Many people have started to realize the relevance of investing and this has gradually kick started a positive investment culture in the country.
More and more people now appreciate the fact that surviving on one source of income alone is no longer sustainable hence the need to diversify their incomes by venturing into several ventures with the potential to create multiple streams of income.
This has seen many start-ups, saving groups and individual saving schemes and initiatives to be able to raise money collectively or individually for investment. The challenge for most has been identifying the right investments in which to put their money and savings to be able to earn a descent profit. Today I want to share with you how you can come up with sound investment decisions. These guidelines will enable you make the right investment decisions.
- Draw a personal financial roadmap:
For starters make sure you have a plan. Like the saying goes, failing to plan is planning to fail. If you fail to come up with a clear plan/road map of how you are going to be investing your money then chances are high that you will end up making wrong impulsive decisions and losing money in the process.
Have a clear goal and objective. Why are you saving? When do you want to achieve with your savings? How much risk are you willing to take? What are those areas to avoid if any? This will help keep you clear headed as you go about putting your money here and there.
- Evaluate your comfort zone in taking on risk:
Investment is about risk. Investment is about profits and losses. Your risk threshold is very critical here. How much risk are you able to take? The ability to take risk varies from one person to another based on various factors and natural appetite for risk. Your appetite for risk will determine how much risk you can take and what strategy you will apply; long or short term investments. If your risk appetite is high then short term high return investments may work for you but if your risk appetite is low then long low return investment may be your ideal pick.
The key here is to make comfortable choices. Choices that your gut is okay with as this will reduce the whole stress round the investment and encourage calm decision making.
- Consider an appropriate mix of investments:
Like they usually say, you can’t afford putting all your eggs in one basket. It’s not a wise thing to put all your money in one place/venture. Spreading your investment helps you spread your risk too.
If you put all your money in real estate and we have a real estate crash then you’re in trouble but if you put some of your money in other portfolios then the hit may not be that severe.
There many portfolios in which you can spread your investments with some being safe low return ventures and others a little risky but high return ventures. Some of the safe low return ventures include; real estate, stocks, bonds, securities and the risky high end ventures like business, capital markets, forex to name but a few.
Just make sure you spread your investment well enough to cushion yourself from sever repercussions of losses from any particular industry since it’s impossible that all will crash at ago.
That would literally mean a world crash which isn’t a foreseeable event.
- Create and maintain an emergency fund:
Then most importantly, put away put some money for the rainy days. You can’t invest all your money leaving yourself with nothing stashed away at all. Smart investors usually put away some money those days when not having money could be a matter of life and death.
It’s wise to put away for example an equivalent of your six months’ salary just in case you lost your job and had to survive without one for some time.
These days people lose their jobs without having to even do anything wrong as mergers, shut downs and acquisitions are becoming the order of the new world order.
Those guidelines should be good enough to help you make the right investment decisions. Please let me know if this article was useful and if it was; please share with all your social networks.
Jaluum Herberts Luwizza is a Business Consultant, Writer and Public Speaker with YOUNG TREPS a business management and consulting firm that helps people start, run and grow profitable and sustainable businesses.