When entering any kind of investment, one must remember that if a program worked to a certain person it will also work for you because every type of investment differs to every investor. There are loads of programs and strategies in the market that may or may not be suitable for you which will put you in situation of confusion. What matter here is one must know his goal and risk before pushing through in any investment program.
Positioning your goals definitely may give you successful gains in the future; and knowing on what risk level can you tolerate may put you in a safer and healthier investment journey for you.
Goals / Objectives
In investing you must know the answers to the questions why, where and when. Knowing the answers to those questions will give you a stepping stone on moving forward on your goal.
Why? Why would you need to invest? Why would you need to put your hard-earned money on someone else’s’ company? These questions will give you a significant reason before entering a certain investment. Is it because of your family? Is it because you want to be financially free in the future? Whatever the reasons on your why’s, it will be the main justification of your investment journey.
Where? Where would I invest my money? It’s a rhetorical question that will give a big impact on your future goals. Knowing where to invest your money by researching and fact-finding will set yourself in a safer ground, since frauds has been using investment to scheme people nowadays. It will give confidence that your hard-earned money is in good hands.
When? When will you need to withdraw? Setting up a time frame in investment will be the direct meaning of your investment goal. Example, is it for your child’s college education, and then set your investment for at least 10 – 15 years.
Having a goal and objective will not be enough to start investing. One must also know his own risk tolerance.
In investing risk is like a thrilling adventure (e.g. jumping of a bridge with just a rope for support and etc.) Where you challenge yourself if you can do it or not. The only difference in an adventure (which is your life in the line) to investing is… it involves money, your own hard-earned money.
The context of ‘RISK’ in investing means ‘the risk of losing money.’ A possibility that the value of the money you invested may decrease or on worse scenario is… it goes all the way down to zero.
That is why, one before entering any investment plan should know how much risk he can handle or tolerate.
Every single investment program are like a seasonal fruit, which you need to wait till the price goes up so you can gain more before selling and buying again once it decline in price.
All investing involves risk in one way or another. Stocks can and often do go down in value over certain periods of time—in 2008, the S&P 500 dropped by 37%. While this decline in the stock market was one of the worst in history, less severe market corrections are not uncommon.
The question is… how low in value of your investments can you cave in? Aside from knowing how much drop can you handle… your risk tolerance may also imply to the question on when do you need to withdraw your money? Usually this question pop up depends on investors age, or he has been targeting something like a son or a daughter’s college education… or rather for retirement.
Whatever the reasons be… your goal and risk tolerance will have a major impact on your investing journey.
There are many ways you can maneuver investment. One famous investor, Warren Buffet believes on his ‘buy and hold’ strategy, because he rarely sells his shares nor gets bothered by market fluctuations.
There are also investors who do trading in a daily basis. They buy and sell regularly while watching the market 24/7. But this process is usually done by professional investors.
The above examples are just some of the strategies other investors use to gain more on their invested funds. We are not asking you to do the same. What we want you to do is evaluate yourself of how much of a risk investor are you.
Comfort in Knowledge
Some investment vehicles require sophisticated knowledge and monitoring, while others are more set-and-forget (long term strategy). Your investment decisions should be based on how comfortable and willing you are to research for the right choice.
The easiest way is to start on a variety of low-cost index funds that cover various parts of the markets such as bonds, domestic stocks and foreign stocks. Alternatively you may consider professionally managed vehicles like target-date mutual funds, where the manager allocates portfolio over time. These funds are designed to gradually reduce their exposure to equities as the target date of the fund gets closer
Investors with more knowledge and experience might consider actively managed mutual funds, individual stocks, real estate or other alternative investments.
Understanding that you need to Learn First
It is very important that before entering into any form of investment you must understand what the things that you know and what not. You must not be talked unto something that you don’t fully understand and you are not comfortable with.
For now, browse and click more on Redwood Capital Management Limited to know more about what we can offer for your financial needs.