MAKING WISE FINANCIAL INVESTMENT
From a financial point of view, investment is purchase of commodities, assets or other items with the intent of having considerable returns on them. The items purchased are kept over a period of time with the hope that they increase in value so they can be sold off. While the best way to invest is a long term based one, there are very important considerations to be made before a decision is reached. It is important that a personal financial road map is draw up, taking an in depth look into you personal finances and loans. What do you plan to achieve from your investments and the amount of risk you can tolerate are the questions you should be asking yourself. For first time investors, it is advised you get a professional to help draw up these plans, there is no investment without risk so getting the facts pertaining to the particular investment intended is very important. These facts will help you plan and give you considerable financial security over time. In investing there are different opportunities available, from stocks, options, the foreign exchange market to bonds and mutual funds. It is important that the risk involved in these investments are well looked into and you find a comfort zone in which to make your investments. There is high risk involved as all or part of the capital can be lost in investments but there is also a potential for high returns. If you have a long term plan towards investing there is money to be made from some high risk investments such as stock and bonds, unlike cash investments which have less risk but are subject to inflation. A variety in investment can reduce the risk involved, by analyzing past data it shows that stocks, bonds and cash investment are not directly correlational, that means they move in different directions at any given time, when one market is performing poorly another might be doing much better hence the need for variety in investment. It is important to allocate your assets in such a way that they meet your financial goals, if the risk is too low you will come up short on the intended target.
It is not wise to invest a lot of your principal on one particular stock or currency pair, as the saying goes “don’t put all your eggs in one basket”. By choosing a variety of investment options and investing the risk involved will be greatly reduced. Do not invest all your money as there is risk involved in investing. If things don’t work out as planned it is wise to have something to fall back on. Before investing with any company, research has to be done on the legitimacy of that institution. Many have lost money in “Too good to be true” a scheme. A very good example is the Enron case. For long term investors, always refer back to your original plan and re-align your current position with your goals.