Anyone who wants to achieve their long-term financial goals is aware that they have to invest their funds somewhere they have the potential to grow. Long-term investments can cater to your goal at various life-stages, such as when you set up a business venture, buy your dream home, achieve financial freedom in your golden years or finance your child’s college education. There is a horde of investment options that can be found in the market. According to Ido Fishman, you should evaluate the different options at your disposal based on your risk tolerance, age, and your financial goals. When you do so, it will ensure that your financial portfolio consists of an ideal mix of the best investment vehicles.
So, what should you consider before you make an investment decision? Following are the most important factors that should be taken into account:
Best use of your money
Experts like Ido Fishman will tell you that the golden rule for maintaining your financial stability is to make the best use of your money. For instance, you might assume that you have money available for investment, but there is also a huge outstanding credit card debt you have to pay. If the interest charged on the outstanding debt is higher than the return you will make on your investment, it will result in financial loss. In this situation, it is better to pay off your debt and consider investment later. Ido Fishman recommends that you buy an insurance policy before investing as this provides coverage against risk.
Consider the reason for investing
You need to identify your goals and expectations from the investment in order to decide where to invest. Those who want to preserve their capital would take low risks while investors who want to see their gains multiply will be more open to higher risks. As per Ido Fishman, you need to be aggressive if you want to make higher profits from your investment. Stocks and mutual funds can be good options in this regard. If you don’t have any immediate financial goals to achieve, you can look for investments that offer moderate appreciation and have well-balanced risks, like balanced funds. If you are risk-averse, then you need to go for less-risky investment options like bonds. This will keep the capital safe as they don’t decrease in value.
Don’t forget your age
Your choice of investments will also depend on your age. If you are on the younger side, you may be open to taking greater risks because you don’t have that many responsibilities. Moreover, it also means that you have a longer time for recovering from your losses in case the financial market doesn’t perform. In addition, starting early gives you the opportunity of benefitting from compound interest. You can earn interest on the principal amount as well as on the interest itself. When you grow older and your responsibilities increase, you can choose investments that are not that risky.
Know your ability to take on risks
It is a widely known fact that the higher the risk, the greater the chances of potential return. Ido Fishman says that before you make an investment decision, you should assess the level of risk you are ready to take. After you have ascertained your own risk tolerance, you can choose from a wide array of investment options. For instance, someone who is risk averse would prefer to invest their money in fixed deposits. Alternatively, if you want to take on greater risks, equity investments would make a solid choice.
Think of the time horizon
You should choose the best investment vehicle depending on your time horizon. If your financial goals have a greater time horizon, Ido Fishman says that you can take more risks for earning higher returns. But, if you have short-term financial goals, the primary aim would be to invest in an avenue that doesn’t put your money at risk and can be converted into cash when you want.
With the different types of investment products available today, choosing the right one can prove to be an overwhelming task. When you take the aforementioned factors into consideration, it will help you in making a well-informed decision that helps you meet your financial goals.
