Nowadays, investing is in everyone’s best interest and involves making the right choices in meeting the demands and needs of our financial goals for the future.
Your personal goals and decisions will produce the outcome of your financial investment at the end of the day- when you need it. Beyond costs, what matters most is variation of investments you have access to and the percentages in which you own them. Holding both stocks and bonds and other assets can reduce risk and possibly even boost your returns, financially speaking, this is a win win situation for you. When owning many stocks rather than just a few, your fortunes aren’t tied too closely to one company, industry or division. Your investment could be aimed at saving for a new home, schooling and education expenses for your children, your retirement package or even a well-deserved holiday abroad.
We recommend when making decisions about investing, that you consult with a Financial Adviser. A financial advisor should work with you to understand your needs to be able to offer advice to help you achieve your long-term goals. We only give information about our own products and services and does not provide investment advice based on individual circumstances.
Whatever your future holds for your invested cash – there are factors which may help you make the investment easier on you and your wallet.
Table of Contents
- Investment Goals
- Start Investing Early
- Make Regular Investments
- Monitor Your Investment
- Aligning your investment with your financial goals
- Grow Your Money
- Spend Less Than You Earn
Investment Goals
From the beginning, you need to know what you are investing in, and get it started early.
The presumed outcome of your investment matters. How long do you want to invest for counts towards the outcome? Short term investments are often a savings for something you want sooner than later i.e.: a car, studies or a holiday while long term investments are for a longer period of time such as retirement and looking after your family in the future.
Whoever you decide to invest with, there is always a level of risk which goes along with any investment option. Risk need not always be a negative thing, the upside to risk in investment is the bigger the risk the greater the reward especially if you choose long term investing.
To understand your proposed investment better, consider your risks, understand your investment, your objectives, net worth and investment turnaround times.
Start Investing Early
The early bird catches the worm they say – this applies to investment in a similar way.
When taking advantage of the effects of “compounding” is the best way to make your money work for you. Compounding means multiplying your cash on its own by earning a return on the returns.
Your financial advisor can assist you with more detail on compounding. Keeping a track of your spend is important for investing; this is the best way to stay committed to your goals and your budget. Use your smartphone, spreadsheet or use an app like QuickBooks or SAP to keep track of your finances, so that you have a better idea of where you stand financially.
Make Regular Investments
Contributing to your investment policy on the day you receive your salary or salary for the month or week can make a difference in your return.
It’s easier to invest smaller amounts on a regular basis rather than a large contributions. You can organise with your financial advisor to deduct your instalment through a debit order, this makes it easier to ensure your instalments are always made on time, and you don’t necessarily feel the pinch of the money leaving your bank account. Should you receive a bonus or incentive financial reward at work, the wise thing to do would be to contribute a portion of it to your investment. Having the ability to divide your money over a branched investment option, is always worthwhile. Large lump sum contributions, could lead to a large fall in share prices just around the corner. Making regular payments means you are staggering your investment over time. If the stock market falls, you will have only invested a portion of your savings in that specific sector.
Your future payments will take advantage of the cheaper share prices now on offer.
Monitor Your Investment
Regular monitoring of your portfolio with your financial adviser, at least once a year will ensure that it continues to meet your financial needs.
Market conditions, life events (marriage, children, job changes and retirement) and changing goals are some of the reasons to review your portfolio. Should anything happen to you, your next of kin or beneficiary details would be the deciding factor of your invested money. Identify your investment risks, “no pain, no gain” these words sum up the relationship between risk and reward. It’s important to understand that investments involve some degree of risk which are calculated in relation to the potential pay out.
Know your risk tolerance limit, strength and weakness, since the act of investing is an emotional one for those new to the investment game. It’s good to think of the reward aspect, but also important to consider the prospect of losing all the money. For whatever reason investors lose their tolerance, decisions tainted by emotions are almost never good ones. Don’t be scared to ask your adviser broker all of the risks involved in your investment options.
Aligning your investment with your financial goals
The investment option you choose will depend on whether you’re saving long-term or short-term.
For long-term goals, you may need to consider long-term, growth investments. Short-term goals call for investments that are more conservative, and accessible. For example, if you are investing to save for a deposit on your new home, you’ll need quick and easy access to your funds. Short term goals: objectives are usually for a period of 5 years or less and generally for vacations, home deposits, planned expenses and home maintenance. Saving short term means you need to take into account an investment that is more conservative and more accessible. Long term goals: investments that average over 5 years and more.
Many people invest long term for extended travel, a holiday homes, and educational purposes for their children or retirement. Saving long term, you should consider a diverse portfolio which may include a financial growth component.
Grow Your Money
Your financial adviser may advise you to invest in companies which have well-run growth.
If your priority is the comfort of knowing you own lucrative and profitable companies, this may count in your favour. However, if you want superior long-term returns, value companies and small-cap companies have a higher probability of giving you those rewards long term. Why? Well, high-quality growth companies are popular and fully priced. Almost by fact, you can’t buy them at bargain prices.
Spend Less Than You Earn
If your end goal is to build wealth, you need to spend less than what you earn.
This sound simple, but many people don’t live by their means while dealing with their finances. The wider the gap between earning and spending, the more financial success you get. There is a formula of the two connected ideas:
- Earning more: You increase income through switching jobs, getting an appraisal or starting a small business.
- Spending less: You reduce your spend through different forms of frugality.
The only thing between your wealth and you is the dedication to act on this enduring strategy.
The investment world is bigger than what we think, if we look into the different aspects of things, the market place has majority of the world’s population hanging on in suspense for the next stock market results.
Clever investing is not always as easy as it sounds.
To achieve maximum results from your investments and get superior results at the end, you need to look at the tactical advice above and invest wisely. Secure your future by investing properly, meeting with your financial advisor to discuss options will only benefit you and your investment in the long run. Investing in the stock market with expectations of getting rich overnight, will leave you sadly disappointed. You have to have proper expectations and the patience to wait for your nest egg to grow. Unless you are blessed with extreme luck, it will be unlikely to double your stocks in the first year of investing. Such a dramatic return generally cannot be achieved without great risk and by buying extensively on margin or taking a chance. This is when you mix investing with speculating.
We are often misled by noise trading, false signals that are sent out by the market trend and trading patterns. In today’s world the market has its ups and downs, the more you invest in investing, the better the benefits and rewards!