Here I thought of giving information on what you need to know to get started with investing.
Looking forward
There is no single investment strategy or portfolio that is best for everyone. Money needed for your short term needs has to be separated from your long term needs/investments. Act wisely…
All humans are not the same, so the personality aspect plays a role. History shows that the stock market has ups and downs, so people panicking and selling at huge losses should not hold excess stocks. Only those with patience to hang on, will truly reap the benefits, from stocks.
How much should I invest?
What is your purpose? The first step in investing is to write down your purpose and break it down into goals. How much money do you need, and when do you need it?
Most investment goals are related to retirement or freedom from 9-4 jobs. A typical goal is to retire around 65-70 with the ability to maintain pre-retirement, inflation-adjusted spending. This goal typically requires workers to invest about 15% of their paycheck for retirement.
Before investing any money, most experts recommend you to pay off high interest debt and build an emergency buffer. Your emergency buffer should be enough to cover about 6 months of expenses without your salary.
Don’t forget savings for other needs or desires. The typical family will need to save for kids’ education, a house down payment and retirement.
What should I invest in?
The primary investments are stocks, bonds and real estate. If you own your residence, you may be heavily invested in real estate already.
Experts are divided on whether the average investor should buy more speculative assets like cryptocurrencies, gold and other commodities. They don’t generate cash flow or have an intrinsic reason for growing value. If you chose to buy these assets, advisors recommend limiting it to a small portion of your portfolio, given the high risk of little or negative return over long time horizons.
Money you will need within a year should be invested in short-term treasury bonds or similar. With a larger time horizon, over 10 years, stocks and real-estate are often more advantageous. They may temporarily lose substantial value, but you’ll have time to wait for recovery before trading these for less volatile investments, as your time horizon shrinks.
Some other points.
- If you have been saving cash, the thought of suddenly investing it all and then experiencing e.g. a stock market crash is daunting. This prevents some people from investing. Experts agree that holding too much cash is the most likely way to fall behind financially, long term. One strategy to avert this fear is to gradually invest the money over time (e.g. dollar-cost averaging).
Leave a comment. Stay tuned for more updates…
Busy And Useful 