That's why you should only invest in a few great companies.

So how many stocks should you own?

As fewer as possible!

With each extra stock you buy, you have to spend extra time and resources to follow it, read it's financial statements, and make a financial analysis.

Of course, you should not put all of your eggs in one basket, but you also shouldn't invest in more and more companies just for the sake of diversification.

There are some great companies out there in the market that have consistently been doing great, such as coca-cola, apple, Berkshire Hathaway.

Because they are such great companies, they will definitely survive any crises and would continue to grow.

Each of these companies has at least doubled its stock price since the last recession.

6.

Number 6, Dividends matter When it comes to making a profit out of a stock market, what people mostly look at is the stock price.

The strategy is simple, buy low, and sell high.

That's a good strategy, but stocks don't just go up and down.

They provide a stake in the company, which means, every time the company makes a profit, it has to send you your share of that profit - that is known as a dividend.

A stock by itself isn't really that helpful, yes, of course, if the stock price keeps rising, you will get wealthier, but you are only getting wealthier on paper, you can't materialize that wealth unless you sell that particular stock at a higher price.

It's like buying a piece of a real estate and then waiting for its market value to increase instead of renting it to profit from it every month.

And then you use that profit to buy more real estate or these dividends to buy even more stocks and grow wealthier.

Passive income is always great!

Of course, sometimes its better if the company does not pay dividends, especially if it is in its early stages or if the company has the potential to reinvest that profit to grow much faster.

7.

Next, The stock market isn't your only option When you hear the word investing, the first thing that comes into mind is the stock market or the real estate or government bonds.

They are all great investment tools, but they might not always be a perfect choice.

Remember, investments come in different shapes and sizes.

Sometimes the best investment specifically for you might be that business you have been thinking about for some time.

Or maybe if you have plenty of extra time after your job, and you have a passion for graphic design.

Investing in a photoshop course might earn you much more than if you would have invested that cash in the stock market.

Investing doesn't always have to result in immediate materialistic gains.

Maybe investing in a self-help book or finance books will have a much bigger impact on your life, in the long run, than any other kind of investment.

The point is, think outside the box.

The Opportunity might right under your nose.

8.

and lastly, patience is everything Finally, after a few months of saving, you have earned enough to invest, but you can't find any good deals in the market.

What do you do?

Wait.

Of course, sometimes the opportunity strikes, and you have been quick enough to take advantage out of it, but quite often, they are traps that will simply drain your money.

Don't rush, carefully analyze the market, read one more article, and invest when you are confident enough.

That also applies to selling.

If the market is down, don't be a fool to rush to sell all of your stocks, maybe that's temporarily, and the stock price will rise back.

Don't be driven by your emotions, learn to be patient.

I hope you guys have enjoyed this video, make sure you give this video a thumbs up and leave a comment because that will really help the channel.

And of course, hit that subscribe button if you are new around here.

Thanks for watching and until next time.

from AN English https://www.norjoe.com/2020/06/the-8-rule-of-investing-how-to-earn.html