Politics and Business
A Practical Guide On Investing: A Key To Financial Security For Most People
Investing is a necessary part of ensuring financial freedom and independence. It’s difficult to accumulate wealth if you’re not investing, and it’s even harder to maintain a healthy lifestyle without an investment portfolio. To help you out, we’ve put together a practical guide on investing that will show you how to get started.
This guide is meant as a resource, not as professional financial advice. Before making any investment decisions, you should always consult a financial professional.
7 Things To Have In Place When You Invest
1. A Balanced Financial Picture
One of the first steps to investing is ensuring that you’re in a good financial place. This includes having an emergency fund saved up, not carrying high-interest debt like credit cards, and ensuring that you’re not living above your means. You also need to make sure that you’re in the best place to take advantage of investing opportunities.
2. A Reasonable Risk Tolerance
The key to investing isn’t to avoid risks altogether but rather to take smart risks that will allow you to grow your wealth over time. However, if you’re risk-averse, you might want to start out with a more conservative portfolio before moving into riskier assets. If you’re willing and able to take on more risk, you can start developing your portfolio with higher-risk assets.
3. A Proper Investment Mix
Your investment mix refers to the various types of assets you have. Basically, you don’t want to put all of your money into one asset class because this leaves you exposed to the risk that that particular asset class will drop dramatically while other asset classes continue to grow. At the same time, you don’t want to put all of your money into every asset class because this will spread your money too thin and won’t maximize returns like a well-balanced portfolio does.
4. Having A Well-Diversified Portfolio
If you’re investing in stocks, it’s important to have a mix of large-, mid-and small-cap companies as well as different sectors. For example, you might have a portfolio with 1/3 large-cap growth stocks, 1/3 mid-cap value stocks, and 1/3 small-cap value stocks.
5. A Plan For Your Investments
The best way to develop a solid plan for your investments is to start with a written financial goal. This might be something like sending your kids (or future kids) to college, buying a house, or retiring early. Regardless of your goal, you need to make sure that it’s attainable and specific before you start investing in it.
6. A Backup Plan
Having a backup plan is important because the market, no matter how good it looks now, will take some serious dips. This plan means you’ll have help recovering your stock losses. It’s always important to be prepared for the worst, even if you have a solid investment plan in place.
7. Patience And Discipline
As with any investment plan, you need the patience to see real results. For example, it might take two or three years for your investments to really get off the ground. On the other hand, if you can stick to your plan and ride out some of those bumps in the road, you’ll be well on your way to reaching your financial goals.
The most important thing to remember is that you don’t have all the answers when it comes to investing, which is why it’s a good idea to seek the advice of professionals who know more than you do.