When it comes to investment, we find our self in the middle of an island, stranded & alone. It seems very difficult to decide – How? What? & When? This confusion is another factor which makes most of us to avoid this topic. It takes nothing to be a good investor, you just need to follow some essential steps. You consider the following 5 factors before you start investing & you’ll be the doing good yourself.
1. Your Savings Rate
Your earnings needs to divided proportionately considering your expenses, your savings & your fun. One must fix an amount for investment so as to secure monetary backup at hard times or other needs. The outflow pattern of money must be balanced to avoid any financial choking at last week of month. The %age of your earning, which you select for investment needs to be increased with time, as per the progression set by you.
2. What You Invest In
The most important decision is to figure out the best out of all prospective investment options. There are plenty of options available for investment today-
- Stocks – represents your ownership in a company. They are considered as one of the highest potential return options but with a high risk factor.
- Bonds – Kind of loan offered to government or company, which in return offer you interest.
- Mutual Funds – can be termed as a basket with stock & bonds. Your pooled money is invested in securities by a fund manager assigned to do this job.
- Gold, Silver – Coins, bars, Exchange traded Funds etc.
- Property – Investing of land is always considered good in all terms.
It totally depends on your understanding of each of the above mentioned options & choosing the best suited one.
3. How You Diversify
It is advised by financial Gurus to diversify the amount fixed for investment as that decreases the chances of loss. It helps in compensating the time frame based return also. Always divide your total investment amount for different investment option. This is an essential step for secure investment.
4. What You Pay
It is assumed that the higher payout will give you relatively higher returns. Financial advisers emphasize on regularity rather than quantity. Vanguard founder John Bogle once said: “In investing, you get what you don’t pay for.” The best way of investing is to keep small regular investment amount which needs to progress with time, this decreases the chances of major losses. The less money you pay for the privilege of investing, the more you have available to invest in your future.
5. Stick to Your Plan
Never get tempted to the investment success stories of your neighbor, colleague or relative. Keep your pattern of investment intact & follow it religiously without being getting distracted with such kind of noises. Always stick to your investment choices. Don’t let the “out of the box success” news about any stock, Mutual Funds & Bond etc. make you take a decision.
When you’re an investor, you can look at the quantitative and qualitative elements of an investment, but there’s a third aspect: What you feel in your gut. – Kevin O’Leary