Financial Advice Every Investor Needs to Know
“Don’t work for money. Make it work for you.” – Robert Kiyosaki
Investments are a must to grow and make your wealth. The number one thing for investments is to take time to chalk out your life goals for the next three to six years and jot down the financial resources you will need to achieve them. It is said investment in knowledge pays the best interest and therefore we have collated some essential advice adhering to which is a must for every financial investor.
1. Annual Review is a must
At the end of every year, it is a good time to check your financial performance and if you are in line with your savings goal as well as investments. It is imperative to keep your investments in sync with your goals and objectives. If there has been any life event taken place suddenly or due to taking place in the future your investment portfolio needs to be catered to that accordingly. Events like birth or death of a family member, or a new kid due to go to school, or an upcoming wedding are all for life events which might alter our investment plans for which we must make provisions.
2. Investing in a peer-to- peer loan
There was a time peer-to peer lending in India acted like a matchmaking service only between lenders primarily banks and the borrowers. However, now in peer-to- peer lending, banks form a small part of the lenders whilst most of the lenders are individuals who prefer to use peer-to- peer lending through online peer-to- peer lending companies like Lendenclub. These investors are promised regular payments at a set interest rate. Thus lending money online to borrowers is now a huge investment opportunity for investors and P2P lending industry has experienced an exponential growth from 2006 onwards. If an investor will get a yield on his investment higher than that of a bank, which he does, in peer-to- peer lending, it becomes a great investment tool for him.
3. Always measure your tolerance for risky business
You should know your tolerance for risky business whilst investing. If the market drops and you look at your balance and its lower and the mere thought of it makes you ill, you don’t want to put yourself through that scenario. As a rule of thumb your fund allocation must be done in this manner: Use your age and that number forms the percentage of your holdings you must invest in fixed-income and safer investment avenues like bonds etc.
4. No risk, No return
For those who believe risking in stocks is a gamble, staying on the fence and avoiding the market risks altogether can be an even bigger losing bet. Staying out of the markets subjects you to the risk of inflation which might be more than your fixed deposit return. Your money appreciates in value when you invest and therefore when you are out of the market your money isn’t making any money on funds. With the time value of money concept, your money is losing its value. Therefore a certain amount of risk appetite is required for investing in the right investment product so you can garner a sufficient return to growing your money. Also, remember high risk also garners a higher reward.