If you have saved up a lot of money, then you may start thinking of investing it in any profitable opportunity. And when you look around, you will notice that there are numerous investments that you could make, right from stocks, to real estate, to cryptocurrencies and more. To help you with making better investment decisions, we list below five simple tips.
Research And Compare Various Investment Options
Never focus on a single investment opportunity alone. Instead, research all available options and compare them with one another. Look at the profitable opportunities available in stocks, real estate, business funding etc. Check the investment required and the expected returns. Then compare and see which opportunity gives the highest return on the lowest investment. This will tell you which opportunity you must invest in, and which you should avoid. There can also be times when an opportunity appears to be too profitable that you solely invest in that while avoiding all other opportunities around. This is a dangerous habit. Always keep your investments diversified. If you put all your money in one single investment, say stocks, and if the stock market crashes for some reason, then you will effectively be rendered penniless.
Stick With Simple Tactics
As far as possible, stick with simple investment strategies. Remember that you are only starting out. Trying out a very complex investment strategy might lead you to losses because of your lack of experience. For example, suppose that you have chosen to invest in stocks. The simplest investment strategy will be to follow the trend. This will require you to find an up trending stock, wait for the price to fall, and then purchase the stock at the lowest possible price. For a beginner, such a tactic will be suitable. But if you try to involve yourself with too complicated financial calculations that include subjects like Gann tools, Fibonacci theorems, and so on right from the first day, then there is a good chance that your investment will suffer a loss since not many novices get such strategies right within the first few days of being exposed to them.
Don’t Blindly Follow The Media
The media can be a good source of information. But it can also give you false information. So, before you act on the news item, be sure to double check it and verify its authenticity. Only then should you take an investment decision. For example, suppose that a news channel reports that the government is planning a very major development in a nearby locality. You may think that this development will have a positive effect on the real estate prices in the locality. However, before you go ahead and invest all your money in real estate, do your own research. Visit possible leads in the government departments and confirm whether such a huge development project is planned or whether it is only a rumor. And only if you receive a positive reply from them should you think about investing in real estate.
Always Look At Risk And Return
Remember to always consider the risk and the return on an investment. The risk refers to the amount you are investing, and the return refers to the profit you are expected to book from the investment. For example, imagine that there are two investment opportunities – one offering $100 per month in profits for an investment of $15,000, and another offering $130 for an investment of $30,000. Now, the return looks higher for the second opportunity. But when you look at the amount you are investing, you see that you are putting in twice as much money but only getting 30% extra return. As such, it is better to avoid the second investment option and choose the first opportunity.
Set Profit/Loss Targets
One of the biggest enemies of an investor is their own emotions. If you are the type of person who always gets tensed in situations where there is a possibility of monetary loss, then you should learn to strengthen your mind. You can also avoid being emotional with your investments if you set a profit/loss target and stick with it. For example, suppose you decide to invest $10,000 in stocks. You should make up your mind that you will sell it off either when the value hits $15,000 or when the value falls to $8,000. This allows you to set a profit/loss goal that you can implement.
And be sure to check out the short guide How to Start Investing: A Complete Guide for Beginners, which contain the basic info that you need to know when you start investing money.