02 Nov 2018

MASTERING INVESTMENT: A BEGINNER GUIDE TO THE RICH MAN'S WORLD

Gabriella Bassi

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One of the key strategies towards becoming rich is an investment. Well, it is true that many billionaires across the globe were not born rich. It is through investments that they were able to acquire their wealth.

We might be talking about investments day in day out, but do we really understand what an investment is? Investing is the act of placing capital in an expectation of deriving profit or income from it.

Investing in stocks, bonds, mutual funds, or exchange traded funds can be a bit of a gamble in today’s frantic and competitive reality where short-term thinking associated with daily events and "expert" analyses dominate the mind of the average investor. So how can I overcome confusion and misleading factors to maximize my chances for stable financial growth through investment?

Steve Selengut, a financial advisor and author of the book, “The Brainwashing of the American Investor” stresses: “If we reconcile in our minds that we can't predict the future (or change the past), we can move through the uncertainty more productively. Let's simplify portfolio performance evaluation by using information that we don't have to speculate about, and which is related to our own personal investment programs.”

In one word, a personalised investment portfolio does not fall flat to the unpredictable stock market.

Paul Koger, a Wall Street trader, advises serious preparation before you aspire to become rich through investing, starting with: NEVER begin an investment without deciding on the type of investment you are venturing in.

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Let’s have a look at what his successful finance career has to give away:

Long-term investments
Long-term investments focus on the future and provide continuous and reliable profits for the retirement years in the future. Long-term investments involve lesser risks along the way and are hence termed as safe but they require a lot of patience. This is because the profits will not be acquired immediately. If you are in dire need of finances due to emergencies, then long-term investments should not be your option.

Short-term investments
Just like the name goes, short-term investments are investments done over a short period of time. These are plans that have a great possibility of growth and rise in value over a very short period of time. Unlike long-term investments, short-term investments allow for more personal control. This is because you will be the only one to keep an eye on your money. At some point, you might be faced with economic challenges, but this will only be outwitted by the risk management mechanisms you put in place.

PREPARE FOR THE GAME

1. Come up with your own financial roadmap
What is a financial roadmap? This is a critical analysis of your own financial position. It is good to take a look at your own situation financially and make an honest decision. This is the time that you need to come up with a financial plan. Drawing financial plans means that you ought to come up with your goals and a critical analysis of the risks that may be involved. If you are not sure how to do this, it is appropriate to seek help from a financial professional.  

2. Evaluate your comfort zone in taking the risk
A risk is anything that may impair a business or an investment from achieving its goal. All investments involve some degree of risk. What you have to understand is that an investment is a speculative risk. It has a possibility of either profit or loss. It is therefore important that you understand this before making any major step. But if you really want to invest, be ready to take up the risk. The reward of taking up a risk is the possibility of getting a greater investment in return. Greater risks mean greater profits, think about it.

3. Eliminate bad personal spending habits
If you want to be a successful investor, then your bad spending habits should be stopped. Whatever you were spending unreasonably should be directed towards investing. How to start investing should be a question to professionals, especially if you do not know how. Investments need sacrifice, sometimes you might need to eliminate the present luxuries to enjoy better ones in the future. So do not feel bad if you are forced to do away with your poor personal spending habits. One important thing is that the proceeds you get from your investment should be handled properly. They can be returned back to the project, so as to get more out of it. 

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4. Raise the funds 

An investment can never start without initial or starting capital. There are many ways with which you can raise the funds, these include: Saving over a period of time, getting funds from relatives and friends or borrowing from a financial institution like the bank. It doesn’t matter which method you use, all you need to ensure is that the funds are available.

5. Decide on what to invest in and where
You cannot make an investment in everything. This, therefore, means that you need to single out a particular area that your investment will focus on. Should it be in property, clothing, natural resources, food, soft drinks, transport, digital services or art? There are many areas that you can invest in, and a diversified portfolio is key. It only calls for a critical analysis of the customer location.

Congratulations, you are at the management plan stage! Make it an efficient one!

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Categories: IBA Blog , Friday Buzziness

Tags: #investment #wealth #growth #property

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