Friday 8 December 2017

4 Important things to consider before making an investment

Investments are great tools for growing and accumulating your money. However, it is important to keep some basic things in mind before making investment decisions because of the risks investments generally carry for your money. Here are 4 important things to consider before making an investment.

The Time to make the Investment
This is one of the most important things you should consider before investing. You need to consider if it is indeed the right time for you to invest. There is no hard of fast rule to this but it basically just involves you being observant enough to know the right time to make your investment. You can as well consult  a financial advisor for this, and you can also employ your sense of good judgement in making the decision on the right time to invest.

Where to Make the Investment
Many times your objective for investing will determine where you will invest. If your objective for investing is to keep your money relatively safe because you will need it soon, then investing in less risky instruments like bonds will make more sense for you. On the other hand, if the objective of your investment is to take aggressive risks to make higher gains, then you can of course invest in high risk instruments like stocks etc. However, if your objective for investing is to take some moderate risk with your money for better appreciation, you can consider investing in real estate or in a mix of stocks of very stable companies that pays out dividends (income).

The Time Before You Need the Money
Not everyone invests for retirement, some investments have shorter goals. This will therefore influence where you are going to make your investment. Typically, the longer you can stay invested the more you can take risks and hopefully make more gain, since you can still recover from potential losses. However, if you do not have a lot of time to stay invested, taking a loss might be more disastrous to you, it is thus best to make less risky investments or invest in less risks instruments.

Tolerance for Risk
This is another very important factor you should consider before making an investment. The general rule is the higher the risk of an investment, the more potential there is for higher return. However, not everyone can tolerate risk or take risks with their money over a certain level. You need to understand your threshold for risk and the level to which you can take risks with your money before making any kind of investment. This is to avoid the adverse of effects of risk taking on your life and health. It is thus best to invest within your level of risk tolerance.

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