10 Golden Rules of Money Every Investor Must Follow to Protect Their Capital

When you plan to go in full-time business it is more appropriate to understand business ethics which will guide you to be a successful business man. This is because money that is meant for investment is supposed to be separately preserved or save for that purpose. There are rules of money meant for investment must be obeyed by investors who truly want to succeed in their business venture.

I personally have issues with this same concept about money in the past, I would be planning to do some kinds of investments and whenever the money comes it will escape my memory completely. That’s because I never wrote it down so I was completely wrong by doing so.

I took out time to learn these rules about money from experienced people including Dan Martell, a YouTuber with over two million subscribers and I decided to share them with you so that if you were also in the same show with me then definitely this may help you too.

I’m not guaranteeing you that these rules are 100% sure to transform your financial habits or discipline.

Introduction

The reason why many investors end up going bankrupt is because, they didn’t either plan well or mismanaged the capital that they should have set aside for their investment purposes. Money that is meant for investments ought not to be used for any other thing apart from the investment purposes it was set aside for.

Before we begin to list and explain the various rules of money that every investor must take into account when handling money that is meant for investments purposes, we need to at least know what the term “investment” mean.

Not all who are reading this article understand Investment especially in the context we are using it, even though they might have been traders of some sort. It will be only right if we elaborate in summative paragraph what the term investment mean and why rules of money should be applied when dealing with it.

What is Investment

There are many ways that investment is been defined by many authors, we can also define it in our way.

The term investment is used to describe resources or capital that is been paid for goods or services by an investor with the aim of generating profits or income thereafter (ROI).

One is said to have invested his or her money or resources when he or she buys for instance properties he or she intends to resell in the future and make more money in return.

Traders and businessmen are also investors in this context and even in real life. This is because they buy goods and services with their money (Capital) with the sole aim to sell and make more money (profit) in return.

Their are key terms in the definition of investment that I would like to explain further for more clarity. These key terms are investor, capital and Return on Investments (ROI).

Who is an investor?

An investor is a person who purchases goods or services with the goal to resell and make profit (ROI). For example and exporter, real estate investors and so on.

Capital

This is the business term used to refer to the money that is used in investment.

Return on Investment (ROI)

The return on Investment is profit made on an investment. For example, if I buy a tuber of yam for N500 and later resell at the cost of N800, the interest generated here is N300 and it’s refer to as a Return on Investment (ROI).

Why Rules of Money Matter in Investing

Without the rules of money in business, so many people will be extravagant with spending. Some may even spend the entire capital and start all over again.

What is Rules of money?

Rules of Money are the ordinances or guidelines that determine how decisions about money are executed. Without these rules, so many people will not be guided on how they deal or treat money that should be invested.

Without the rules of money in place, financial decisions will be emotionally made which may negatively impact the investment. These rules also create a structural framework that minimizes risks and guarantees stability and preservation of the capital.

What are rules of money for investment?

Rules are simply guidelines or principles that are been set aside to protect a particular thing.

In this context, we can say “Rules of money for investment” are just principles or guidelines that investors must abide by in order to protect their investment capital. They must follow these “dos and Don’ts” in order to keep their capital growing or safe.

There are many rules of money that is meant for investments but we will just be looking at the ones that I consider more important or necessary to in investment today. I urge you to also read our previous post 👉👉 How I Made ₦16 Million Blogging: My Google AdSense Success Story

Below are major rules that investors who wants to protect their investment capital must follow or abide by;

1. Consider investment in long- term

The volatility of the present market must not be ignored by investors who wants to protect their investment capital. Take for instance, proprietors of private schools who have invested their resources in a long-term business (education). This kind of business can continue to yield interest annually for as long as the school remains or is well managed.

Because of the market volatility, if you always buy and sell immediately you might lose a portion of your capital due to the volatility of the market.

2. Diversify or spread your investment

Like a wise saying in Africa goes, “Don’t put all your eggs in one basket”. This simply explains that it is risky to put all your resources in one channel of income, because if it fails the entire capital will be gone.

Invest your capital or money in many businesses as possible so that if one fails the other ones can make up the loss. By so doing, your capital is more secured.

3. Plan to pay taxes

Taxes must take a portion of your earnings from the Return On Investment (ROI) . So it is more wise and appropriate if you take measures to prevent taxes from taking a portion from your capital. You should always plan to keep a portion from the income or profit generated to pay taxes annually, it’s important and mandatory.

4. Have some financial goals

This is one of the golden rules of money that is meant to be invested. It is a good idea to set your financial goals, this includes setting aside some cash from the income generated for bills payment.

Try not to use part of your capital to pay bills or settle family issues. All of your goals should be planned from the income and not capital.

5. Don’t predict or time the market

Another way of protecting investment capital is by focusing on the long-term investment that has been yielding results.   Try not to forecast or predict the market as this has the potential to ruin your entire capital. For instance, because a bag of rice was sold at the rate of N20,000, and those who invested in it made profit as huge as N12,000, that should not prompt you into investing all your capital into bags of rice, it might fall due to surplus that might follow immediately the sudden surge in its price.

‎6. Getting professional advice is important

‎Not every body who is an investor has a formal education about investment, so don’t ignore the advice of a professional and always seek or consult them whenever there is need to do so.

‎Don’t just invest in a kind of business that you know nothing about or you do not have any prior knowledge of. Try to constantly seek the advice of a professional in the area of business or the type of investment where you want to invest your capital.

‎This is another powerful way of protecting your resources or the capital that you want to invest.

‎7. Remember to keep an emergency fund (miscellaneous)

‎What do I mean by an emergency fund? Well, I term it so because unexpected event sometimes occurs outside of your plan so it is more appropriate or advisable to set aside funds that can be used to settle the unexpected events that may occur along the line.

‎For instance, after buying a real estate property that you plan to resell in four or five years later, you can not keep your family starving for the four years that you have planned to resell the property, you must make provisions of some emergency funds or miscellaneous that can be used to handle such issues as buying of food  for the family.

‎8. Don’t chase market performance

‎Like I have stated earlier, it is so risky to be drawn to such investments that have recently done very well in the market. Of course the whole attention of many  investors will be drawn to such investment and it will quickly crash due to oversupply.

Trends are good but they come with risk that must be considered and caution be taken before venturing into them.

‎For instance, if a commodity that was sold for N5,000 suddenly rose to N20,000, it is very common that most investors will divert or channel their capital to invest in such a commodity and because those who stored that particular commodity will also be attracted to the sudden rise in price, they will definitely bring it out to sell at that particular moment and that will increase the supply chain which may definitely cause the price to fall.

‎9. Re-invest profits and dividends

‎When you make profit on your investment, in order to secure or protect the capital that yielded such profit, it is better to re – invest and be expecting more returns on maturity of the investment.

‎For instant, a man who has a school can be making profits annually so if he wants to protect his investment capital, it is more profitable if he is re -investing his capital into other investments available (diversification).

‎10. Learn from the experiences of others

‎Similarly to consultations, you need to learn from the experiences of others who have invested in those investment choices before you so that you may not repeat the mistakes they made. This is one of the important rules of money

‎Their experiences will help you to adjust or make better informed decisions about which kind of investment you should invest your resources. Those who have invested before you can tell you about the things they did that caused them to lost and you should use those experiences of theirs to make a better informed decisions that is capable of protecting your capital.

‎Conclusion

A good investor is one who would make sure he or she does not lost both his income or profit and capital at the same time. These ten rules of money meant for investments can help you to be more proactive in making decisions that will protect or secure your capital. These ten rules will also teach you to be a good manager of resources and money in a broader context.