If you have some ‘extra’ money lying around, the inevitable question of whether you should invest has probably crossed your mind. Should you keep treating yourself to fancy dinners at your favourite restaurant? Or, should you throw caution to the wind and invest?
Instead of burning through your savings, by investing you can double, or even, triple, what you have in the bank. Well, as long as you are smart about your choice of investment, that is. While investing can be a fantastic way to increase the size of your bank account, it’s important to realise that it’s not for everyone.
To help you work out whether investing your money is the right decision, we have put together a handy guide, below. This includes all the vital questions that you should be asking yourself before parting with your cash.
What’s my goal?
The first thing that you need to ask yourself is what your goal is for investing. Think about what it is that you are trying to accomplish and whether investing is the right route to go down. If, for example, you are attempting to save up for a pension, investing could be an excellent option. However, if you need money quickly, it probably, isn’t the best route to go down.
When it comes to deciding whether investing is right for you, it’s important to think about your end goal. Your reason for investing is crucial, as this will determine not only if it is right for you, but also which type is the best option.
What is my risk tolerance?
The next thing that you need to ask yourself is how high is your risk tolerance. If you were to lose half of your investment, how much damage would it do to your finances? When it comes to investing, it’s important to realise that there is always a risk of loss of money. Yes, even with low-risk opportunities.
That being said, depending on the type of investment you make, you can minimise the amount of risk you face. For example, one of the riskiest forms of investment is stocks, as these have a tendency to go up and down, on a frequent basis. Whereas, buying property, for example, is much less risky. This is especially true if you can leave your money tied up in the property for at least ten years, or more.
When it comes to investment, it’s crucial that you take into account the level of risk that you can face. Otherwise, you could end up being left in a bad financial situation. If you are putting all of your eggs in one basket, the key is to choose an option that’s as low risk as possible.
What will happen if nothing comes of my investment?
It might not be something that you want to think about, but if you are going to invest, you need to take this question into account. If nothing comes of your investment, what will this mean for you? Do you have more money to invest or will this leave you struggling financially?
If your investment fails will you be financially devastated? If the answer is yes, then don’t part with your money in the first place. Investing can be a fantastic way to boost your income. However, it can also lead to the loss of a significant chunk of your savings if things don’t go to plan.
What is my time frame?
Generally, the longer your time-frame for allowing your profit to build up, the larger amount of risk you can afford to take. This is because if you lose some of your investment, you have long enough for it to build up again.
When it comes to investing, the time frame that you have is crucial, and should be taken into account. For example, if you have years to boost your investment, property could be a good option. However, if you need a quick turnover of profits, investing in stocks, shares, or bonds is the best choice. To find out more about the different types of investment, take a look at the Investing Tips blog. Here you should find all the information that you need, to make an informed decision, about how and where to put your money.
Do I know what I am doing?
When it comes to parting with your cash, it’s crucial that you have a good idea about what you are doing. If you want to make a success as an investor, you need to be clued up on what you should and shouldn’t be doing.
If you don’t have the knowledge that you need to ensure that your investments are as successful as possible, take some time to do research. When it comes to money, it’s important to be as clued up as possible. Many first time investors seek help from a financial adviser – while this can be pricey, if you are new to investing, seeking help is crucial.
Do I understand the investment?
If you want to be a successful investor, it’s crucial that you always adhere to the most important rule. That is, never invest in something that you don’t completely understand. If you don’t understand how an investment will work, such as how you will make money, or what the risks are, don’t put your money into it.
Before putting your savings into any investment, it’s important that you understand what you are getting into. If you are ever unsure about the potential of an investment, don’t put forward any money. Contact an expert for help to ensure that you understand everything about it.
Investing can be an easy way to boost your savings or income. However, the risk that comes with it means that investing isn’t suitable for everyone. That’s why, before you choose to invest, you need to ensure that it is the right decision for you. You may find that while one type of investment isn’t suitable, another is. So make sure to take your time to consider all of your options, before coming to a decision.