At the end of each tiring work day, do you ever ask yourself, “Where has my hard-earned money gone after all these years of working?”
Working in an 8-hour job or traditional business can be draining. Sometimes it feels like you’re only getting paid just to stay afloat.
Most of us might have no idea where our money went and probably, we might have spent them on our daily bills, loans, shopping, night out with friends, etc.
This is why we need to invest. With investing, you get to reap the fruits of your labor and you’ll never have to regret your money only went to monthly bills. Not to mention the long-term financial cushion it provides.
So what is investing?
Investing is expending your money with the potential of earning a profit or gaining financial returns.
Investing can be daunting to a beginner. But it doesn’t have to. In this article, I’ll show you a brief overview and what you should know before you start investing.
Ready? Let’s dive in.
1. Financial management
“I don’t have extra money, how is getting an investment possible for me?”
Know your financial capacity. Plan how to allocate your income. Review your budget and spending habits. Cut expenses. Example, make it a habit to invest 5%-10% of your monthly salary. You can start with a small amount but make sure to increase your portfolio periodically.
2. Know your goals and objectives
If you know the reason why you want to invest, your will and determination to invest will always be in place.
What is your money for? Is it for your retirement? For family security? For building a home? Or maybe for education or for travel?
You have to set your time frame too. How soon will you need the money? Do you consider it short or long term?
3. Assess yourself
As a beginner, we have to understand that investing take risks. Remember the basic, the higher the risks, the higher the profit. Sometimes, the actual return may not be the same as your expected return.
We have to know what kind of investors are we. Are we risk takers? Or are we the type of persons who are willing to wait over time for profits? How much money are you capable of losing? Or how soon do you want to experience the gains and returns? Know your risk tolerance. It all depends on you.
4. Study different investment vehicles
Don’t go to war unarmed. Research on where to invest best. Know their pros and cons. Have the boldness to invest but make sure that you have the right tools to help you profit.
Here’s a quick look at different types of investment to start with.
Stocks. This is when you purchase a piece of ownership of a company. You can earn in stocks either by dividends or by trading.This is best as a long-term investment. Stock’s value changes every second so is considered high risks.
Bonds. This is where you lend money to a corporation or government in exchange for a periodic interest and bond’s face value when it matures. It is less risky if you will choose a fixed interest rate as a return.
Mutual Fund. This is where putting your money into an investment company and they will be the one to manage the fund for you. Here, you don’t really need to master the art of finance because professionals will do it for you which makes it less risky. There is also diversification where they invest your money in a different company or industry thus lowering the risks if one fails.
Others – such as ETF(Exchange-Traded Funds), Foreign Exchange, Hedging, and the newest, cryptocurrency.
5. Develop your financial strategy
Once you have entered the world of investment, eventually, you will determine your own style and techniques to stay and win in the market.
People gain and lose money along the way so we have to keep ourselves fully informed of the current events that may influence your investments.
Read newspapers, read books, visit financial blogs too. Seek financial advice.
Don’t put your eggs in one basket. Diversify your portfolio.
Your bank savings are good but having additional investments are better. There are lots of money-generating opportunities besides having passbooks and time deposits. There are risks, investing is not always a gain, but it is a sure win if you learn how to manage them.
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