What Is Investment in Finance?
Investment means using money to bring about profit, regardless of the involved risks such as inflation risk. The investment has a long-term outlook and ranges from safer government bonds that have low returns to the higher risk international stocks that are more rewarding. Notable and successful investors like Warren Buffett and Edward Thorp have reiterated the essence of long-term investment with a right choice of assets.
What Are Some Tips for Investment?
The highly perceived means of investment to a layman is educating your children to get lucrative jobs. However, in the contemporary world where unemployment is very high, it is important to seek for alternative methods of investing. A good business idea that requires little capital is the starting point for you. Later, you can use your proceeds to optimize your earning potential through stocks, real estate, bonds, or starting another business.
Why Is It Important to Invest?
Money is the means to an end; without money life becomes unbearable. It goes without asking that people invest to increase their financial security, gain personal freedom and lead a comfortable life. In the contemporary world, there is a shift of responsibility as planning for retirement is left to the individual in comparison to the state as was the case some time back. You therefore need to secure your future in your old age.
Why Long-term Investment?
This is only meant to encourage you to start investing early because the earlier you begin investing, the greater the rewards. The rationale behind this is compounding interest; hence, there is reinvestment of income gained from the original investment and this accelerates with time as the reinvestment is consistent.
What Do You Need to Consider When Investing?
The following factors as influenced by age, personal circumstances and stage are what you should consider before investing:
1. Safety of Capital
2. Capital Appreciation
3. Current Income
Safety of Capital
It is important that you choose the right investment company because of the many hoaxes out there. Many people have lost chunks of money due to very auspicious deals presented by scammers. It is very important that if you want to invest money, do a thorough research on the company you intend to invest with. The company should be a registered company with a long history of operational activities.
Your current income dictates how much you are going to invest. The money invested should be the remainder after meeting all your expenses. It is not worth it if you are going to invest all your income yet you have a lot of debt. Then again many find they can be perfectly comfortable spending less so they have more to invest. Examining your budget can lead to more money to invest.
The most important element of investment is capital appreciation, without which investing would be rendered useless. In order to have a high capital appreciation, then you should consider investing now because the longer you wait to invest, the lower your returns will be.
This is the best time to start investing; waiting for tomorrow is not beneficial to you as an investor. You need to select the proper channels so that your investment is safe and you are assured of high returns. Take the risk now because you may be the next Warren Buffett.
Mike Hayes is a financial adviser for ten years. He shares some of the best tips when it comes to financial planning. He wrote several books on achieving financial freedom and savvy investment tips. When not writing, he gives coaching advise to clients in Nick Scali Limited (ASX:NCK)