August 8, 2013
Points to consider before investing
When it comes to investments, merely following the herd doesn’t work as a single kind of investment might not benefit different persons. Investment depends on our individual financial conditions, our own circumstances and our ability to determine the best that works for us. Some education and exposure to the global market certainly helps.
A certain amount of market experience and flexibility is expected from an investor and following guidelines regarding investments can assist a person better to assess the best investment type for him. Here is a quick guide that will assist you to make sound investments for your future.
- Ask yourself – How much and for how long? – Have an insight of how much you need to invest and for what duration. Depending on your requirement and affordability, you can invest a lump sum towards say corporate bonds or deposit funds to buy a property. Also, it is imperative to know the duration of the investment. Products like shares are long term investments while some have a shorter span.
- Flexibility – An investment once done remains locked for a definite period. Gauge the flexibility of the invested product in case you need to liquidate the asset to fund during a crisis. Don’t forget to ascertain the penalty involved in such situations. Know it beforehand the repercussions of access your investments before time. This factor enables you to zero in on the kind of investment suitable for you. Sometimes, the financial advisers can be consulted for guidance who might direct you to have short term and long term investments. They recommend having a portfolio of investments. Further, remember to consider tax propositions of the investments to measure the actual returns. Keep assessing your portfolios yearly to keep up with the changing economic conditions and identify the best investment options for you.
- Expecting an income from your investments– If you anticipate a steady income from the investments, then the products you choose would be different. A pension is a kind of investment tool which would see you through after your retirement as an income. Investing in corporate bonds, annuities also make sense. Buying a property and use it for rental purpose also provides a steady rental income.
- Personal circumstances– Depending on your personal conditions, you can decide on your investments. A self employed person can get an investment product which is more flexible compared to a single employed person with no dependants who can afford a short term investment with minimal risk. A parent with financially dependent children would have a cautious approach towards savings.
- Know the purpose of your investment– Question yourself what you intend to do with the money. Everyone has different needs and reasons for savings. It all boils down to the risk factor – how much risk are you willing to take with the money? If you intend to pay for your kids’ education, you can go for a long term investment and higher return, thus, amplifying your risk manifold. On the other hand, for a car purchase or a holiday trip, a short term investment is a viable option with low risk and guaranteed returns.
Morgan Finance New Zealand is the one among the various types of mutual funds. Invest in mutual funds to achieve your financial goal.