WHO KNOWS WHICH INVESTMENTS ARE ‘RIGHT’ AND WHICH AREN’T?
When you have money to invest, you must choose the right investments.
How’s that work? Who knows which investments are ‘right’ and which aren’t?
There isn’t a manual telling you what to do and what not to do. It’s a bit of trial and error, but knowing your goals and risk tolerance, you can choose accordingly.
WHAT ARE YOUR GOALS?
First, let’s start with your goals. Are they short-term or long-term?
Short-term goals need ‘quick’ wins. You can’t risk it all by going 100% aggressive, because you also risk losing it all at the same time. You don’t have time to make up for the losses.
If you have long-term goals, you have more time. You can be more aggressive with your investments. If you lose because of the market tanks, you’ll likely have time to make it up. Take retirement, for example, if you start investing when you’re young, you can get aggressive. Have a few big wins and you’ll compound your earnings much earlier. If you lose, you still have time to make it back. But, as you get older, you may want to scale back, choosing more conservative funds to keep your account intact.
WHAT’S YOUR RISK TOLERANCE?
If you have the stomach for high risks, though, go for it. Just make sure you’re smart about it. Don’t put all your money into one aggressive investment. Choose a few aggressive and Conservative investments to balance it out.
DIVERSIFY YOUR INVESTMENTS
Diversifying is crucial no matter your goals or risk tolerance. When you diversify, you invest in a variety of assets. For example, putting all of your money in stocks isn’t smart. If the stock market tanks, you lose everything.
If, on the other hand, you diversified in other investments, such as bonds, T-bills, or even CDs, you lower the risk of a total loss. Choose investments that help your money grow, while also choosing some that will be there no matter what. It’s called balance and it helps you make the most of your ability to invest without going overboard and risking it all.
It’s up to you to choose the investments that work for you. Today, it’s easier than ever to get started, whether you have $5 or $5,000. Robo-investors, online discount brokers, and standard brokerage firms are available to help you. Whether you want hands-on investing, automated, investing, or handholding there’s an option for you.
It all comes down to what you want and what you’re comfortable doing. Are you ready to make your money work for you?
Every dollar you invest today will be worth a lot more if you invest it – you have to take the initiative to do it based on your goals, risk-tolerance, and overall financial mindset. Are you ready?