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7 Considerations Before Investing Money

03 June 2022 | 0 comments | Posted by Jane Du in Money Talks

Before you invest money consider the following

Are you looking to grow your money at a higher return than the old savings account? The reality is that no one is going to pay you a reasonable return for simply saving; you have to go out and risk your capital in the market if you want to outpace inflation or grow your nest egg.

What comes to your mind when you hear the term "investment"? Most people picture large amounts of cash being channelled into a considerable activity and high associated risks.

However, contrary to what most people think, investments do not have to involve huge amounts of money or high risks, as there are products for every range of risk tolerance and capital allocation. With just a little cash, you can invest wisely and still generate enormous profits for yourself within a reasonable time frame. However, to achieve this, your first need to know how to invest in the right way.

If you are considering investing, here are seven tips that will help you make the best investment decisions; the kind of decision that will not only ensure low risks for you but also generate for you double the amount you invested:

Identify your goals and time frames

Before you can carry out any investment plan, you should first determine your short-term and long-term goals. For example, short-term goals could include your plans for the next vacation, an emergency fund that you want to create by the end of 6 months, etc.

On the other hand, long-term goals include retirement and other plans you might have for many years to come. Identifying all your goals will help you determine the best investment plans to go for.

Consult an advisor

Consulting an experienced person can help you make the best investment decisions, especially if you are a beginner. Investment advisors usually use advanced software and computer algorithms to build an investment portfolio.

Also, they provide additional services, such as tax optimization and personal customer support. And the good thing is that hiring professional help is nowadays very affordable, so you won't have to break the bank to consult an advisor.

Choose investments that match your risk tolerance

How much of a risk can you take? Before investing your money, you must analyze yourself and determine how much risk you will be willing to take. After all, almost every worthwhile investment has its associated risks; some have low risks while others have higher risks. Therefore, make sure to choose only investments that match your risk tolerance.

Get insurance plans

Insurance plans are an excellent investment choice for beginners in the stock market. And especially if you earn a steady income should you consider this investment. For example, you can opt to invest in pure protection plans, such as the term insurance plan that covers your family financially if you pass away prematurely.

Alternatively, you can choose insurance plans that include insurance and savings, accidental insurance, or general health plans.

Consider allocation to mutual funds

The good thing about mutual funds is that they allow you to invest indirectly in the stock market. They are ideal for beginners since the funds are dealt with by professional managers who know their way around the stock market. Mutual funds offer various investment options, such as debt mutual funds and equity mutual funds. Therefore, you can always rest assured of finding the best investment choice that matches your goals and risk tolerance.

Consider allocations to fixed deposits and provident fund (PF)

The best investment is that which earns you a steady income, whether on a short-term or long-term basis. And fixed deposits offer precisely that; they serve as good savings schemes that generate a steady decent income. And just like with fixed deposits, the provident fund also provides safety and better liquidity than most similar investments.

Risk in the stock market

The stock market is one of the most profitable businesses you can engage in. And the market offers different types of stocks and bonds that you can choose from. For example, you can find cheap, low-risk stocks that can generate good profits or even choose expensive stocks if you are the sort that is willing to risk for more gains.

If you are a beginner in the stock market, take advantage of the best stock research tools. These tools can help you identify the best stocks worth investing in so that you won't lose your money while at them.

Conclusion

Investing in the stock market is the best way to build wealth for yourself and save for the long term. However, before starting investing, have a clear picture of your goals and consult a professional advisor. Also, remember to use the best stock research tools to identify which stocks are worth investing in!

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Recommended reading

If you enjoyed this post and have the time to spend diving deeper down the rabbit hole, then we suggest you check out the following posts about improving your finances in South Africa.

Disclaimer: This is not investment advice and is for informational purposes only. nichemarket cannot be held liable for any investment decisions made based on the information given by independent financial service providers. Under the ECT Act and to the fullest extent possible under the applicable law, nichemarket disclaims all responsibility or liability for any damages whatsoever resulting from the use of this site in any manner.

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