by Paul Koger
One of the key strategies towards becoming rich is with investments. Also, it is true that many billionaires across the globe were not born rich, but it is through investments that they were able to acquire their wealth.
We might be talking about investments day-in and day-out, but do we really understand what an investment is? Investing is the act of risking your capital with the expectation of deriving a profit, or an income from it.
When you make the decision to join the community of investors, there are many investment factors that you need to consider. Besides where you should invest, and the amount of money to invest, you also need to make a choice on the type of investment to specialize in.
Note: A few things are repeated several times throughout this article, due to the proven fact that repetition helps you to learn and remember important information.
Types Of Investments
There are two main types of investments that one can venture into. These investments are categorized in accordance with the time frame used to achieve results. They include long-term investments, and short-term investments.
Long-term investments focus on the future. These are investments that provide continuous and reliable profits for your future retirement years. This type of investment helps you to get little, but well-distributed, profits over a much longer period of time.
Long-term investments involve lesser risks along the way, and therefore they are termed as safe. The risks are minimal, because of the steady, reliable, and conservative management style of those type the investments.
Long-term investing requires a lot of patience. This is because the profits will not be acquired immediately. If you are in dire need of finances due to emergencies, then long-term investments should not be your option.
Just like the name says, short-term investments are investments done over a short period of time. These are plans that have a great possibility of growth, and rise in value over a very short period of time. The time period of getting profitable returns ranges from only a few weeks, to a few months.
Unlike long-term investments, short-term investments allow for more personal control. This is because you will be the only one to keep an eye on your money. At some point, you might be faced with economic challenges, but this will only be resolved by the risk management mechanisms you put in place.
As an emphasis, NEVER begin an investment without deciding on what type of investment you are venturing in. The above-mentioned and explained investment types should help you to come up with a proper decision for yourself.
Additionally, before you start with any investment, be it long-term or short-term, there are important things that you need to consider.
Important Things To Consider Before Starting To Invest
1. Come up with your own financial roadmap…
What is a financial roadmap? Well, a financial roadmap is a critical analysis of your own financial risk mindset. It is good to take a look at your own situation financially, and make an honest decision. This is the time that you need to come up with a financial plan.
Drawing financial plans simply means that you need to know your financial goals, and a critical analysis of some risks that are involved. If you are not sure of how to do this, it is appropriate that you seek help from a financial professional.
2. Evaluate your comfort zone in taking risk…
A risk is anything that may impair a business, or an investment, from achieving it’s goal. So definitely, any investment will involve some degree of risk.
What you have to understand is that an investment is a speculative risk. It has a possibility of either earning a profit, or suffering a loss. It is therefore important that you understand this before making any major investment decision.
If you really want to invest, be ready to take up the risk. The reward for taking a risk is the possibility of getting a great return on your money. Greater risks could mean greater profits, if your investment.is successful.
3. The type of investment (as mentioned above and below)…
Deciding on the type of investment is very essential. This will help you to decide on the amount of funds to put into an investment. You can either decide to go for a long-term, short-term, or both types of investment.
If you need the money within a very short period of time, then it will be necessary that you go for short-term investments. On the other hand, if your focus is on the future, then obviously long-term investments will be more appropriate for you. Another approach, to diversify your portfolio, would be to wisely take advantage of each investment category available to you.
4. Eliminate bad personal spending habits…
If you want to have enough money to be a successful investor, your bad spending habits have to stop. Whatever you were spending money on needlessly should now be directed towards your current and future investing.
Investments are a sacrifice, so sometimes you might need to eliminate your present luxuries to enjoy better luxuries at a later time. Therefore, do not feel bad or sad if you are forced to do away with all or most of your poor shopping choices, and personal spending habits.
One more important thing to remember is that the proceeds you get from your investments must be handled properly for maximum results. Those proceeds, if possible, should be reinvested back into your investment portfolio to earn the most profits out of it.
After you are completely aware of the things you need to consider before you start investing, you can then invest with confidence. Not many people know how to properly start an investment portfolio, but that will no longer be the situation for you.
Four Things About How To Start Investing
1. Raise the funds…
Obviously, an investment can never start without initial or starting capital. There are many ways with which you can raise the funds, these include: (A) Saving you own money over a period of time, (B) Getting funds from relatives and friends or (C) Borrowing from any type of financial institution.
It doesn’t matter which method you use, all you need to ensure is that the funds are available, and that you know how to successfully manage them.
2. Decide on what to invest in…
For example, you cannot invest in every commodity. This, therefore, means that you need to single-out a particular category that your investment will focus on. Should it be in clothing, food, soft drinks, transport, etc?
In other words, there are many commodities that you can invest in, but it takes a critical self-analysis for you to decide which one to initially focus on.
3. Business investment location…
After deciding on the kind of business investment you will venture in, the next step is to decide on the location. You can decide to have a brick and mortar location, or an online location. This is true only if your investment deals with consumer products and services.
4. Come up with a management plan…
After you have established your investment, you must then establish a feasible management plan. Your management plan and style will help you to know how to deal with your immediate finances, and your financial resources.
All of the above info are some of the simple steps, or guidelines, on how to start and implement an investment. If you are serious about any type of investing, then you should consider, or follow, the factual information in this article.
Paul Koger is the head trader at Foxy Trades LLC. He also runs a trading blog over at: https://foxytrades.com