Principles of Investing. Ste, kick us off, what is the first principle of investing? [Ste] Numero uno is
'Start Now!' In the markets, time in the market is greater than the amount of money you have to spend
when you can and just do it consistently - that's lesson number one. [Cian] So, I'm ready to start what
is invest in what you know. Think of what you do for work, think of the products you use in work,
to find companies that are potentially worth investing in. Because you know these companies
you'll enjoy following along with them and the fact that you own a piece of that company
(or those companies plural) is going to make your investing journey a lot more enjoyable
and just a better experience overall. [Cian] You always hear people talk about companies that are
growing at these crazy rates and that you should definitely invest in them. [Ste] Yeah and you will hear
those and it's hard to avoid them with the media, social media - you're going to see all these people
telling you to buy to sell and really what you need to do is think for yourself. Buy companies
that you believe in, that you think will be around in 10, 15, 30, 100 years, stick with those
and ignore all that background noise. That's not to say that you shouldn't do your reading and
listen to experts and at least use those as ways of potentially finding new companies to invest
in - but at the end of the day don't listen to the guy on the bus telling you to buy x, y, and z,
don't listen to the girl telling you to sell when the market is going crazy, keep your head, do your
own research and keep calm. [Cian] Yeah you mentioned the media talking a lot and you hear a lot of people
is what we call emotional investing and that's really a key part to remember where as an investor
at any stage of your career is to avoid emotional investing. Benjamin Graham, who is the teacher of
Warren Buffett, another very famous investor who we speak about regularly on the show,
he basically used an allegory called Mr Market. On any given day Mr. Market might be in a great mood
or he might be in a terrible mood. On a good day he might be offering you a really high price for
your shares then on another day he's upset, he's depressed, and he gives you a really low price.
With a level head you can ignore these ups and downs of the market on a daily basis,
invest for the long run, and over the long run you will avoid those ups and downs
and benefit from it. [Cian] It is very tempting to buy stock though when you see it growing so quickly.
Absolutely, and that's kind of like the investor's curse because you can see
a share going up in price and you're like "oh do i buy, do i buy" you wait you wait you wait it keeps
going up you buy it the next day it crashes. So chances are, if you've already seen a stock going
up there's no point in trying to time the market and that's really the core message here is if it's
going up or if it's going down realistically no one knows for sure what the market is going to do,
so what you can do to avoid that is use a method called dollar cost averaging. What is dollar cost
averaging? Dollar cost averaging is investing the same amount, at the same time of the month,
consistently. So if it's monthly if it's weekly if it's bi-monthly whatever time frame you're working
with just make sure to do it consistently. You can buy when the price might be higher, you might buy
more when the price is lower but because you do it consistently over time you basically average
out the market and it'll be more of a benefit to you in the long run. [Cian] So are there any other ways
of limiting the risk when investing? One other big one is diversification, and what diversification is
is buying shares or asset classes across many different industries, geographic locations,
and then types of investments. Asset classes can be stocks, they can be shares, they can be bonds,
if you own real estate it could be rental income and essentially what you're doing
by diversifying is you reduce the risk of one aspect of your investment taking a big hit
and that having an adverse effect on your overall portfolio. Say you were invested in
e-commerce and say a global pandemic hits where e-commerce suddenly becomes hugely important
and all e-commerce stocks go through the roof. That's fantastic, however, if you are on the
other side of things and you only own shares of restaurants and hotels during a global pandemic
such as the coronavirus pandemic those shares would have taken a huge hit. However, if you
had say 50% in e-commerce and 50% in restaurants and hotels, your portfolio will take less of a hit
the journey. And that just means that you're going to learn so much about yourself when
you're investing: what your risk tolerance is, how you react when your portfolio loses value of 25%,
30%, 50% - how you react when it goes up 100%, 200%. You're gonna learn so much about yourself
by taking this journey and it will really add to your future as a whole so enjoy it. [Cian] So, to
summarize the 7 Core Principles of Investing are: 1.Start Now, 2. Invest in What You Know,
3. Ignore the noise and Think For Yourself, 4. Avoid Emotional Investing, 5. Don't Try to Time
the Market, 6. Diversify, and 7. Enjoy The Journey. [Cian] Thanks for watching we hope you enjoyed the video.
[Ste] As always, subscribe to the channel and let us know in the comments below what topics
you want us to cover next. [Cian] And of course like that video! See you in the next one.