TIP 1: Have a Plan
An investment plan is a road map on how you intend to achieve your wealth target. This plan must address both short term and long term investment objectives. It is usually best to develop a long term investment strategy highlighting the nature of investments you are willing to utilise. When doing this you must be mindful of the peculiarities of your financial situation, this would determine the kind of investments you can pursue. For instance, for someone with little income it may be difficult to invest in real estate using equity. Another key issue is ability to accept possible loss; this will determine your risk appetite. Individuals with low financial strength, high existing liability or high spending needs would typically have less risk appetite and may be better off with less risky but more liquid assets. But remember the higher the risk, the higher the return.
TIP 2: Seek Advice
Before pouring your hard earned cash into a bottomless pit, seek advice! Don’t ever invest in an asset without gaining understanding of the asset. For investors with low financial literacy it is always best to consult a financial expert before taking that plunge. If an investment seems too good to be true, it probably is; rather than being greedy probe the possible source of your return on investment. Finally, read financial literature to improve your understanding of investment products and you may be the one giving free investment advice in the future.
TIP 3: Diversify
Don’t put all your eggs in one basket
One of the cardinal rules of investing is diversification. This promotes risk reduction and ultimately maximisation of returns. For the average investor, an easy way to diversify your risk is by investing in a fund. This allows you own a stake of various asset classes at a much lower cost. It is always advisable to do proper research before selecting a fund manager. This can be done by searching the internet or simply asking more informed investors.
In summary, having good investments can be a source of financial security and should be the goal of every ambitious individual. The key is to start small, have a plan and stick to it.
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