Tips for a newbie investor
Nowadays, leaving your money in a savings account is just not enough. People are searching for greater potential for growth and they usually find that through investment. Everyone can invest if their set their facts strait and know exactly what they are doing.
Before you begin investing, set your finances and time frame to know what you are getting yourself into. Current economic climate dictates low interest rates and inflation rising, and if your money is in a savings account you’re losing them, due to inflation beating the return on interest rates. You can beat the unfavorable economic climate with investment and better your financial situation in long term.
No investment is without risk. But, the greater the risk, the greater the potential for financial growth is. Get yourself informed before even considering investing your money, by understanding investment risk. Before you make the financial decisions, consider these steps and you’ll avoid most of the risk out there.
You have to have a clear goal, a clear picture of what you want to achieve by investing your money. Strategies for investing are different from a different standing point, so be sure if you are you just looking to grow your money, or you want to provide an income. Set the starting amount of money that you are comfortable to send, or project the minimum income that you’ll need as a result of your investment. Knowing how much you have, how much are you willing to spend and how much you expect to gain will help you to decide on how much risk you are willing take to reach your goals.
You need to project the time you will need to achieve your financial and other goals. This projected time frame will help you chose the rates of return from your investments and will show you if your goals are realistic or not. You can also decide on time frame depending on your age. For short term goals of less than five years you better stick to cash savings. A medium term goals of five to ten years and long term goals of ten years and more make a suitable time frame, but if you are older, avoid investments with a larger time frame, because you will have less time to recover if things go south.
Don’t let your attitude get in front of the numbers. Yes, it is natural to want the money to grow fast over a shorter period, and you may be tempted to invest riskier. But bare in mind that patience will bring you more, if you are willing to wait.
You have to be very realistic on how much money you can afford to invest and rely on the numbers. Make good assessment of liabilities such as debts, as well as pension contributions, savings and living costs. Good assessment will show you to see how much to invest, because once you put that money aside, you should avoid access to that money for other purposes. If you’re not able to do good assessment, better ask for a financial advice.