Why should we invest? What are the benefits of investing? Is investment risky? How to manage money? Do I have enough money to invest? Whom to consult before investing? Where to invest?… and many more questions that you might have in your head. So, this article will be the gateway to your steps towards financial understanding.
Reasons for Investing?
When we think about the investment we immediately think that investment will yield a return on the investment amount or maybe fear about the loss it can incur. The primary agenda for investment should indeed be returns but investment not only yields returns but helps you to grow financially. Once you start investing you will get experience about how money works to function socially. Let’s say you decide to invest 20% of your monthly income then you can impact a lot just by doing a single action. It will directly help to boost economic activities in society. A business may get financial resources to execute, a jobless person may get a job, a new service and commodity may enter into a society which can help to make people's life easier, the government will receive more taxes which ultimately can be invested in primary sectors in a society like health, education, etc.
Is Investment risky?
A quick answer to the above question is it depends. The riskier the investment it is going to yield higher returns. But should you take all risks? No! You will need to take advice from an investment manager/expert who knows the ways of investing. Risk assessment is highly important before investing. You will have both sides of gaining and losing with the investment. It is advised to read all investment-related documents carefully before investing. If you are investing a huge amount then invest in areas with lower risks and vice-versa.
How much to invest?
Do I have enough money to invest?
If you are on the job you can do the following calculations before investing
1) How much do you need for your basic monthly expenses?
2) How much do you want to save?
3) Are there any obligations with your family, children’s education, retirement plan?
After calculating all of the above, if you can manage some surplus funds you can invest. You can put constraints on unnecessary expenses to invest. You can act smartly by spending returns from investment rather than your hard-earned money.
If you are on the business side you are most likely already aware of the investment. It is better to diversify investment so you have better risk management in an investment portfolio.
In the end, it’s all about personal choices: Your investment goals should help you to meet your life goals by adding strength to your financial portfolio.
Where to invest?
There are so many areas you can invest in. You can invest in the ideas of your friend who has a start-up or look into more standardized investment areas like real estate, equity, and commodities.
Whom to consult before investing?
You can consult any friend who is well known about certain areas of investment. There are investment analysts/managers/experts who can guide you to investments professionally. They will charge some fees for the consultation services regarding investment.
If you are a good reader you will find lots of books regarding investments.
How to invest?
You will need a friend / make a friend / pay a friend who is already in the investment business. By a friend, I don’t mean you need to have any emotional bond but rather a person who can guide you genuinely. Lots of people get scammed in the name of investments. It’s better to invest in a small amount in the beginning. If someone can keep your trust and genuinely help you, you can gradually increase investments based on his/her suggestions.
What to know before investing?
You need to strongly consider the following points before investing in anything:
1) You should never rely on any person without any core proof. You need to ask for relative prospects/documents. Most people seek investment in the idea phase. You will need to ask for the information so that you can follow through with full knowledge.
2) You should know the legal procedures to acquire anything with investment. If someone guides you properly you can trust them. This is useful while investing in real-estates.
3) When you want to invest in equities it’s better to go through companies’ financial documents. It’s always better to invest in undervalued stocks.
4) Know when to buy and sell. It’s better to buy when things are low in demand and sell when demand peaks.
5) Don’t put all your money into investments. Diversify investments so that risk remains low.
The above content has been possible due to a lot of research, reading, and experience. Hope it got you a little excited about the idea, to begin with, investments.