4th Principle of Finance …Investing
Investing your money wisely can increase your net worth and help you live out your dream retirement lifestyle, provide a quality education for your children. Help create an estate plan that helps your family’s successive generations not to have to always struggle, as you did.
It’s important to determine why you’re investing. Your investment goals will dictate what you invest in, how much money you invest and for how long.
Factors to consider when investing:
• Your age
• Your income
• A particular financial goal
• Risk you can tolerate
• Your time horizon
Let’s discuss each of these factors today, each in turn.
Age:
One’s age relative to investing can vary depending on health conditions, where you are in a career, that has a defined timeline for you to retire, will I still be working and receiving active income or depending on passive sources of income, such as government benefits or a pension. It is not always true that because you are older, you should not be investing and keep all your money in CD’s and savings account. That’s like someone dictating that you should start slowing down at 60 years of age, that would be considered backwards and rude nowadays.
Income:
Your level of income pretty much dictates how much you can invest, why because you have to meet your bills, set aside an emergency fund for a rainy day but should you be concerned that I may never be able to afford to invest based on these factors, usually with an inventive and creative mindset, you can uncover valuable sources of money in your budget that is going to the cell phone companies and the cable companies that you could reduce, if only you could let your pride and outlook factor, “in ten years, where will I be financially vs. these companies.” A financial advisor can usually utilize advice and tools to make sure you are able to do all three goals at the same time.
Your Financial Goal:
It is critical to make up your mind what you would like to achieve. Dream and dream big, why, in the golf game of finance, it is always better to overreach, so if you fail or come up a bit short, you would have been further ahead anyways than if you didn’t do something in the first place. It’s what you want that’s important and in todays “Me Society” if you are making sacrifices. It should be you enjoying your monies, right?
Risk:
It’s always best to analyze risk relative not to the best of times or conditions but to the worst. Ask your financial advisor for data on conditions and losses in the worst possible scenario and then go backwards from there to construct your portfolio. Say to yourself, “if I can make this happen and the investment acts up, will l lose sleep, or will I keep a balanced positive attitude. Your financial advisor should construct a 🪜 laddered or layered strategy that has defensive and tactical strategies for every market situation. If he or she has only a vanilla solution that you can find in a retirement brochure from 20 years ago. It may serve you better to interview others to find fresh ideas for your investment.
Time Horizon:
Time is the master in the investment game. Just like there are quarters for a game and strategic decisions and play is considered at each quarter so too must your investment portfolio be structured, did I gain a lot earlier on, then why not go on the defensive. Am I running between bases and gradually building up points, then why not continue and keep an eye on the clock. If the market crashes and my financial advisor shows me data that reliably says I will recover, given a particular period of time. Do I listen or do I freak out an sell at the lowest point or consider carefully. I have one more quarter to recover. Keep these tips in mind to build your time horizons for investment.