How to invest in 2012 and in life – Part 1

The bulk of information and reports you will read about investment advice is almost always too simple or far too complex to be used in your portfolio to any great effect. It is simply impossible to react to every minor fluctuation within the market with the appropriate response. Doing so will drive any trader insane, and will render his investments far too confusing to reap their benefits, whether as a whole or individually.

Yet your garden variety buy and hold-onto approach that most inexperienced investor take can be too simple to generate desirable profits. To put it in perspective; the market reached its peak in the fall of 1929. A trader who opted to buy and hold his assets would have only broken even by the late 50’s. That’s an unreasonable amount of time to wait, especially for someone who was going to use their investment to retire in the 30’s or 40’s. The market is not built to kick in profits to every dealer. One has to use certain investment strategies to get what one expects.

There are certain golden rules to investing wisely. One of the most important of these is the dogma that the return of your money always outweighs the return on your money. For those who discarded that rule, the investment world prepared many curveballs, like the bursting of the tech bubble, the series of recessions still lingering across the globe, and more recently, the euro zone debt crisis which is still only unfolding.

Capital preservation certainly does not sound as exciting or potentially-profitable than other investing methods. Yet it creates a safety zone for your money, which is ultimately so much more useful. Think about the basic figures of it; an investor who just lost 20% of his primary asset would have to generate 25% in profits just to get back to where he was. If you lose half of your investment, you would need a profit of 100% just to break even.