Tuesday, 23 February 2016

RULE 73: Know When To Let Go Of Investments


By on 05:00
Share this Post Share to Facebook Share to Twitter Email This Pin This



(L-R) Patience Jonathan, Titi Abubakar & Bola Shagaya
I have my own little calculation which I am happy to pass on to you. I learned it from an Internet site a while back and it has stood me in good stead. Basically for an investment to work for me means I am looking for returns that will double my money in five years.

The calculation I use is to divide the interest rate into 72 to find out how long it will take me to double my money. For example, if the interest rate on a particular investment is 6 per cent, then it will take me 12 years (72 divided by  6 = 12) to double my money. Too long for me; So, I would be looking for an interest rate (known as a ‘return’) of around 14.4 per cent (I know, I know, you’d be lucky at the moment but this is only an example). This works for any amount of money incidentally. 

There’s a Chinese proverb: The more you know, the more luck you have’. So it is that the more money you gain, the more knowledge of the markets you’ll need. Take it slowly and build a portfolio based on experience, knowledge, decent advice, up-to-date research and helpful friends”.

 Advert
So, if you want to know what interest rate to look for divide 72 by the number of years you are prepared to wait. 72 divided by 5 = 14.4%. Gosh, something useful for you there and I did all the work for you.
For me, therefore, any investment that looks like it won’t double my money in 5 years I pass on or, if it makes financial sense to get out (i.e. no penalty for doing so), I will let go of. I have my criteria, you need yours.
Perhaps you need to let go when:
• You feel in your waters that something is not right.
• The market has taken a downturn.
• You read something that makes you curious or suspicious of a particular investment.
• You need the money for something better, hotter.
• The investment hasn’t been doing well for a while and is sluggish.
• You’ve achieved your maximum profit and its time to get out.
• You’ve lost interest in a particular investment and simply can’t be bothered any more.
• You have changed emotionally or ideologically and need to move on - perhaps you only invested green and now want mainstream or vice versa.
• The investment isn’t fashionable any more - old hat can be costly if the return isn’t there.
• You need to spread your portfolio around to minimize losses in a recession or down market.
• You bought blind and now have more information - and can see our fingers getting burnt.
• Throwing good money after bad will just aggravate the situation - cut your losses and get out (see Rule 74).

There’s a Chinese proverb: The more you know, the more luck you have’. So it is that the more money you gain, the more knowledge of the markets you’ll need. Take it slowly and build a portfolio based on experience, knowledge, decent advice, up-to-date research and helpful friends. And if an investment isn’t
Working, know when to let it go.
I know a man who bought shares in his company when he worked there - a good investment at the time as he bought them at a discount as an employee perk. After he left the company, he found out from contacts that the company was beginning to get into trouble and read about industry changes that he knew would be bad for the company. Sadly he was too lazy to do anything about his shares and didn’t sell when there was the first sniff that all wasn’t well. The value of these shares is now a half of what it was. He knew when to let go - but he didn’t do it.

From The Book; The Rules of Wealth by Richard Templar
(Read Rule 74 of Rule of Wealth tomorrow on Asabeafrika)

Read-to-Wealth Series
POWERED BY:
http://www.proshareng.com/
 

Gbenga Dan Asabe

Africa's Number One Celebrity Encounter Blog

0 comments:

Post a Comment