We don’t save for saving sake. We save for a lot of reasons and one of the main reasons we save is to invest. Leaving your money in a savings account only yields peanuts and so you can’t just leave your money there forever. A savings account is good if you want to save for a particular need in the short term.
It is therefore very needful to learn about investments and how best you can put your money to work and earn for you whiles you concentrate on other stuff. An investment should yield more profit than if the money was put into a savings account.
Also, when you save your money in a savings account over a long period, your money is affected by inflation which reduces your money’s worth over time. Inflation, which refers to the rise in prices of goods and services makes your money worth less over time.
The other thing is that you don’t use all your savings on investment. You can start with 50% of your savings or less and top it up when you gain more experience investing.
Unfortunately, not everyone is in the situation where it will be wiser to invest in anything more risky than a savings account.
Before you venture into investing, you should consider these factors which will aid you in making your decisions of when, where and how to invest.
Is your money best put into investment now?
It is very important at every point in time you determine what your money will be best used for. For example, if you have a debt to pay which keeps compounding over time costing you for instance 25% annually, wouldn’t it be wiser to pay off that debt than investing in stocks which will probably grow at a rate 5%? If you agree then you can well proceed into considering additional factors.
Do your research
In decision making, research cannot be looked over. You need to find out how profitable the venture is before you invest your hard earned money. Weigh different investment options and make sure that you are going in for the package that best suits your needs and objectives.
Consider short leaps
You are not obliged to possess billions before you start investing. Moreover, if you have little to no experience then it is advisable that you take very careful steps and be careful about how much you invest initially. With time, you will grow flight wings and you can then put more money into the investment. But if you’re just starting out, then start small and build up your experience and knowledge.
How much risk can you tolerate?
In life, higher risks usually reflect higher returns. Investment is not any different as the higher risk you make towards an investment, the higher the potential of you getting higher returns.
Figure out what kind of personality you are. Are you the type who won’t be able to sleep or stop worrying about the probabilities of you losing your money, or are you the type who can put all out and be willing to accept all loses without breaking down? if you are the former, then consider taking only less risky investments like bonds which are relatively safer. However if you’re the later, then dare to take more risky moves like growth stocks for the possibility of getting much bigger returns.