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How To Make the Right Investment Decision – The Ultimate Guide

Personal_Finance / Learning to Invest Aug 10, 2021 - 04:14 PM GMT

By: Mark_Adan

Personal_Finance Given the current market events, you're wondering whether to change your investment portfolio or not. It has been a great concern because various investors - including mattress stuffers and bargain hunters - make rapid investment decisions without planning long-term financial goals.

However, we can't tell you how you need to manage your investment - particularly during a volatile market. But we can provide you an alert to help you make an informed decision.

Since the pandemic hit the world, the world of investment has become challenging. So, as an investor, you need to be concerned about consumer demand points to a strong economic recovery.

Before you make a decision, consider these tips:

1. Draw Your Personal Financial Roadmap

If you are an investor, to garner success, you need to make the right decision. Don't wake up one day and make the wrong decision. Therefore, before making an investment decision, take an honest look at the entire financial situation. This is particularly when you haven't made a financial plan.

The first thing to do is to figure out the goals and risk tolerance. These could be with the help of a financial professional or do it on your own.

2. Take Risks

Any investment you make involves some degree of risk. If you want to purchase securities - mutual funds, bonds, or stocks - you must understand that you can lose your money.

This isn't like NCUA-insured credit unions and FDIC-insured banks, which means the money you've invested isn't federally insured.

In other words, to succeed with your investment portfolio, you have to take risks. Be knowing you can lose some or all your principal amount. This may also take place even when you purchase investments via a bank.

On the other hand, when you take risks, you will have more significant investment returns. The more you invest in categories with greater risks, the more likely you will get higher returns.

3. Multiple Investments

The other essential strategy to succeed as an investor is taking an appropriate mix of investments.

Asset categories have investment returns moving up and down. So, this may be a strategy to help you avoid losing all your money. Historically, stocks, bonds, or cash categories don't move up or down together. This will create a chance for you to make money when things turn positive.

When your invest your money in more asset categories, there is a higher chance to reduce the risks of losing money and portfolio.  That means if one asset category return falls, there is a chance to counteract the losses with better returns from the other asset categories.

Asset location plays a significant role because it determines whether you can meet your financial goals.  Perhaps, you will not have enough risks in your portfolio; then, your investments will not earn a significant return.

4. Be Careful with Individual or Employer's Stock

The significant way to lessen your investment risks is by diversifying your investments. This is common sense - as it is said, you should not put all the eggs in one basket.

You have to pick the proper investment asset categories to limit losses and fluctuations of investment returns. Again, you will not sacrifice your potential gain. On individual or employer's stock, be careful because when they go bankrupt, you garner significant losses.

By Mark Adan

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Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

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