Investing hard-earned is a big decision. You need to weigh all the pros and cons of investment plans and their impact on your financial stability. This will help you to make a better decision. If you are going to invest for the first time, there are a number of investment plans and attractive offers that confuse anyone or can motivate you to make the wrong decision. Therefore it is important to take advice from professionals like business accountants or similar that can evaluate your financial health and guide you with the best high yielding and tax saving plans. But if you do not have an expert opinion, then this write-up is for your guidance.
Table of Content
- Make a Personal Financial Needs Roadmap
- Evaluate Your Risk Bearing Capability
- Pay Off High-interest Credit Card Debt
- Consider An Appropriate Mix of Investments
- Create And Maintain An Emergency Fund
- Consider Rebalancing Portfolio Occasionally
- Avoid Circumstances That Can Lead To Fraud
- Be Careful if Investing Heavily in Shares
Let’s know important things that every investor should know before investing.
1. Make a Personal Financial Needs Road-map
Before investing in any securities or mutual fund, sit down and do some homework. Make a list of your present and near-future needs. Check out your source of income, whether it is regular in nature or irregular. On that basis, figure out your investment goal and risk-bearing capacity. Keep in mind; high interest-bearing investment instruments comes with high risk. Therefore, if you can afford a complete or partial loss on an investment, then invest. Otherwise, play a safe game and invest in professional recommended govt securities. These securities also help you to take income tax benefit and create passive income flow.
2. Evaluate Your Risk Bearing Capability
Whether it is an individual or company, everyone has its own risk-bearing capacity. Going beyond can affect day to day financial health. Therefore, it is always recommended to evaluate your liabilities and then find out the risk-taking capability. Remember, there are several investment options to meet short term to long term savings goals. There are opportunities for a fortnight to three or six months investment plans. You can also choose investment through banks, as they have less risk investment options to meet different financial goals. These investments insured your principal amount when you have the capacity to sacrifice return in case of loss.
3. Pay Off High-Interest Credit Card Debt
An outstanding credit card is a major concern. Before planning to invest, it is essential to clear all your credit card balances. The major reason is high interest on debt amount, and debt recovery agent’s call can lead your life into stress. On the other side, if you are investing in investment that gives you only a 10% return and you are paying 30% interest on credit card outstanding. This will never be a profitable deal. Therefore, it is important to pay off your debt and then a 10% investment will be a fruitful decision.
4. Consider an Appropriate Mix of Investments
Put all your eggs in one basket is never suggested by experts. Whereas an appropriate mix of investment is always a worthy decision. This is due to two reasons. First, if you invest all your money in one investment, there are high chances of market depression that can sink all your money. Secondly, in case of an extreme emergency, you need to withdraw funds. This will affect interest-bearing capacity. Even in some cases, you need to pay the penalty for premature withdrawal. Therefore, be careful while investing. It will be better to invest in small funds until you have a good backup.
5. Create And Maintain An Emergency Fund
Most smart investors put enough money in their savings accounts to meet uncertain calamities. Indeed, it’s a great decision. It helps you to meet with sudden unemployment(individual) or work stoppage(companies) conditions. A six months backup in account helps you to live a peaceful life without breaking investments and effecting future plans. This is the primary investment need than investing extra funds into other short terms and long term plans.
6. Consider Rebalancing Portfolio Occasionally
Rebalancing portfolio means when you are buying an asset at a low cost and selling at a higher price. This is a great way to generate a high return investment. For this, you need to invest money in different investment options and analyze them regularly to know the high income-generating asset. For example, if you plan to invest in property, buy different flats at different locations when they are under construction. Then during the ready to move phase, sell them at high prices. This is a great way to generate income. But you need to regularly analyze the market conditions. You may need to wait for a longer time, till that time, create enough backup.
7. Avoid Circumstances That Can Lead To Fraud
Scams in investments are quite common. There are a number of fraudulent activities that become headlines in all parts of the world. Therefore, it is essential to be careful while investing your money. You can take guidance from accounting experts like gold coast business accountants who have good knowledge of investment and genuine investment tools. Otherwise, do not go with investments that claim a high interest in a short time unless these are secured.
8. Be Careful if Investing Heavily in Shares
Shares are risky investments whether you are investing in equity or preference shares. There are high chances of company insolvency. This can put all your funds into a heavy loss. Even if you are investing your company’s employees funds, you need to make a complete investigation about the company, past, present and future strategies. With this check out the company’s trend in terms of sales turnover and profit. This will help you to make better decisions. Otherwise, invest your funds under the diversified portfolio. Right return and low return will compensate if you meet loss somewhere.
Adopting the right investment strategy always makes sense to save your money. Therefore, do not leave any stone to unturn before planning to invest. Also, do not hesitate to take advice from investment and accounting experts. Always invest in less risk-bearing investment opportunities unless you have surplus funds. Otherwise, evaluate your risk-bearing capacity and invest in less risky instruments.