Facts You Should Know before Investing
By Saghir Aslam
Rawalpindi, Pakistan
(The following information is provided solely to educate the Muslim community about investing and financial planning. It is hoped that the Ummah will benefit from this effort through greater financial empowerment, enabling the community to live in security and dignity and fulfill their religious and moral obligations towards charitable activities)
What sounds most right about stocks, bonds and mutual funds may not be so right.
Sometimes it’s not the crazy investing ideas that we need to avoid – it’s the ones that seem most sane. Many widely held beliefs about stocks, bonds and other investments sound like reasonable guidelines for where to put your money on Wall Street. But through my work in the financial industry, I’ve seen how these oft-repeated truisms can be the catalyst for financial disaster. So be on your guard against these misleading beliefs, and pay attention to the real truths instead.
I have shared with you repeating about investing that it’s not as simple as some people think. It’s it requires good amount of time to research, particularly knowledge. Proper planning is the key. If you don’t plan you are not going to be successful for sure. You can plan for yourself. You also need to plan for your retirement. Emergencies that may cause don’t plan, start planning either. And it can save your big amount of money. Allah ST give us lot of because we just need to understand and learned. If you want to learn more, talk to people who are in already doing this as they can give you great amount of valuable information.
Big markets sell off in 1987, many people started to dump stocks like crazy. Many people thought this is the end and they are going to lose a lot of money. People were selling left and right. When I talked to some of the state brokers. Few days after the market sell off, I was told that they were receiving so many calls. It was getting extremely difficult for them to handle the phone calls. Because out of few, every Tom, Dick & Harry wanted to sell. They could hardly have a time for lunch.
On the other hand, instead of selling like everyone else, I was not afraid, because I knew it’s not the end and the market will be turned. Myself buying the stock while others were selling on terrific prices. Because when this kind of selling comes, stocks goes down and continue to go down further. Myself buying the stock at that time secured me well and it was the blessings of Allah ST. I really bought very good stock which saved me well and I end up making really good money.
FACT # 1
IT’S IMPORTANT TO FOLLOW YOUR INSTINCTS
Though that approach may work well in many areas in life, it serves us poorly when we invest. In fact, our gut feelings lead us down predictably money loosing paths. Think of the stocks market as bandwagon that holds sway over our emotions. Is it plunging? Fear says hop off-not just to you but to millions of other people watching the decline of the Dow and other market indexes. Unsurprisingly, doing what everybody else is doing precisely when they’re doing it doesn’t seem to be a winning formula for investing. You end up buying stocks as they’re getting expensive and selling them as they’re getting cheap- in other words, buying high and selling low.
INSTEAD Ignore your gut. What does work on Wall Street is flipping the script. As Warren Buffett famously said, “Be fearful when others are greedy and greedy only when others are fearful.” I followed that advice by buying stocks during the financial crisis a decade ago. It went against every instinct I had.
FACT # 2
INVESTING IS COMPLEX
Everybody likes to feel needed, including people who work in the financial services industry. We love to throw around terms like fundamental analysis, technical analysis, alpha, beta, correlation, Contango and backwardation (really!). Many investment products are mind-numbingly complex, perpetuating the perception that investing is way above the pay grade of the average investor. Spoiler alert: It’s not.
INSTEAD keep investing simple. Make sure you can explain your investing strategy to any 8-years-old. For example, you can own virtually every public company on the planet (roughly 10,000) with one or two simple low-cost index funds, such as a total U.S stock and total international stock index fund.
Let me share with you some other information about investing. This will save you good amount of time and also give you the opportunity to be invested in the market without spending tremendous amount of time. Do your homework searching and some more searching. Many of us are busy with full time job and family. Here is the easy way for you to invest at the same time be diversified.
Think of buying index fund. For example, you could buy total US stock fund. This will give you the opportunity to be shareholder of many well know blue chip companies. (To be continued)
(Saghir A. Aslam only explains strategies and formulas that he has been using. He is merely providing information, and NO ADVICE is given. Mr Aslam does not endorse or recommend any broker, brokerage firm, or any investment at all, nor does he suggest that anyone will earn a profit when or if they purchase stocks, bonds or any other investments. All stocks or investment vehicles mentioned are for illustrative purposes only. Mr Aslam is not an attorney, accountant, real estate broker, stockbroker, investment advisor, or certified financial planner. Mr Aslam does not have anything for sale.)
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