Making money is one thing, but getting that money to work for you and multiply is another thing entirely. Investment is a serious matter that shouldn’t be taken lightly because it can have a huge impact on your economic future. What can you do to make sure you’re getting it right?
Investments are not just reserved for financial experts or bankers. In fact, anyone can make an investment if they have the right knowledge and a solid plan about how to do it. The most important part is making sure you’re looking at a good investment that’s likely to grow your wealth instead of wasting your time or losing your money. Let’s look at a few considerations that will help you pick the good investments from the bad ones.
1) How Much Do You Want to Make?
It’s good to start out with a realistic estimate of how much you want to make through investing. Setting a base figure will help you to think more logically about your choices, avoid scams, and look for the best choice for your needs. If you don’t have any idea how much you want to make, you may have difficulty making a choice when you look at your options.
Sometimes investments are just for long-term savings purposes and you may not have a set goal in mind. Even in these cases, it’s wise to come up with a potential figure you want to make, or at least a figure of how much you’re willing to invest initially. If it’s something you just want to invest in and leave alone for years, a stable investment with a set return is usually the best option for your security.
Many investments have a specific purpose. If you’re investing for retirement, a child’s education, or otherwise, you will need a more specific number. Knowing where you want to get is only half the battle, as you should also figure out how much you can reasonably start with. Analyze your finances to see what kind of initial investment you can make.
With and understanding of how much you want to make and how much you can afford to invest initially, you can use a logarithm calculator to figure out what percent increase you’ll need on average to get to your goal. You can also use the same calculator to find out how much money you should invest initially to get a return over a certain period of time and a set interest rate. It’s a flexible tool that will help you make better decisions about your investment finances.
2) Finding a Comfortable Risk Level
How much you want to make and how much time you have to make it will determine the level of risk you should look into with your investment. Risk is always present with every investment, but you can manage it to keep your risks at a more acceptable level.
Low risk investments are usually a better choice for long-term savings, such as retirement savings. These are funds you can’t afford to lose, so risk should be kept low while still allowing you some stable returns. Some long-term investors choose to diversify their investments by keeping multiple investments of various risk levels. This helps to balance out high risks with some lower risk investments as well, creating a higher potential of growth without risking everything.
High risk investments are better for those whose main intention is to gain wealth, not necessarily for those looking to save up for a certain purpose. The higher the risk, the better the benefits in most cases. However, with high risks comes the chance of losing your money as well, making it a bad idea for those who either cannot afford to lose their money or are more risk averse in nature.
Choose a risk level you’re comfortable with. There are many legitimate options for each different level of risk, so you will still have choices even if you choose to invest with lower risks.
3) Calculating Returns
You may not be able to calculate your ROI precisely for every investment you want to make. Some options, such as stocks or shares, are not as easy to predict because of their potential for volatility. But, bonds or investment savings accounts usually have a set interest rate that will inform you of exactly how much you should be making after the set period of time.
Some investors like to buy shares in companies that offer dividends, because it’s a more certain return than other shares that may never offer dividends. You still cannot precisely calculate your returns, although you will usually be able to come up with a good estimate.
Most investment strategies come down to planning. Anything that makes you the money you’re interested in making is a good investment, whether you could have made more or not. While you do want to make as much as possible, you also have to be realistic about what you can expect to make. If you plan out the returns you want and the level of risk you’re willing to take, you’ll be better prepared to make investment choices that actually suit your needs and nature.