Investment is a big task to manage; if managed well, rewards can be charming else it will be big disaster.
Before jumping in to investment market, we should follow basic steps or generate own basic steps and must have understanding of different markets.
Selecting the Market:
Golden rule for the investment is 'Never invest in the market which you don't understand'. You may know the market but you must understand the market. So first need to find out the market where you expertise fits in. We see many people investing in real estate while they have no understanding of real estate market.
Just seeing friends and family, making money out of it; doesn't mean you will also make the money form the market.
Each investor much understand their own capacity of taking risk, amount that can be invested and backup plan if investment goes wrong and only invest that amount of money that they can loose and still walk away with no harm to their personal or financial life. Depending upon type investment and returns, debt investment is not always good because when it it goes bad, you may not able to walk away safely.
Understand - Market Cycle:
Every market has low, average, peak , saturation and bubble phase.
Investor must invest wisely as per the investment need. Many people invest when market is at peak or bubble phase, in this phase prices are very high and huge number of people are buying these phase just hoping price will go higher, but ultimately market will crash due to peak or bubble phase and investor will left empty handed.
Best way to invest is at the low, when there is less buyer. This is also called buyer market so buyer always has bargaining power to purchase. Its a long term investment so when the peak, saturation or even bubble comes , investor can come out with the hefty sum of rewards from their investment.
For the short time and 'high risk quick gain' returns, investors can enter in peak, saturation and bubble phase. But exits should be much quicker. This is not a long term investment, this is like making quick buck in short time but the risk / reward ratio is too high.
Research - Do your home work:
Before entering to any market, one should do research on that market. We can get the sales history, price history, buyer , volume e.t.c data easily from online sources. These data must be analyzed to find out the phase of market. Base on that investor can derive when to invest and how to invest.
i personally suggest to use different chart analyzing tools , specially median price, RSI, Bollinger band, support and resistance e.t.c. These tools helps to find out state of the market and even help to find out entry and exit point.
Advice - Don't follow the crowd:
This is human nature that we always follow our friends, relatives and intent to do what they are doing. Many people are investing like in real estate as their friends made good money out of it. But this formula not always work as you may not have. As i mention earlier that many people enter market at peak while following crowd, this is the point where the initial investor makes money by selling rather than further buying. So do your research first, find out the market phase and then only invest. Mostly following the crowd is just devastating results most of the time.
Entry & Exit point:
This is the most important phase in the investment. As i mentioned earlier, entry should always be low or saturated phase and exist is always in the peak or bubble phase, not the other way around. When the price of the investment is high, we get so many news, events on the media, so most of time peak is generated by media or handful of people mostly related to that business, so if we are going to enter in the market taking the advice from the same kind of people for the same market is very bad idea as they always suggest you to buy no matter the market condition. So research research and research before you enter to market.
Same kind of hype is generated while exiting the market, many people cant exit while market is still high, either they are waiting for more price rise or waiting the time when price will start to fall but remember unless we show others ( buyer) that they can also make money by buying from us we can't sell. So if we sell at the time of peak we can sell easily but if we try sell it when price is going down, no one is ready to buy as its going down. So in investment we also need to think for those buyers from our side, and make sure they will also make money (no matter big or small) buying from us.