3 Factors That Determine Your Investment Strategy
You may be wondering what the right investment strategy is for you, but without knowing anything about yourself, any advice on which investments are right for you can actually be wrong. There are basically three factors that determine which investments are right for you:
1. Your age?
2. Purpose for money
3. Your risk profile
From your age. It would be foolish for you to invest all your money in growth funds if you are 65 years old, because if the market were to decline as much as the 1987 stock market crash և to a lesser extent, in the early days of the global financial crisis. In the 2000s, you have less time to recover from these setbacks, while young people have time with them.
The purpose of money is the second factor.
Decide whether you need money in the short, medium or long term.
Short-term – up to one year.
Medium term: 1-5 years
The long-term term is more than five years
Short-term expenses will be a bank account for emergencies, one-year leave, dental expenses or not paying children for one-year schooling.
There will be savings for the car in the medium term.
Will your pension fund be long-term, home savings savings or lifetime travel savings?
Your risk profile is a decisive factor in where you invest your money. If the idea of diving into the stock market will give you sleepless nights, then investing in rising stocks is not for you. A better option would be managed funds, where you would be given a choice between growth, balanced “conservative funds”.
It is possible not to fall into debt because the debt is expensive, it is the interest. Interest is added to the value of goods purchased on borrowed money, which is the amount of material consumed over the life of the loan. This is called bad debt because the cost of the product decreases over time.
However, there is a good debt և this is your first home as the value of the property increases over the course of the loan, but even this is not always a good option for some people if you are living a transient lifestyle.
“Everyone has their own”, so only you know what makes you point out that your personal circumstances are the deciding factors in where to best invest your savings.
You need to do your homework before investing in anything, be it the stock market, managed assets or gold. There is so much information about everything, including finances. It’s just a matter of learning the ropes and having a financial strategy tailored to your personal circumstances.