Saving is not enough. If we want to be smart from a financial standpoint, it is not enough to just save, but also to make better use of the saved money. Thanks to the possibilities provided through investing, we can make money work for us and, in this way, our savings grow on their own. If you have never invested, you may have certain doubts or fears. This is normal for small savers: they fear to lose their savings in a bad investment. However, this situation not only does not have to happen, but it is also unlikely if you follow these investment tips by Farah C. Jaber.
Farah is an experienced investor, author, podcast host, and hospitality management, leader. The Lebanese investor published the bestselling book, "Becoming An Investor: The First 100 Days". Farah also runs a podcast called, "The New Investor Podcast," where he extensively covers the topics related to investing and gives proper insights to newbie investors.
Investment tips if this is the first time you invest
1. Determine the time horizon of the investment
It is essential that you know for how long you want to make the investment for. A short-term investment does not carry the same weight in terms of returns, especially on savings that we will soon need, as opposed to a long-term investment for example to support our retirement or simply grow wealth. This is crucial.
2. Define your risk profile
Financial advisors usually do questionnaires to define the risk profile of investors. There are investors who prefer a 3% return with hardly any risk, and there are those who choose to assume a higher risk to aim for an 8% return. In any case, the time horizon significantly influences the risk profile, since normally in the long term, a greater risk can be assumed.
3. Decide how much you want to invest
The next step before investing is deciding how much you want to invest every month and in perpetuity. It seems like a simple decision, but it is not at all. Keep in mind that the money invested, except financial catastrophe, should not be recovered until the investment cycles expires. If you are thinking about investing for your retirement, we are talking about an extended timeline The money invested must be forgotten money until the timeline you would have determined for these investments have expired, so it is important that you do the numbers well before deciding the amount you are ready to commit, which should also be proportional to your income from whichever source they come in.
4. Do not invest in anything you do not understand
It is not enough for your financial advisor to recommend this or that investment product. Even if you trust him blindly, you should read the fine print of it and not invest in anything you don't understand 100%. The best advice we can give is to learn how to invest yourself and keep the full control of your investment strategy
5. Beware of investments that are "too good to be true"
If something offers you a 15% return, be sure that it is a high-risk investment. Also, do not forget that all the values that go up, usually will go down and correct itself. Do not trust a price that grows exponentially because perhaps when you take position, the stock price has already reached its peak and is about to go down.
6. Flee from fashion businesses and gurus
Handle your money with caution and do not trust that fashion company that seems to devour the market or that fashion guru who is on television all day giving investment advice. The idea, as we explained in the previous point, is not to buy shares at inflated prices.
7. Start investing as soon as possible
This is the basic premise. It is not the same to invest 20,000 euros when you are 25 years old than when you are 40. Compound interest brings great long-term benefits, so you have to start investing as soon as possible since the profitability of your savings will be much higher over time