What Are Your Strategies and Investment Goals?

Before you begin investing, you must have your strategies and investment goals in place. This is crucial to your success! Investing is a learned skill, not a calculated guess. It takes years to learn, it is not just not a quick phone call or meeting with a ‘professional.’

When it comes to investing, many first time investors want to jump right in with both feet. Unfortunately, very few of those investors are successful. Investing in anything requires some degree of skill. It is important to remember that few investments are a sure thing – there is the risk of losing your money!

Before you jump right in, it is better to not only find out more about investing and how it all works, but also to determine what your goals are. What do you hope to achieve with your investments? Will you be funding a college education? Buying a home? Retiring? Before you invest a single penny, really think about what you hope to achieve with that investment. Knowing what your goal is will help you make smarter investment decisions along the way!

Too often, people invest money with dreams of becoming rich overnight. This is possible – but it is also rare. It is usually a very bad idea to start investing with hopes of becoming rich overnight. It is safer to invest your money in such a way that it will grow slowly over time, and be used for retirement or a child’s education. However, if your investment goal is to get rich quick, you should learn as much about high-yield, short term investing as you possibly can before you invest.

You should strongly consider talking to a financial planner before making any investments. Your financial planner can help you determine what type of investing you must do to reach the financial goals that you have set. He or she can give you realistic information as to what kind of returns you can expect and how long it will take to reach your specific goals.

Again, remember that investing requires more than calling a broker and telling them that you want to buy stocks or bonds. It takes a certain amount of research and knowledge about the market if you hope to invest successfully.

Diversification

The Importance of Diversification

It is very important to spread your funds into different investment areas. If there are any market trends that could ultimately affect your investments in a particular venture, then your potential capital losses are minimized.

Diversification is the key to successful investing. All successful investors build portfolios that are widely diversified. Diversifying your investments might include purchasing various stocks in many different industries. It may include purchasing bonds, investing in money market accounts, or even in some real estate. The key is to invest in several different areas – not just one.

Over time, research has shown that investors who have diversified portfolios usually see more consistent and stable returns on their investments than those who just invest in one thing. By investing in several different markets, you will actually be at less risk also.

For instance, if you have invested all of your money in one stock, and that stock takes a significant plunge, you will most likely find that you have lost all of your money. On the other hand, if you have invested in ten different stocks, and nine are doing well while one plunges, you are still in reasonably good shape.

A good diversification will usually include stocks, bonds, real property, and cash. It may take time to diversify your portfolio. Depending on how much you have to initially invest, you may have to start with one type of investment, and invest in other areas as time goes by.

This is okay, but if you can divide your initial investment funds among various types of investments, you will find that you have a lower risk of losing your money, and over time, you will see better returns.

Spread your investment money evenly among your investments. Many financial advisors recommend putting all spare cash into 401K or Superannuation Funds in order to capitalize on tax breaks. I personally am against putting all your money into a Superannuation Fund or 401K, (depending on your origin) from a capital security view point. I know of many people who have seen their superannuation holdings reduced in value due to share market downturns.

When, more so than if, there is a major crash in the share market, many who have trusted in the advice of specialists (who are quite possibly earning brokerage fees for their recommendations) may see years of savings wiped from their retirement portfolio.

As in all areas of investment and financial management the key to success and security is in self education. Make yourself aware of all the possible alternatives to diversification of your investment portfolio.

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