“90% of millionaires got their wealth by investing”. Andrew Carnegie(billionaire)
Nearly every adult wishes to invest at some point in their life. That you’re here certainly means you’re ready to hit the road running! But are you ready? Do you need to prepare yourself or should you jump right in?
Here are a few things we think you should consider if you want to invest wisely:
- Make a plan
Prepare a road map of your investment journey. What’s your aim of investing? What do you want to achieve? Let your plan also include the possibility of failure and how to tackle it.
- Learn how the market works
Do your research, visit investment companies and find out what they offer. Identify the best investment option for you- Talk to financial experts and fund managers of various companies. They will analyze the type of investor you are.
Note: If you invest in options that are funded by managers, the high returns are reduced by the investment costs
- What kind of investor are you?
Do you have an insatiable risk- appetite or do you prefer playing in the safe zone? It’s essential that you understand your level of risk tolerance before making your move:
- Conservative– You will panic sell immediately there is a market shift thus invest more in fixed income.
- Moderate– You can withstand some market changes however, you will also invest more in fixed income than equity bonds.
- Aggressive– You are the market guru. A shift in the market doesn’t cause you a lack of sleep. You invest more in equities and less in fixed income because you understand the market and know when to liquidate the funds.
- Beware of false investment companies and professionals
Investment companies are all about the deal and whether it’s gone through. After conducting research, take some time to understand your odds before you commit your funds.
- Build on your investment path
Consider mix investments versus single investments. Note that by diversifying you lessen the risks associated with investing. As a newcomer one may wish to start with low risk and walk up the ladder as you gain knowledge.
- Decide how long you wish to invest
Long-term investments yield high returns if you go for options with greater risks such as stocks and bonds. However, if your goal is short-term investments, then it’s better to go for those with a lower risk such as money markets.
- Be a student- Be ready to learn
Accept that the market is volatile. Be ready and willing to learn how to weather the storm and to learn from your mistakes as well as others.
Key factors to consider prior to investing
Here are factors you may want to check off before signing off that cheque:
- Compare the risks to the rewards. How much are you willing to lose to win?
- Is the investment for you? – What works for another investor may not necessarily work for you.
- How much money do you have for investing? Are there available options that allow monthly or regular injection of money?
- Get an emergency fund. Remember you intend to invest all your money and for higher returns and less risk, the funds should be invested for a longer period.
The fastest way to lose money is by choosing the wrong investment option. Just because the returns are high and you get to reap in a short period of time doesn’t necessarily make it a better option. In the end, adopting a resilient character could set you on the right track and ensure you’re flexible enough to make a turn where you need to.
Sources: YoungMogul, investopedia, sec.gov, policybazaar