There are many reasons why people invest. I can think of the following :
2. Wealth Preservation – they want to keep the little extra that they save and invest it as a hedge against inflation.
3. Goal-setting – they invest so that they can buy something out of the money that they will make from their investments.
4. Security – mostly for long-term, they want to be secure financially when they grow old and retire.
The truth of the matter is there are no guarantees in any kind of investment.
Investment portfolios include bonds, stocks, real estate, gold, jewelry, bank placements, to name a few.
What people should know is that there will always be risks in investing. It could be inherent (business, company performance), market-driven (natural, political, economic), liquidity, inflation, and even default.
But what’s good about investing is that you risk your money in order to gain and you call this risk, a calculated risk. Calculated because you were informed and you make your decision based on the information at your disposal.
It can only become a reckless risk if you invest your money out of ignorance and without any informative guide to help you decide.
So how do you make calculated risks in investing?
For one, you do not invest on your own like a stock trader. Instead you invest your money in mutual funds and let a fund manager take care of your investments. This is recommended for people who have regular jobs and have no time to monitor their investments on a regular basis.
Another thing is that after considering all options, you are left with that choice to invest where your heart and mind will be. It could be stocks or real estate. But the important thing is you are investing based on your tolerance risks, investment appetite, comfort level and willingness to allocate financially.
Actually, if you will invest long-term, it is not advisable to check the status of your investment every now and then.
Another good thing about long-term investing is that you can leave your investment for a time and just check it after some period of time to appreciate how much it has grown since you invested it. This applies to mutual funds and real estate.
But the prudent way to invest is to know where you are investing, why you are investing in that fund, and how much are you setting aside for your investment portfolio.
So do not invest blindly. Do not invest just because it is the trend or the “in thing”. Do not invest with the flow. It does not follow that you will succeed just because others have succeeded. Why do I say this? Because timing is key in investing. So the prudent way is you invest as early as possible. Yup, the earlier the better because historically, the prices or rates have indeed gone up over a period of time.
You can choose to be passive or active in investing so a lot of prudent planning is the key to a successful investment.
Investing is a personal choice. It requires mental preparation and emotional involvement, not to mention financial participation.
Actually, it goes without saying.