Safe Investing - Matching Objective,
Risk And Investment Purpose



Safe investing? All investing has a certain degree of risk attached to it. As an investor you need to be comfortable taking on a certain amount of risk as a trade-off for the potential higher return on your investment.

safe investing


You need to be aware of your risk profile and you need to be aware of the risks associated with any investment instrument.

As such, you need to be sure that your investment portfolio reflects your investment aims and goals, as well as taking into account your risk comfort level.

Make sure that you have answered, or are able to get the answers from your financial broker, to the following guidelines before you commit to a particular investment option.


SAFE INVESTING


The length of time that your money will be invested is important. If you have twenty years before you will need the money, then you are in a position to be more aggressive in your investing.

This is because your investment will be less affected by the short-term volatility of the market.

Remember, the more volatility that your investment is exposed to over a short period of time, the higher the risks associated with your investment.

It is generally a good idea to invest for at least ten years if you are looking for capital growth investments.



As a rule for beginners investing, the higher the potential return on your money, the higher the risk you assume.

So, you need to decide up front what your investment goal or purpose is.

You need to decide if you need growth or income; or a combination of growth and income.

You need to decide if your investment return will be used to finance something you need or something that will be a "nice-to-have".

The answers to these questions will give you insight into your risk profile.


Safe Investing:

Consider how much money you earn or currently have - generally, the more money you have, the better you will be able to absorb an investment loss (and thus take on a slightly higher risk).

Consider your age - again generally, the younger you are, the easier it is to take on higher risks because you will have more years ahead of you to recover from a potential loss.

Consider your health - generally, if you are in good health and expect a certain amount of longevity, then you are in a position to assume a higher risk profile because you have time on your side to recoup any losses.

Consider your financial education when it comes to a beginners guide to investing- the more informed you are, the more knowledgeable you are about investment options, then you can consider doing due diligence on higher investment risk options.

Consider the liquidity potential of your investment option - if you will potentially need your invested money in a rush or a hurry then make sure that your risk profile and investment option will allow you easy access to your money.

You don't want to be in a situation where you need to sell shares, for example, in a bear market (when the shares market is down).

Consider the transparency of your investment option - generally, the less transparency there exist, the higher the potential risk.

Consider the legislation and regulations that govern your investment choices - generally, the less regulated an investment instrument is, the higher the risk.

Consider the track record of both your financial broker (should you be using one) and your investment instrument, fund, company, product or asset class - generally, "fly-by-night" operators have the potential to expose you to more risk.


Safe investing - know the risks and then put strategies in place to minimize them.



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