Investing your money is a great way to grow your wealth, but it can be intimidating to someone who is starting fresh.
Investing is unique to each person because of the time and money everyone is willing to invest is different. Before you begin investing you should think about what sort of investing style you would like to adopt, how much money you can afford to invest, and your risk tolerance.
Investing style
There are two main investing styles that you can adopt. The style you choose will depend on the time and effort you’re willing to put in, and the sort of output you expect from your investment.
Passive investing: This is a hands-off approach that tends to focus on long term returns. The return from these investments will be stable and predictable.
Active investing: This is a lot more hands on. It requires you choosing and conducting the investments yourself. This will require a lot more of your time because you will need to continually be researching opportunities. The return from these investments, although risky, can be quite large.
As a beginner, the passive style might be more appealing till you can learn and understand the market well enough to invest more actively.
Budget
It isn’t necessary to invest a large sum of money, it is necessary however, that you are financially prepared to invest the amount of money you choose. You should be able to set aside an ‘emergency’ fund, aside from the money you are prepared to invest. This is because there will always be some sort of risk involved in your investment and you should not rely on quickly selling your investments to fund an emergency.
Risk tolerance
The risk involved in an investment is usually proportional to the expected returns (higher returns = high risk; low returns = low risk). You need to find a balance of risks and returns that works for you and the amount of money you are willing to lose. This balance might take some time, and at the start, you might choose to only invest in low risk investments.
It is definitely intimidating to start your investing journey, but outlining how much time, effort and money you are willing to commit will put you in a good position to kick start it!
To discuss your investment journey please speak with one of our financial advisors to discuss your current situation and needs. Contact us today.