Individual Investors – 5 Things to Consider Before Making Investment Decisions

Individual Investors - 5 Things to Consider Before Making Investment Decisions

With record low cash rates showing woeful returns on some savings accounts, many savvy savers are looking for ways to grow their nest eggs in another way. You might consider stocks, mutual funds, or even real estate to set you up for success. 

However, if you’ve never looked at investment options before, it pays not to rush into a decision. Before you decide what to do next, consider doing some of the following things:    

Seeking Professional Help

You may have worked hard to save your money, but that doesn’t mean you’re skilled in how to manage it properly. Before you put your hard-earned funds into something you’re not entirely sure about, seek professional help. 

Align yourself with people who can handle everything from your individual tax return to general advice and everything in between. Every investor should have a group of experts to call upon for help and advice when making big decisions. 

Creating a Financial Road Map

You might have a fair idea of your financial situation, but that’s not to say you’ve sat down and looked at all your money and assets as a whole. Surprisingly, doing just that can make or break your decision to invest and might even help you decide your risk tolerances if you still decide to go ahead. 

Creating a financial road map is something you can do on your own, but also with the help of financial professionals who can share advice and general information about saving and investing. 

Identifying the Risks

No investment is a sure thing. However, some are riskier than others, which is why it’s crucial to identify the risks associated with each investment option and decide if they are within or outside the parameters you’re willing to accept. 

It’s also important to note that, generally, the higher the risk, the greater the reward. Of course, there’s also a greater chance of considerable loss. If that’s something you aren’t comfortable with, don’t force yourself into high-risk, high-reward arrangements. 

There are plenty of investment types that provide far more certainty and less stress. Some of the safest options include savings bonds, money market funds, corporate bonds, and high-yield savings accounts. 

Looking at a Mixture of Investment Options

The adage of not putting all your eggs in one basket can often ring true in the investment world. If you choose one investment type for the majority of your wealth, you’re relying on this single wealth-building strategy to succeed. 

However, if you opt for a mixture of things like bonds, stocks, and cash, market volatility can be much easier to manage. These three asset categories rarely experience losses and gains simultaneously. As a result, you may lose or gain money in one category but not in the other. 

Keeping an Emergency Fund

When you see how lucrative a particular investment avenue is, it can be tempting to throw everything you’ve got at it. After all, you might still be receiving a steady income to maintain your current lifestyle, and the money is otherwise sitting untouched. 

However, employment is not guaranteed for everyone, which means your current income stream may one day disappear. Make sure you have a fund set aside for emergencies like redundancies and medical bills. There are no guarantees that you’ll be able to withdraw funds quickly from your investments when you need them. 

Before withdrawing money from your savings account and investing it in an exciting new opportunity, there are many things to consider. Talk to the experts about your financial situation, keep emergency money set aside, and make sure you’re aware of all the risks before going full steam ahead.

 

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