Investments are a huge decision to make. That’s why we’ve compiled a list of things you should take into consideration before investing your hard-earned cash.
Fact #1: Assess Your Needs & Goals
Take a moment to sit and write down in a notebook or on your computer what you need this money for in the future – or how long it will take before you’ll be able to use this money again.
Fact #2: Consider an Appropriate MIX of Investments
Many people have a tendency to invest in only one type of investment, like investing exclusively in stocks.
It’s important that you diversify your portfolio so that if one part does poorly, the other parts can help balance things out.
Fact #3: Weigh up the Risk vs Reward
It’s important to consider how much risk is involved in order to get to your financial goals.
Evaluate and analyse every possible investment opportunity you have and then weigh up what might be best for you!
Fact #4:Consider the Time Span of Your Investment
Usually, people are investing in retirement. If that’s your goal, make sure to take a look at the timeline – and how much risk is involved in order to get there.
Fact #5: Find Your Inner Critic
Be a critic of your investment decision and once you have a well-defined plan for your investment, make sure to be open and honest with yourself. Is the risk worth the potential reward?
Does this investment line up with my goals as well as any other opportunities that might suit me better?
Fact #6: Evaluate Your Comfort Zone in Taking on Risk
When investing, it’s not just about the size of your return. It also depends on how much risk is involved in order to get there. If you’re uncomfortable taking risks with your hard-earned money, don’t be afraid to invest only what feels comfortable for you.
Fact #7: Maintain a Cash Emergency Fund
It’s important to establish a pot of money as an emergency fund1. This should be enough for you and your family to survive off of, in the event that anything unexpected happens, like being laid off.
Fact #8: Check the Hidden Fees
Look for hidden charges and don’t be afraid to ask questions about what you’re paying for. Remember, it’s your money!
Fact #9: Be Diligent About Fraudsters
Avoid circumstances that can lead to fraud and any situations where you could potentially be a victim of a scam. For example avoid responding to an unsolicited email or giving out personal information to strangers.
Fact #10: Take Advantage of “Free Money”
The average annual contribution to an employer-sponsored retirement plan2 is $14,000 per year. That’s a lot of free money that you’re leaving on the table if your employer matches contributions!
What are the best ways to invest money?
There are a lot of different ways to invest your money, and some strategies may be better suited for you than others.
For example, if you have the time and skill set to actively trade investments on the stock market or in individual stocks then it might make sense for you to take that approach rather than investing passively through funds or diversified index funds.
What are the risks of investing?
Investing is not guaranteed to make a profit. There are many different risks that can affect your investment, including the risk of losing money due to fluctuations in value and inflation.
When should I start investing?
The earlier you start investing, the more years your money has to grow.
The sooner you begin investing for retirement, the less risk there is of running out of money in old age.
How do diversify my investments for risk management purposes?
Diversifying your investments means putting money in a variety of different types of assets.
Some people choose to diversify their investments by putting money into stocks, bonds and cash – while others might also invest in property or precious metals.
The best investment you can make is in yourself, by improving your skills and knowledge. It’ll help elevate your earning potential, which could help with any loans or debt you may have acquired earlier on in life. Investing time into developing more marketable skills also keeps the option open for taking a different career path if what you are doing now isn’t working out as well as planned.