Tips for investing wisely
Published 06/16/2022 | Last updated on June 22, 2022
Most people do not dare to become Investors because they mistakenly believe that they need a lot of capital, that they must have advanced knowledge of economics and finance, or simply because Investing can be risky.
The truth is that starting investing does not require a large amount of money or financial or technical knowledge; the risk in a regulated investment is undoubtedly minimal compared to the scams or deceptions seen daily on social networks.
Now, to become a Smart Investor, we recommend working on developing the following personal habits, considered the basis of a successful experience in the financial world.
Why should we invest money?
Some investments allow you to allocate a small amount to them, while others require a higher value to get started.
With the withdrawal, it works the same way. There are investments that you can withdraw at any time, such as savings, and others where you will only see your money again after six months or a year.
If you research the market, you will see that investment options are available for every entrepreneurial profile, from the most insecure to the most daring.
However, it is not advisable to put everything you have (even if it is tiny) into a single investment.
As the financial market suffers many oscillations, mainly in more fragile economies, if you put all your money in one place, in the event of a fall, you can suffer a lot of damage or even lose all the value invested.
If you diversify your investments, besides ensuring that your financial resources are multiplied, you can avoid dramatic losses if there is a negative variation in one of the markets.
Tips for investing in a better way
Listening to advice on investing money is crucial in every venture and business. We can say that it is common for people, regardless of their work, to seek financial stability, but with the concern of having to carry debts and high interest on loans to achieve it.
For entrepreneurs, knowing how to manage their money healthily is even more critical, considering the uncertainties that an own business can bring, especially for beginners.
1. Know Yourself and Question Yourself
Most people tend to follow the advice of a friend or family member. Then, the investment experience becomes generic, and since it is not personalized, it no longer adjusts to each person's unique needs and characteristics. This is a typical mistake you will solve by seeking the advice of professionals who know to offer you a customized portfolio; they are trained to propose solutions by understanding your needs and investment objectives.
The difference between an Investor and a Saver is that the former is advised by an expert who teaches him to know the aspirations that can be achieved given a certain amount of investment, and the investment horizon, among other factors. The Saver, in most cases, does not get advice from the Financial Institution.
2. Portfolio diversification
The appeal of portfolio diversification is that it can help minimize risk and maximize returns. Traditional core assets tend to perform differently in various market environments. For example, stocks often perform well when economic growth is strong, while bonds may outperform when growth slows.
Diversifying your investment across asset classes helps you not to be dependent on one asset class exclusively and not be tied to one particular market, industry, or geographic area.
As in many other areas, we are finding the right balance is a possible challenge. Thanks to artificial intelligence, you can make automated intelligent investments based on a portfolio of investment funds with global diversification.
3. Investing is about Preserving Purchasing Power, not Saving capital
The best investors in the world know that to be successful in the financial arena, one must seek to preserve the purchasing power of investments, i.e., that returns consistently exceed the rate of inflation. In the stock market, returns and economic conditions are constantly adjusted to the inflation rate and other economic factors so that the invested capital manages to maintain its purchasing power.
In contrast, the bank only holds the money in exchange for an inevitable return in a savings or checking account. The bank does not seek to preserve the value of the purchasing power of the savers' capital. Therefore, the saying that the most significant risk is not wanting to take any chance is often true.
4. Keeping an eye on commissions
Knowing that markets are fluctuating and economic cycles unpredictable, we sometimes find that there are few things we can know for sure. But one of the factors we do know about is commissions.
Different commissions and fees depend on the type of asset under management. For example, actively managed funds tend to be more expensive than passive index-tracking funds.
Although commissions may seem minor initially, they can significantly reduce your returns over time. For example, if you have $100,000 invested in two diversified portfolios: Portfolio A charges 1.2% in fees, and Portfolio B charges 0.25% in costs. Assuming an annual rate of return of 6% over 30 years, Portfolio B would earn about $130,000 more than Portfolio A.
To compare the costs to ensure you are not excessively high fees. You can save on costs using an automated investment tool and forget excessive management fees.
Manage the risk
The most important law of investing is to know how to deal with risk. Successful investors see no risk, no gain; this is the fundamental law of all investing. The logic is that anyone who invests at a higher risk should be able to expect that, over time, those investments will generate a higher return than alternative investments.
Investing with experts who seek a higher return than alternative savings options is the best way to achieve long-term gains. Becoming an investor is more beneficial and profitable than just being an investor. To improve profits and reduce risk, Investment Funds usually diversify their investments, diversify currencies, buy short, medium, and long-term assets, etc.
At El Paisa Multiservices we want to help you with your finances in Hartford, CT. You can contact us if you have questions about our services.
By Ingenuity & Solutions
