Is your little financial knowledge keeping you away from investing? Nowadays, investing is straightforward, and anyone can do it. You do not need to go through complicated charts to get the hang of it. Truth is investing is not time-consuming, and even if you choose to spend 5% of your savings, it will be worth it. But why should you invest? A savings account works for most people, but it earns very little interest. Therefore, if you are storing away your money for retirement, your money is losing value. Investments give you a chance to grow your wealth. Start investing with these simple steps.
Who Should Handle Your Investment?
Should you get a managed portfolio or do it yourself? With a little research, you can manage your investment portfolio. However, you will spend most of your time studying companies and projecting their potential growth. DIY investing awards you an opportunity to create a customised profile. You can select the stock , funds, and bonds to invest in without any interference.
On the other hand, finance professionals handle a managed portfolio. All you have to do is select your risk tolerance and arrange the deposits. As much as managed portfolios are a hands-off form of investment, it is recommended for beginners.
Choose an Investment strategy
Before you begin your investment journey, have a timeline in mind. When are you likely to want your money back? Are you investing for retirement? Your schedule will determine whether your strategy should focus on financial stability with low returns over an extended period or concentrate on growth. If you need the money soon, you have to be more cautious with your investments.
Age also affects your investment plans. If you are young and do not plan to retire early, you can take more risks. While you do not need a lot of cash to invest, your current financial situation affects your risk appetite. Remember your money will be unavailable for a long time. Do you have an emergency fund? Or a steady source of income? You cannot afford to be aggressive if you do not have a financial buffer. There is always the possibility of losing your money. Never invest what you cannot afford to lose. Sometimes your cash is better off in a savings account. If a bank account is a better home for your money, read our ISA guide .
Once you have set your goals, timeline, and risk tolerance, the fun begins. You can choose from individual stocks, bonds, and funds. You need to keep a safe distance from individual stock. You will be taking a huge risk that could go south without warning. Picking individual stocks also makes portfolio allocation overwhelming; you have to research and project the potential growth of companies. Investment is straightforward if you go for low-cost index funds, including mutual fund and exchange-traded fund. They are less risky and diverse. Therefore, you will have higher returns.
Investing is enjoyable, and once you start earning returns, you will appreciate the importance of taking risks.