There are many ways that one can invest their money. A financially savvy individual must know all these different ways although it is not necessary to follow them all. Some investment strategies might work wonderfully for some people while for some other people it might not work at all. The key is in identifying the best strategies that work for you. Here we present 10 steps that you can take to best invest your money:-
Step 1: How much do you have to invest?
There are a few key questions that you must ask yourself before you can safely determine the amount of money that you intend to invest. First of all, are you going to invest a sum of money one time or are you going to invest a little every month?
Secondly, you have to ask yourself if it is going to be a short term investment or is it for long term.
Lastly, you have know to how much money that that you want to invest.
These questions are very important because the answers will drastically cut down your investment options. Some investment vehicles are more suitable for one lump sum investment which others are more flexible with smaller monthly contributions.
In order to identify which investment strategy will be best suited to your individual needs, the above questions must be answered honestly.
Step 2: How long is your investment?
This is very important as it will determine whether your investment can be converted into cash when you need it. There are many investments which requires your investment to be locked up for a specified time frame. There are also some investments which only can yield substantial returns in a longer period. If you need your investment to be returned in a short period of time, it is best to choose a right investment that can meet your requirement.
Step 3: What is the purpose of the investment?
Although it is generally a known fact, that the single most important purpose of investing your money is to grow your money, that is not the answer that we are looking for. Besides growing your money, there must be an underlying purpose so as to why you want to grow your money.
There are many people who invest money with some intention or purpose behind their decision to invest. People invest for all kinds of reasons such as retirement, education, overseas trip, and etc.
Different purposes will require a different kind of investment vehicles and strategies. It will help if the investor realizes the purpose behind their investment decisions.
Step 4: What kind of returns are you looking for?
Depending on your actual ROI needs are, there are many investment strategies that one can follow. If you need some regular income through your investment, one makes a different investment choice compared to someone who is looking for a one-off payday.
Step 5: Your age factor
Your age is an important criteria as it can to some extend affect your risk appetite. It is generally known that a younger person will have a higher risk taking appetite compared to an older person who will want to be take a more safe route in investing.
Step 6: Your current environment
Your current life and surroundings plays an important role in determining the kind of investor that you are going to be. This is not true in all cases but for most of us this might ring true. A family man with 3 kids will have his investment sense slightly different from an unmarried person.
The scenario might be different also for a single person who has to look after an ailing parent. Different scenarios and life situations will undoubtedly influence your investment decisions.
Step 7: Other investments
An individual with several investments in their belt will calculate their investment differently from an individual with none. With prior investment experience, the ROI is calculated slightly different compared to a new investor.
Step 8: Your values
Your value and belief systems will affect the way that you invest. There are many investment vehicles which may are not ethically acceptable for you. In order to have a good return on investment as well as a clear conscience, the individual must also look into the background of any investment vehicles before going ahead with it.
Step 9: Your risk profile
Knowing your risk profile might be one of the most important factor that you need to know before making any investment decisions. A person with a high risk profile will naturally will have a more aggressive risk taking appetite compared to a person with a lower risk profile.
Knowing this could very well be the difference between failed and successful investments.
Step 10: Flexibility
You need to know how much flexibility your investment need to have in terms of liquidity in order for you to choose the right investment vehicle. If you anticipate a sudden need for a cash in a short to medium term period, you definitely should not invest you money in a long term investment vehicle.
These 10 factors will help you to make the right investment choices and avoid a lot of pain and suffering. All these factors must be considered and weighed thoroughly before you make any investment decisions.
For you to be able to make that assessment, please consult a financial professional or an investment consultant who will be able to guide you through the entire process and identify key traits in your profile and help you build your investment portfolio.
Note:
Extracted from an investment talk by Datuk.Dr.Elamaran Sabapathy, the Group Executive Chairman of PG Capital Corp Group, a Capital Strategy firm involved with wealth management advisory.
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