It’s natural to feel some anxiety about investing. From sharing your financial records to committing your hard-earned savings, you might feel nervous about taking the plunge. However, if you don’t take any risks, you won’t make any returns!
The truth is, it’s harder to reach financial goals—or financial freedom—on your own. Investing can help grow your savings to make your dreams possible. Take the time to consider our helpful points below to help guide you towards your own unique investment profile.
What are your goals?
Retirement should be the first goal on everyone’s list, but it doesn’t have to be the only one! Investments can help you save for a house, a vacation, or a wedding. It’s also a great way to save up for an emergency fund in case of the unexpected.
You could also set financial goals to take care of your family. It’s a great idea to set aside money for an education fund, even if you haven’t begun your family yet.
Remember that there is a lot of variance in these goals. A goal of retiring by age 55 requires a different approach than retiring by 60. You’ll also want to review your goals to ensure they stay relevant as your life changes.
What’s your situation?
Just as everyone’s goals are different, so is their situation. You’ll need to work out how much you can invest and your willingness to face the ups and downs of the market. This will help you find the right investments to help you reach your goals.
Things like your age and your family situation will also affect how you approach investing. A younger person has time to plan for their future and can afford to take on more risk than someone who is within ten years of retiring.
What about risk?
When you undertake more risk in your investments, you could stand to see more reward. Take a look at Bitcoin. It’s considered a high risk investment due to the fluctuations it sees in value. You’ll buy it at a certain price one day, and the next it may be worth more—or less. This type of investment could lead to amazing rewards, or dizzying declines.
Weigh the potential reward against the risk before making a commitment to see if this is a good fit. You need to be willing to face some loss due to the ups and downs of them market. Over time, this type of investment could pay off with rewards that help you reach your financial goals.
If you aren’t sure about how much risk you are willing to take, you may think low risk sounds like a better option. Remember that low risk means a lower reward potential.
For example, money under the mattress could be considered a low risk investment. Whether it’s one day or one year, you’ll get back the same amount you put there. But you won’t see any rewards when your money is hidden away, making it impossible to save up for retirement this way!
Diversify your portfolio
The best way to approach investing is by diversifying your portfolio. With diversification, you choose several different types of investments. By spreading your investments to include different industries and types, your portfolio will do better than investing in a single stock or company. This approach helps to reduce the impact that a single asset has on your portfolio, and can help you limit your losses.
A diverse portfolio is crucial to help you navigate the ups and downs of investing. Although you can’t control how your investments are doing, this allows you further freedom while working towards achieving your financial goals.