Five Must-Know Facts about Making Investments

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Do you know that you should invest, but don’t know where and how to start? If yes then you are reading the right article as we would be discussing the 5 must-know facts about making investments!

1. Investing is compounding!

In simple term, investment equals putting your money to ‘work hard’ to earn more money. It works on compounding, i.e. re-investment of earnings and time. For example, if you invest 10,000 USD at 5% annual interest, your earning would be 500 USD for the first year, 525 USD (5% of 10,500 USD) for the second year, and 551.25 USD (5% of 11,025 USD) and forever increasing year after year! While investment can make a person rich, one must bear in mind that it is not gambling, neither it is a get-rich scheme.

2. You must first know yourself before you start investing.

Three key questions you need to ask yourself before investing: what is your financial status, what are your financial goals and what kind of risk you can tolerate. Knowing yourself is important because this would directly and indirectly decide your preferred style of investing and the type of investors you become. There is no a single investing style that works for everyone, but there is always a right one that fits your needs and the kind of environment you are in.

3. Investing is about educating yourself!

Investment requires skills and knowledge. The last thing you would want to do with your hard-earned money is to blindly throw them into some investment schemes that you yourself is unsure of, that would be equal to gambling! So, you should spend some time to educate yourself about the area of investment you intend to participate in. Understand how it works can help you to plan your investment portfolio.

4. Investing is like a long adventure trip.

You need to have plans before you embark on a trip, similarly for your investments. Budget the amount of money you can invest as well as devise a strategy on how to maximise the usage of your money. Strategy must not only include how to enter the market, but how to exit with your profits. Proper planning can lower the risks of losing money.

5. Never put all your eggs in one basket.

Diversify your investment. Put it simply, if you are investing in a stock market, invest in more than one company. You risk losing all your money if you put them in a single company when its shares nosedive. It would be wiser to invest in more than one sector or different types of investments.