How to Invest Your Money?

Are you scared of investing your hard-earned money? Well, don’t worry there are many people who are just like you. Not everyone has the right idea of investing their money in the right place. You need good financial knowledge before putting your money in any investment. There are a lot of parameters that have to be looked upon before investing.

Today, in this article, I am going to guide you on what is investing and why it is a risky affair if not done correctly. I will also give you some tips before making your investments.

What is Investing?

Investing is a process wherein you put your money in a venture or financial plan with the expectation of achieving a profit. In our case, investing in shares of a company with the expectation of getting back a higher amount than the money you placed. This higher amount of money you get back is called the return on investment or ROI.

Any investment has a risk attached to it. A high-risk investment will give you higher returns whereas a lower risk investment will give you lower returns. It is inversely related. Investments should be made taking into consideration your risk-taking ability and current scenario.

There are common characteristics, by age group, of individuals with typical financial risks and goals. You should be familiar or find a Financial Advisor to help you with these typical characteristics so that financial wants, needs, and goals can be anticipated. Young investors should take advantage of their age and their increased ability to take on risk.

Young people tend to be less experienced with having money. As a result, they are often tempted to focus on spending their money right now, without focusing on any long-term goals such as retirement. A lack of saving and investing while young may also lead to poor money habits as the person gets older. Typically , you should save and invest at least 15% of your income.

Why is Investing Risky?

We may all look at the stock market and think if only I had invested in that stock, for example Tesla 900% ROI this year. I would have earned so much. However, not all bets give you good rewards. Investment is a risky affair and there are high chances you may end up losing your money as well if you are speculating, trading (buying and selling) the stock without proper knowledge.There are many people who make bad investment decisions and end up losing their money. This is where you need someone who can guide you. This is where a financial advisor comes in.

You need to take in consideration the following information prior to any investment:

• Your age

• Marital status

• Number and ages of children and grandchildren

• Family income by each contributor

• Family net worth

• Whether you are self-employed or an employee

• Investment Horizon

• Market knowledge

Most mistakes come when the source of information to invest is by talking advise from a non qualified person, for example, you are talking to your friend and he tells you that he made a financial investment and made thousands of dollars. You listen to it and decide to make the same investment. Without knowing the investment plan or risk capacity of your friend, you make the investment and you end up losing money.

Who is a Financial Advisor?

A financial advisor is a qualified person who will guide you on where you should be making your investments. He is well versed in the concepts of finance and knows your requirements.

A financial advisor is going to help you create complete financial planning that is specific to your requirements to meet your financial goals. This will help you gain financial freedom so you don’t have to look for help in tough times in your life.

Financial Planning, as defined by CFP Board is: A collaborative process that helps maximize a Client’s potential for meeting life goals through Financial Advice that integrates relevant elements of the Client’s personal and financial circumstances.

Why Should You Have A Financial Advisor?

For example, you might be wanting a retirement plan of 3.6k dollars per month. As of now, you’re would like to retire from work, but your retirement accounts can only pay you Half of what you need. If you have planned with the help of a financial advisor, perhaps it would have worked out perfectly.

Having a financial advisor comes at a cost. However, once you look at the benefits of it, you will realize it is totally worth it. Here are some of the benefits of having a financial advisor:

Goal Planning

Everyone has some goal in life towards which he or she is working to achieve it. It could be for your future home, future vacation, your children’s future, or your retirement plan. All this requires proper planning, which requires a good financial planner.

Suppose, you want to have a corpus of $128k when you retire, the financial planner is going to guide you on how you can achieve it. A financial planner also helps you be invested so you can achieve your goal. Many times when we see if we are having a good gain we tend to take out our money. A financial planner will help you stay invested and achieve your long term goals.

Maintaining Liquidity

Investments come in all forms from long term to short term and with lock-in periods. This is why you need to be very careful before investing in any scheme. You need to prepare for any uncertainties in your life.

With the help of a financial advisor, you can make sure you have enough liquid money for any unforeseen event in your life. This brings a lot of financial independence for you that you may need.

Risk Profiling of Individuals

Not every person has the same risk appetite. It differs from people to people depending on their current financial situation. For someone, 10k can be a huge amount of money, whereas, for you, it might be chump change.

Investment instruments come with different risks attached to it. You may end up losing in the short term, but in the long term, it can give you good profits. So based on your risk appetite a financial advisor will suggest you investment instruments keeping in mind your risk-taking ability.

Balancing your Portfolio

This is very important as you need to have a mixture of different kinds of investments. You need to have high-risk investments as well if you want to earn good returns. However, the allocation for this should be minimal. Your portfolio should have a balance of the long term and short term investments keeping your goals in mind. A good financial advisor would help you achieve this.

So, here you can see how a financial advisor can help you in your step towards achieving your financial success. It is a small price you pay for a larger goal that you achieve. So, it’s better to be safe than sorry.

To Sum it Up

Investment planning is something that you should only do if you have enough knowledge about the financial sector. It is better to get help from the right people. If you have an illness you need to go to the doctor and not make your own diagnosis and prescription. It is the same when planning for retirement, saving for college and investing for your future. After all, it is your hard-earned money and you should not be playing with it. So, it is better to have a financial advisor who will act as a guide and help you achieve your financial goals.