Six (6) things to consider before you start investing.
“It’s not how much money you make, but how much money you keep, how hard it works for you, and how many generations you keep it for.” – Robert Kiyosaki
Robert thoroughly captured my mind with those few lines, he not only broke down the word ‘Investment’ to its simplest unit, but he also gave us a sense of responsibility for the future.
Investment is all about thinking beyond ourselves. There’s a great big world out there and we are always so concerned about money, security and the vast ‘Tomorrow’, that’s why the right kind of information, portfolios and best practices of investment are necessary.
I will follow up this post with another article titled the Do’s and Don’ts of Investing, but for now let’s take a look at six important things to consider and do before taking that very big step in investing; After all, it’s all about saving enough for tomorrow and bringing about solution to making more of the world’s most talked about subject ‘Money’.
- Think first, Think you:
Take a deep breath and think, look at your purse and what you wish to achieve, what are your goals asides making fast money. The cold truth is there’s no guarantee you will be making those billions you have dreamed of; from your investments just immediately. Some investments take a lot of time to appreciate and bring worthy returns and some poorly planned ones don’t even bring anything in return. So, it’s crucial that before investing in anything, you must sit down and take an honest look at your entire financial situation, especially if you are a rookie at it.
- Think risk:
‘Think Risk’ is another thing you should follow up on; research and weigh your pocket’s risk tolerance level. Can you afford to take a zero return? This is where I advise first timers, rookies or Investment enthusiast to seek the help of a financial professional/expert, fin-tech firm or financial institution, that can provide them with the right information, best practices and options. After getting the right facts about saving and investing, follow through by coming up with an intelligent plan that can grant you financial security over the years and enjoy the benefits of managing your money.
- Think mix:
Considering an appropriate mix of investments is paramount, there’s nothing like being a faithful investor. Try your hands on the investments with the highest returns, with the help of 1 and 2 above you should now be an investor with great foresight and knowledge of the relevant and updated investment portfolios. This should hedge you against significant losses, so if one investment fails, you have others to rely on, and you can always counteract your losses with the returns from the other assets you have invested on. From the market conditions the returns of the three major asset categories – stocks, bonds, and cash – have not moved up and down at the same time. So they can all never fail together or at once. Market conditions that cause one asset category to do well often cause another asset category to have average or poor returns. By investing in more than one asset category, you’ll reduce the risk that you’ll be at a loss or losing your portfolio’s overall investment. So picture yourself having a very smooth ride while doing an investment mix.
- Think Emergency:
Life happens! Your car might need a thorough overhaul, you may get sick, or worse even lose your job. Trust me, you might have a great investment plan, but that doesn’t mean this things can’t happen, that’s why its important you brace yourself and mitigate this potential reality risks; Therefore, don’t go running about when it does happen and not be ‘liquid’ or secured enough to come out strong. Effective Investment comes with effective back up plans (a healthy cash emergency fund) stashed away in a savings account somewhere. It’s there solely to ensure that life’s emergencies don’t upset your bigger financial plans. We don’t want to have you selling off your investments at ridiculous prices before their maturity to cover hospital bills or monthly upkeep.
Carry out that standing order every month or quarter and don’t close your eyes to the truth. Emergencies come up, but only those prepared never fall prey to ‘Predator wave financial market’
- Think Rebalancing:
Rebalancing of portfolios should be done occasionally, it’s the process of bringing your portfolio back to your original asset allocation mix (from the build). By rebalancing, you’ll ensure that your portfolio does not exaggerate one or more asset categories, and you’ll return your portfolio to a comfy state of risk.
Rebalancing your portfolio can be based either on the normal calendar or on your own investments. It could follow a regular time interval, an average of 6-12 months. Your own investments can also tell you when to rebalance. It’s best done infrequently or when the relative weight of an asset class increases or decreases more than a certain percentage in which you/your investment advisor can identify on time.
- Think Clean:
I will be stopping on this note and carefully remind you the main purpose of investing is to live a good and clean life. Please avoid investment circumstances that can lead to fraud. Ask questions, ensure you go through the right channel, so you won’t be scammed or your portfolio be used to cause irrecoverable havoc. Also, always take your time and talk to trusted friends and family members before investing.