Individuals and couples look to investing as a way to improve their financial situation as well as ensure they will be economically secure in their retirement. Determining what type of investment is right for someone depends upon many different items. Here we will look over what types of things to consider when determining what investment is right for you.
Risk Tolerance: How much risk one is willing to assume plays a large role in determining what type of investment to make. A primary factor in determining how much risk one can tolerate is age. Those who are older are less likely to accept high risk, while those who are younger, and have more time to recuperate any loses, are more likely.
For those who are not able or willing to purchase high-risk investment usually prefer more stable investments such as Bonds, CDs, ETFs and Blue Chip stocks. Those who are more risk-tolerant might choose to purchase stock in unproven companies who have the potential for massive growth.
Long Term Vs Short Term: The desired length of investment is a major factor in choosing the proper investment vehicle. Those who are looking for short term gains will be unhappy with the yield of instruments such as bonds and CDs. Those looking short term are better off identifying undervalued, small market cap, companies and investing in those. Another strategy could be purchasing ETFs in undervalued industries.
Those who are looking at long term investments will likely prefer the more reliable success of Blue Chip stocks and government/corporate bonds.
Choosing The Right Industry: People will have better luck choosing to invest in companies operating in industries or niches they know something about. Knowing when to buy is not the only factor that guarantees success. One must also know when to sell. Having some basic understanding of an industry, its cycles and its history will well equip one to manage and continually assess their investment.
Diversify: Investing too much in one sector or industry exposes an individual to large potential loses should that sector have a downturn. Asset-Backed Securities are a good way to do this for those who do not have the time or the expertise to diversify their investment portfolio.
Forex: Many people have had great success in purchasing undervalued currencies, or currencies of emerging markets. The main barrier to entry is a lack of understanding of the Forex field. For a quality introduction to Forex visit Forex Academy.
Constantly Review: Watching the everyday ups and downs of certain stocks, especially those one has invested for the long term, can be nerve-wracking. It is best to avoid this. Instead, it is better to periodically conduct a review of the performance of one’s portfolio as a whole. The investment vehicles which are not performing can be removed before any further losses occur.
Speak To A Financial Advisor: There is no shortage of cases of people who have had investment success on their own. This being said, speaking to an investment professional can help one see a different perspective and get an understanding of what the ‘big money’ outlook is.