Smart and well-informed investment decisions are important to growing wealth over time. As Scott Tominaga mentions, by selecting the right investment opportunities, individuals or entities can generate returns that outpace inflation and help build a larger financial portfolio. Well thought out investment decisions also go a long way in meeting financial goals like saving for retirement or buying a house, while keeping risk levels in check.
Scott Tominaga sheds light on important factors that must be dwelled upon prior to making investment decisions
With the fluctuating stock market trends, many investors face the dilemma of whether they should be making changes to their investment portfolio or not. At times various investors, including bargain hunters and mattress stuffers, tend to make rapid investment decisions without considering their long-term financial goals. But such an approach may ultimately cause them to lose money. Here are a few things one must consider before making investment decisions:
- Draw a personal financial roadmap: Before making any kind of investment decision, people must sit down and take a good look at their entire financial situation. Figuring out the financial goals and risk tolerance of a person is the very first step to successful investing. There is no guarantee that one would make money from their investments. However, if they do get the facts about saving and investing right, and follow through with a robust plan, then they must be able to gain financial security over the years and enjoy the advantages of effectively managing their funds.
- Evaluate the comfort zone in taking on risk: All investments involve a certain degree of risk. If one plans to buy securities like mutual funds, bonds or risks, it is vital to properly evaluate the associated risks. The reward for taking on risk essentially is the potential for a greater investment return. If an investor has a financial goal with a long time horizon, they are likely to make more money by investing in asset categories with greater risk like stocks, instead of simply restricting investments to assets with less risk. However, solely investing in cash equivalents might not be a good idea to meet long term financial goals. Inflation risk is the principal concern for individuals investing in cash equivalents, as inflation may outpace and erode returns over time.
- Consider an appropriate mix of investments: Including asset categories with investment returns that move up and down under varied market conditions within a portfolio can help investors to stay protected against significant losses. The returns of the three major asset categories – stocks, bonds, and cash – usually do not move up and down at the same time. Market conditions causing a certain asset category to do well often leads to another asset category to have average or poor returns. By investing in more than a single asset category, one would be able to reduce their overall investment risks.
In addition to following the pointers mentioned above, one should also consider paying off their high interest credit card debt as soon as possible. As Scott Tominaga mentions, there is no investment strategy anywhere that pays off as well as merely paying off all high interest debt one may have.