Overview: What is investing?
Investing can be defined as the art of making your money work for you. There are two main methods of making money. One, you can work for a salary. Two, you can buy assets or anything that gives you a return (i.e. you can invest). Anyone can invest. You can use your own money (savings) or borrow a loan to invest. Investing is very important because your money works for you. When you buy stocks for instance, you just need to wait for them to increase in price. You don’t need to do anything else. You may be required to do research before buying stocks however, that’s very little work compared to working for a salary. Investing is clearly important. It can, however, be challenging given the number of investment opportunities available today. So, how do you find the best investment for you?
Tip 1: Identify your investment needs and goals
To be able to find the best investment for you, it’s important to ask yourself why you are investing in the first place. Although people invest to make more money, one person may be investing for retirement while another person may be investing to get money to buy a home. In such a case, the person investing for retirement is best suited for investment opportunities which take longer to mature compared to someone investing to buy a home. Some investments may also be better for specific investment goals, so it is important to think of what you desire from your investment before you think of investing.
Tip 2: Know your risk appetite
It’s also crucial to know your personal attitude towards risk. Since all investments come with risks, you should know how much you are willing to lose in case things don’t go as planned. You can assess your risk appetite by assessing your investment goals, need for returns as well as your investment time frame. When assessing risk, ask yourself how much money you would afford to lose. If the investment in question is bound to lose you more money than you are willing to lose, it’s time to look for another investment. Shorter investment terms also come with more risk, so it’s important to choose investments with the appropriate risk timeline.
Tip 3: Choose an investment with an appropriate term
To be able to find the best investment for you, you also need to think about how soon you want your money and/or the returns back. If you are not in a hurry to get returns, longer-term investments like property are always better. If you need returns fast i.e. in a few years, you can invest in stocks. The risks are however higher with such investments since stock prices fluctuate.
Tip 4: Identify a suitable investment platform
To find the best investment for you, it’s important to find an investment platform that works for you. For instance, if you value convenience, an online investment platform will be perfect for you. In such a case, investing in stocks and currencies may be perfect for you because there are very many online stock and currency brokers. With such investments, you can do everything from the comfort of your home.
There are many other investment platforms. For instance, you may want someone to invest on your behalf. In such a case, you can choose investments that come with managed accounts. With such investments, you share your investment preferences with an investment expert, and they do everything else for you at a small cost. If you don’t have a problem paying someone to make investment decisions for you, such a platform will be perfect for you. In a nutshell, the investment you choose should come with your preferred investment platform.
Tip 5: Consider your interests/passion
Your investments should also be in line with your interests/passion. If you are passionate about real estate, you should consider investing in real estate before considering other investments. This should be the case because you are more likely to succeed investing in things you are passionate about. Your investment decisions shouldn’t be guided by returns only. Passion will help you maintain consistent interest in your investment. Furthermore, you are more likely to secure investment funds if you are passionate about your investment opportunity.
Tip 6: Get professional investment advice
If you aren’t able to find the best investment for you after considering the above tips, you should seek professional investment advice. An investment expert can help you discover the investment options available to you. He/she can also match investment options with your interests, finances, appropriate term, platform, risk appetite, etc. Although you will be required to spend some money to get expert investment advice, the cost is insignificant compared to the consequences of making bad investment decisions.
Your chances of becoming financially independent are very slim if you are not an investor. Saving alone won’t make you rich. Although choosing suitable investments is challenging, the above tips have simplified the process for you. Start by identifying your reasons for investing. Proceed by assessing your risk appetite. If you fear risk, stick to safer investments. You should also consider choosing suitable investment terms and platforms that match your preferences. Don’t forget to consider your interests or passion to increase your chances of success. Lastly, you can seek professional help if you have problems finding a suitable investment.