What are the three principles of investment?
Conclusion: Long term, diversification, and accumulation
These are the basic rules for achieving stable investment results.
Organize in one word
- Long-term: Make time your friend
- Diversification: Separating risks
- Accumulation: divide the timing
Principle 1: Long-term investment
Conclusion: Time smooths out the risks
One word explanation
Long-term investment = holding for a long period of time
why is it important
- Price fluctuations are large in the short term
- Growth is more likely to be reflected in the long term
Specific example
- Hold for 5 to 20 years
- Do not repeat buying and selling
Benefits
- The impact of price fluctuations is reduced
- Compound interest effect works
Disadvantages
- It's difficult to make a lot of money in a short period of time
- patience required
Principle 2: Diversified investment
Conclusion: Don't focus on one
One word explanation
Diversified investment = investing in multiple parts
method
- Assets: stocks, bonds, cash
- Region: Domestic/Overseas
- Industry: IT, finance, consumption, etc.
Benefits
- Reduce the risk of big losses
- Increased stability
Disadvantages
- Hard to hit the jackpot
- A little complicated to manage
Principle 3: Reserve investment
Bottom line: Distribute your timing
One word explanation
Reserved investment = Investing a fixed amount regularly
Why is it effective?
- Buy less when prices are high
- Buy more when it's cheap
Specific example
- Invest 10,000 yen every month in investment trusts
Benefits
- Avoid timing mistakes
- Not easily influenced by emotions
Disadvantages
- Efficiency decreases in a rising market
- Immediate effect is low
The combination of three principles is important
Conclusion: Use as a set, not alone
NG example
- Short term + intensive → high risk
- Long term + concentration → unstable
OK example
- Long term + diversification + accumulation → stable growth
common misconceptions
- Absolutely safe for long term → ❌
- There is no loss if you diversify → ❌
- Saving alone is enough → ❌
correct understanding
- risk is not zero
- It only works when you combine the three.
Summary
- Three principles of investment = long-term, diversification, and accumulation
- Basic strategy to aim for returns while minimizing risk
- Operate based on mechanics rather than emotions
action steps
- ① Divide funds based on long-term assumptions
- ② Design diversified investment
- ③ Automate savings