Let’s accept a fact, learning how to invest your money is the best method to grow your money. Though not crucial, investing money is considered to be very important in today’s scenario, as people have understood that just earning money will not help suffice the growing needs of day-to-day living. Alsothat if one is not investing, they are missing out on a lot of earning opportunities.
What is Investment?
Investment is basically the allocation of funds in various different avenues, with an aim of generating revenue from it after a short or long period of time.
Investment of funds is essentially an asset that is created to allow the growth of your hard-earned money that brings along many added benefits if done right that can serve in fulfilling various objectives such as meeting up the financial shortfalls, tax benefits, wealth creation, saving for retirement, or satisfying particular commitments such as debt repayment, tuition payment, or the acquisition of other assets. The assets considered for investment comprise of stocks, mutual funds, bonds, real estate, jewels, and many more. These are purchased with the intention of earning income or benefiting from their appreciated value that increases over time.However, one cannot neglect that every investment comes with a certain risk associated with it. And if not done wisely, the involved risk can boom to bringing you major losses. Hence, one must understand the level of risk or benefit associated with each type of investment and select the one that best suits their needs.
There are 5 basic characteristics of investment one can consider while making their investment plan.
- Risk Factor: Every investment involves a certain level of risk and it differs with each type of investment. This risk is defined as the loss of principal amount, the delay or nonpayment of capital or interest, the unpredictability of return, and so on. Investors thus prefer investments that are less risky, yet involving some assured returns.
- ROI (Return on Investment): The primary goal of every investor is to project the revenue or gain they can expect from every investment they make, this is referred to as a return on investment and the gains from investments can either be in the form of regular income or capital appreciation.
- Safety: It refers to the protection or return of the principal amount without any loss. Safety is an important characteristic of any investing instrument that is evaluated before allocating any funds to it.
- Income Stability: Every investor desires to invest in assets that give a steady return. Hence it is crucial to understand the regularity of income you can expect from your investment and the wavelength of fluctuations involved.
- Liquidity: The liquidity of investment relates to how quickly it may be sold or turned into cash. It simply refers to the ease with which an investment may be sold in the market without incurring a loss. A majority of investors choose to invest in liquid assets.
Where to Invest Your Money?
Today, the world is geared up with different financial activities and there are different types of investment opportunities available that cover a broad spectrum of investment avenues. Instead of simply keeping your money idle in a savings account you can opt to invest the same in the different types of investment options available considering the below mentioned three important aspects:
- How much time do you have for investing your money?
- How much money can spare on your investments?
- How much financial risk are you willing to or can afford to take?
Once you have answers to the time, budget, and risk tolerance aspects of investment it will become easier for you to understand which type of investment can best help you in gaining short-term and long-term befits.
Types of Investment:
- Insurance plans
- Mutual funds
- Fixed deposits
- Real estate
- Stock market
- Derivatives and foreign exchange
- Registered Education Savings Plan (RESP)
- Registered Retirement Savings Plan (RRSP)
Each of these investment avenues has its unique features that involve different risk factors, opportunities, and tax rules. While putting together a complete portfolio may appear difficult, the dividends, interest, and rentals can turn to be well worth the effort. It is up to you to determine where to put your money and how to use these avenues to reach your financial objectives. While doing so, bear in mind your requirement for liquidity, wealth creation, alternate sources of income, capital safety, and life insurance.
However, investing money for beginners is tricky if you are not familiar with the nuances of the different investment avenues and all of the above mentioned investment avenues may not be suitable for those who are new to this money play.
How to Invest Your Money?
Investing money might seem intimidating, especially if you’ve never taken the risk before. Though in most cases, it’s the “not knowing what to do” that slows down or stalls you from doing any investment at all. The easiest method to get started with investing is to identify which asset classes you wish to own. A wise step to begin with investment is to use your money to acquire things that offer the potential for profitable returns through one or more of the following:
- Interest and dividends from savings
- Dividend-paying stocks and bonds
- Cash flow from businesses or real estate
- Value appreciation from a stock portfolio, real estate, or other assets
However, it is most important to know when it is time to have a financial advisor for planning your investments. If you have quite a bit of money to handle and/or you are unsure of how or which investment avenues are right for you to begin with, a professional advisor will be much better at explaining things to you than any investing platform available online.
At SJ Financial, we understand the financial complexes and that optimizing high revenues demand sophisticated planning and strategies. We are a team of skilled financial planners based in Brampton, committed to Canada’s high-net-worth financial market and its unique requirements and opportunities. You will truly experience that we care once you join the SJ Financial Family!