If you want to achieve financial stability, you have to do more than to simply earn and save money. You also need to learn how to hold on to the money you have earned. If you want to level up your chances of being wealthy, you might have already heard about investing your money.
As an investor, you would need to use your money to acquire things that promise potentials for profitable returns through interest and dividends from savings, cash flow coming from businesses, or appreciation of value from various assets including your stock portfolio.
And as you gain knowledge from investing, you will start to dedicate some of your resources to the things that promise huge potential for returns.
Here are some tips on investing on a short or long term basis;
Align your investments with your financial goals
Identify your goals and your preferred time frame in achieving them. Ideally, with longer investments, there is an increased likelihood for you to beat the low market periods.
Assets with higher short-term volatility risks usually guarantee higher returns on a long-term basis (an example is investing in the stock market) compared to less volatile assets (an example is the money market).
Assess how much risk you are willing to take
Most investments fall under a specific asset class that could range from conservative to risky. Cash equivalents, such as money market funds, fall under the conservative end of the spectrum.
Equities from stocks fall under the high-risk end; and in general, falling somewhere along the moderate spectrum are guaranteed investments or fixed-rate products, real estate, and fixed-income investments such as bonds.
If you want to enter the field of investment, the first step you’d have to take is to assess how much risk you can take. Once you’ve identified this, that’s where you can start exploring your options.
Consider diversifying
Learn how to spread your “eggs” in multiple baskets. Don’t put all your savings under the same investment. This could put your money in a very risky situation and you could end up missing out on potential returns. Therefore, it is highly suggested that you spread your savings across different asset classes.
Consistently check your progress
Keep tab of your progress by taking the time to look at your portfolio once a year at the very least. Be aware that over a period of time, the market swings can potentially throw your asset allocation off balance.
In such events, you always have the prerogative to move your money in between investments. By doing so, you can always align your portfolio with the asset allocation that you prefer.
Invest on something that you understand
If you do not understand the business in which you’re investing, you won’t be able to identify and recognize all the meaningful information that can make a huge difference in your decision-making. It’s much like playing slots – you’re only playing with your chances.
Therefore, stay away from businesses and strategies that are too complicated, obscure, and “out of your league”. Focus more on what you understand at the moment. This is the only way to keep up. If you’re unaware of how investments work, you cannot expect them to work in your favor.