FACTORS TO CONSIDER BEFORE INVESTING

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 Most people engage in investing without knowing the terms and risks that accompany the company they are investing in. here are 5 things to consider before investing in a company:


5 FACTORS TO CONSIDER BEFORE INVESTING
 

Plan your investment strategy

One of the main things to consider before investing is to have a plan. This helps you put into perspective not only your investment goals, but when and how you want to achieve them. It can also help to remove the likelihood of emotions influencing your investment decisions.

There's no denying that the nature of investing can be emotional. There are times where you may feel tempted to change your investment strategy because an area of your portfolio is not doing well, or you received recent news the market is going to plummet.

While these events may cause you to react quickly, such as selling off your assets, it's important to take a moment to consider your investment strategy. If your approach is intended to be a long-term plan, making decisions based on short-term market fluctuations, may greatly affect what you set out to achieve.

Review your timeframe and risk tolerance

It's important to consider how much time you're giving yourself to build towards your financial goal and how much risk you’re prepared to take on to get there.

For example, an investment plan for retirement may look very different to someone who is much older or younger. If you're looking to access your money in a shorter time frame, remaining invested through ups and downs in the market may be unlikely, so a less risky investment approach may work to your favour.

Consider where to invest your money

You may choose to divvy up your money across a variety of asset classes such as shares, cash and bonds, or you may choose to invest your money in a single asset class, such as a residential property.

Diversification

One of the main advantages of investing in different asset classes, is the ability to diversify your risk. This means, if one of your investments doesn't perform well, your losses may not be as significant as if you only invest in the one asset class, as your other investments may help to level it out. On the flip side, it does take more effort as you'll need to remain up to date across a variety of markets.

Consider the company not just share price

If you're investing in shares, it's also important to look beyond the stock price and consider the company you're buying into. If it's values and goals don’t sit well with you, then it may not be the best investment option for you.

 

Investigate how to invest your money

There are many ways you can go about investing your money depending on how confident you feel and whether you'd prefer to take a more passive or active approach to managing your money.

Managed investment funds

Managed investment funds offer fund managers that manage your investment portfolio by buying and selling shares on your behalf. This provides a more hands-off alternative so you don't have to worry about the day-to-day management of your portfolio. If you do invest in a managed investment fund, you'll be required to pay a range of fees, which are usually set out in the relevant Product Disclosure Statement (PDS).

 

Research the market

It's critical to take the time to research what factors may have an impact on your investments so you can make informed decisions.

Understanding what's going on in the market, domestically and globally, is important as it may have an impact on your investments. This can include things such as growth, unemployment rates, interest rates and inflation and even political events.

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Written by: Boaz Bett


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