Follow these simple rules for better returns
To have a smart investment plan, you’ll have to follow certain simple rules. They can be more rewarding than you could ever imagine in your wildest dreams. However, factors like your age, the size of your investment or your knowledge about the financial markets doesn’t hold any water as far as being a successful investor is concerned.
3 Basic rules of creating a smart investment plan
Here is an outline of the three most important rules of investment:
Know your risk tolerance – This is referred to the amount of investment risk that you can take with respect to your income and financial needs. Like every other human being, your risk tolerance will be different too and that’ll define your own risk profile. Basically, risk tolerance is more to do with psychological framework, than practical investment ideas. For that reason, you need to find out your risk tolerance and have an investment plan for yourself suitably.
Locate your financial goals – As a part of your investment plan, it is crucial for you to identify your goals and the reason for which you are raising a savings fund. Moreover, you need to earmark your plans to buy a house or pay for your child’s education while at the same time fulfill your retirement objectives too. However, amongst all these things you’ll also have to keep a separate fund for merry-making or to go for holidays as well. So, you’ll have to quantify your long-term goals along with the money needed to realize them as well as the time required for the same.
Strategize your asset allocation – Finally, you’ll have to plan your asset allocation very carefully. Here, at this juncture you just can’t always expect higher returns on investments because doing so may compel you to take more risk than what you can afford at any given moment. This holds true both financially as well as psychologically. It is a lot better to seek an expert’s advice in this regard so that you get to create a portfolio that has got the right mix of all the asset classes. Through proper asset allocations you can minimize the risk to your investments.
What is the most opportune time to invest?
Actually, you can start investing from any age and the only thing that isn’t preferable here in this regard is not invest at all as compared to investing late. You need to understand the power of compounding which is the best reason to start off with your investments early in your life.
However, make sure that you invest as per your long-term as well as short-term needs. So, if you need cash money in the near future, then it’ll be best for you to invest in a low capital, shorter-term investment option that also entails reduced level of risk to your portfolio.
This is a guest article from Zinaida who loves writing articles.
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