PLANNING YOUR INVESTMENT

Wise investment does not depend on luck, but is the result of careful planning.
When you invest, you can not rely on rumors.
You need to take some time to understand the market, whether through research
or the services of experts. Here are some issues you need to know:
Step 1: Know why you want to invest
Before you invest, you need to know your investment objectives, goals and objectives of your finances.
Your financial goals may be to:
• Buying a car
• Buying a house
• Send your children to higher education
• Go on holiday
• To plan a comfortable retirement for the future
Your investment objectives are either to:
• Maintain or preserve the purchasing power of the principal amount invested
• Getting income from your investment
• Increase your net asset value
• Combination of any of the above
Step 2: Know the key issues to consider when investing
As investments are long-term commitments, you have to take into account the ability and
your ability to invest before you make the investment. Among the key issues that need to be
considered are as follows:
• How much money do you have for the medium and long-term commitment?
• Do you fully understand the product that you are investing?
• Are the planned investment in line with your overall portfolio?
• Have you compared the returns of other similar investments?
• Do you understand the risks involved and do you know the level of losses
you bear? (Ie how much changes in the price / value of your investments can
bear)
• What are your expectations for returns from your investments? (Ie how much
returns that will satisfy you)
• How long are you investing? (For example, 5 years, 10 years, etc..)
• Do you have the flexibility to liquidate your investment in the
emergency?
• How can you monitor the performance of your investments over
with your changing needs?
Step 3: Know the concepts of investing
Diversification
A proven strategy for successful investing is diversification - diversification
your investment. Diversification is an effective way to minimize risk and
protect you from volatility in one asset class or industry.
Different types of investments are exposed to different levels of risk and diversification,
losses in some investments can be offset by other investment gains.
Time value of money
Time is the greatest asset for anyone who wants to invest. The earlier you invest, the greater
return on your money. This is due to the concept of compound interest you
will earn on your original investment and the interest you earn on investments
you.
Despite the differences one percentage point in long-term effects can be significant.
The chart below shows how the investment of $1, 000 at different rates of return
will grow over a period of 40 years.