Investing your money is a serious business. After all, it is your hard earned money and there’s nothing better than to find a “vehicle or instrument” where you can “park your money” and let it earn a little more.
1. Have a long-term mindset.
Investing your money grows over time but if you expect it to grow significantly within 2 years, then think again. A short term investment can be had in 2 years’ time but an ideal waiting time should be between 5 years (medium term) and 10 years (long term). If you want to raise capital, investing is not the answer. Instead, find another source of income to fund your short term goals.
2. Investments are not guaranteed.
While the purpose of every investment is to capital appreciation, nothing is guaranteed. Even if past performance can be used as a basis, it is still not a guarantee that future performance will be the same as in the past. Risks are inherent in every investment. It can be “internal”or “external”. It is very important to consider your risk tolerance. They say, “no risk, no gain”. That is true but I would advice that you give it a “calculated risk” meaning, consider the ff.:
a. The company where your money will be invested. Is it stable? Is it legitimate? Authorized to receive investments? Is it reliable? Does it have a track record? How will the company pay you?
b. Where is your money invested? What type of business is your money invested in? What is the earnings potential of the business?
c. Who are you dealing with? Are you dealing with a professional? someone who is licensed to solicit investments? Look at the fine print if someone is giving you any form of guarantee. If you don’t see anything in black and white, then nothing is really guaranteed.
3. Spread your wealth.
Even the Bible says, “But divide your investments among many places, for you do not know what risks might lie ahead.” – Ecclesiastes 11: 2 (NLT). Imagine, receiving this kind of wisdom from the wisest man who ever lived, i.e., King Solomon and is still very applicable today. That is the essence of diversification. Don’t put all your eggs in one basket to mitigate risks.
If you will notice, all 3 guidelines above are associated with some form of risks. To recap, you don’t invest for less than 2 years. A long term mindset is necessary. You look for an “investment company”that you can trust and lastly, you diversify to minimize risks.
Ronnie Reyes is a Financial Advisor of AXA Philippines and is an MDRT Qualifier in 2016. He is also licensed to solicit investments (mutual funds). He has been in the investment industry for more than 15 years.