Investing involves putting money into a financial scheme, shares or property. The asset or item purchased could possibly generate an income in the future and create wealth. However, purchasing something with monetary value could also provide income if it is sold in the future at a higher price.
For first time investors and regular investors, here are a few guidelines to put to good use.
Firstly, focus on the big picture, be aware of your financial standing and determine how wise it would be to fit investments. What are your current tax, debt, insurance and retirement fund obligations.
Then whether its artwork, coins or real estate, not investing can be a risk in on its own. Keep in mind that investing in real estate or your own business, requires one to have expertise, time and money which could take years.
Putting away small amounts of money could be more convenient and even more economical.
Stock markets, such as the Johannesburg Stock Exchange (JSE) are the riskiest money investments to make, as their value can go up or down at any time. But hey have the most potential.
However multiple investments in the stocks, although you might lose on one, there are various others to depend on.
Time plays a generally important part with money and allowing it to grow. The age of the investor also plays a part, the younger you are the more time your money has to recover from market setbacks. So the sooner you start to invest the less growth you miss.
Allow your money to reap the benefits of long-term by multiplying.
When it comes to retirement, more money will be needed to invest because people are living longer and obviously our benefits will be reduced within years to come. Thus investing in stocks may allow you to rake in enough money for as long as you live.
Make sure that your investment choices are appropriate. Stocks and bonds each have its fair amount of risks. Aggressive stock funds are much more riskier than income stock funds. Either way you will want to see growth in whichever you capitalise on.
Starting early, choosing a diverse range of investments and storing away enough cash incase of an emergency, as well as seeking financial aid from an advisor will bring about the best way to get a good return on your money.
Remember when times are tough, the best time to hold onto your investments is when they are down. When investments are going through a bad spell, do not sell if anything consider buying more shares.
Lastly, do your homework before you invest, you do not want to be dissapointed in the end. Never decide on an investment based on the perspective of a salesperson or advertisement. Research, is important so that you can understand and know what you are delving into. Investing does not mean acting on impulse and later asking questions. You work hard for your money, therefore should know what you are ploughing your money into.
Cleo Andrews is a financial advisor working for MoneyVine, a company based in Cape Town, South Africa.