How To Select The Right Investment For Your Needs
Last week, I wrote about the basic things every promising investor in the UK should know. And towards the end, I gave my reason as to why I favour property investing over other types of assets.
The feedback I got from that post was quite telling. There were those who actually wanted to know more tips on the other types of investing. The reason was that they were still unable to invest in property at the moment, and they were thinking about investing in other assets first in order to boost their finances and allow them to invest in property in the future.
So for this post, I’m sharing with you three key steps on how to select the right investment, depending on your needs.
Check your goals
Ask yourself. How soon do you need to get the return on your investment? Are you preparing for a short term or long term goal?
You have to answer these questions as honestly as you can, since your answers will impact what type of investment and risks you take on.
Going back to the original example, let’s say you’re saving up for a deposit on a house and you want to achieve this goal in 2-5 years. In this situation, it’s better to stick to a cash savings account rather than investing in other classes. The latter tends to go on a roller coaster ride in terms of price movement, but the former’s value is more stable and you can cash out your returns easily when you need the money.
Now, suppose you also want a long-term strategy such as saving up for a pension to be withdrawn in 25 years or so, you must focus on the long-term benefits and disregard any short-term falls in price. Buying a variety of investments help you beat inflation and reach your pension goal.
Decide if you want to be a hands-on investor or not
Depending on your approach, investing can consume as much as your time or as of your time. It is really up to you.
If you’re planning to be a hands-on investor, then it’s advisable for you to buy individual shares. This can be time consuming because you’ll need to research ad understand the risks involved.
However, if you don’t have enough time to give your investments or if you don’t have a large sum to spend on investment, then it’s best for you to look for investment funds. This way, your money is being handled in lump sum together with the money of other investors, and it can be used in a wide array of investments. Some well-known varieties of these investment funds are: unit trusts, open ended investment companies (OEIC), and exchange traded funds.
Review your investments periodically
When I say regular review, it means checking your investment at least once a year. Conducting these regular reviews helps you keep track of how your investments are performing. Usually, stock holders in a company are informed of the value of the stocks in an annual meeting, while other corporations send out regular statements to their investors.
The only problem is that sometimes investors go crazy when checking their investments.
Whenever they see a news article saying that prices are starting to dip, they immediately call the nearest and most interested buyer they know. Don’t be like this. Remember that markets rise and fall every time. Don’t falter when you see small changes with the price of your investment, if you’re investing for the long-haul, you can ride out any price fluctuations that you may encounter.
So there you have it: my basic tips for investing. Feel free to click on this link if you wish to access part 1.