Things to Consider Before Making an Investment

How cool is it to put your money into something which you can watch grow and bring returns on the investment. Everyone who has the heart for business or entrepreneurship is either involved in investments or wondering what and how to invest the little they have. For others, who may not really like the idea of investing, it is a matter of diversifying their income choices. And what better way to do that than to make investments? There is a limit to the number of jobs you can have and hold in other to increase your earnings. But there is absolutely no limit to the amount of investments you can make, so long as you have the money to do so. Investing is thrilling and fun. Especially if you are doing it for the first time.

You could either be cool, knowing that you made the right decisions and can therefore be sure of the safety of your capital and subsequent interests or be totally anxious, waiting to hear just how some investment choice turns out. The difference is the considerations you made before making a particular investment decision and the assurance that came from those considerations. Still, some people invest with little or no foreknowledge, realistic expectations, advice or calculations to increase the odds of getting it right. It takes making investment decisions to become a smart investor, but you do not have to make the wrong decisions and learn from the pain of your mistakes. No! Not while you have the following investment decision making tips at your disposal to help your decide where to invest.

Risk Tolerance

One of the first things that come to the minds of those who have been investing for a long time whenever they think of putting their money into something is that old phrase “no risk, no rewards”. In the world of investment, the higher the risk, the higher the returns. But the side of the whole story which you do not hear very often is “the higher the risk, the higher the heart ache (and possibly financial trouble), if it fails”. Wise investments are hardly ever associated with very high risks. Not everyone can tolerate the same level of risk taking. Besides, not everyone has enough cash to their name to take very high risk while investing. Before you invest, try to find out how much risk is involved. You could even get an investment analyst to help you.

Nevertheless, a dollar’s worth differs from person to person. So the amount of money or assets that could be considered a high risk investment to one person could be a very low risk investment to another. At the end of the day, it is about what you are able to tolerate in terms of risk taking when investing. Remember, every investment choice has some risk attached to it. Things may not work out as planned and then people loose their money, property or even go to jail, all because they made a wrong investment decision and took risks they were not ready for.

So before you put in your cash or sell off some valuable asset to make an investment into something you do not fully understand, take a sit and consider the risk. Ask your self “how much risk can I tolerate?” and answer the question genuinely. Be logical, not emotional when making such considerations. An investment deal may promise so much now when in fact there is so much risk involved, you can as well just forget about the money and continue with life once it is invested. To make sure you are realistic when considering the risk involved, be sure to take a careful look at your financial status before you make the decision. Look before you leap. When the money you invested does not come back, how is that going to affect you? Can you bear it? And like I said, your ass may be heading to jail after making an investment decision that goes wrong. So thread carefully.

How soon will you need the money back

When investment opportunities come our way, one could easily get so excited about the promised returns that they actually just dive in head first, putting in every single dime they got. That is one thing the excitement of investments with potential high returns does. But liquidity is important to effectively run one’s life and you need to know how soon you can money from something before you invest in it. Thinking about how soon you can start getting returns on your investments is important when deciding where to invest. You do not always know when there is going to be a need for money, especially an urgent one. When that time comes, the money may not be available. So it is important to consider how soon you are going to need the money you are investing now. It is part of making wise investments.

Some investments only start bringing in something after a few months. Others could take even up to a year before you start receiving anything tangible from them. That means it may be a long time before you even get back the capital you invested. These kinds of investments are great for those who have enough cash inflow to take care of expenses and live a normal life until the cash starts flowing in from the investments. Consequently, if you are going the need the money you are thinking of investing in a few days or weeks, it is better not to invest it at all.

Is investing your best option NOW?

Investing is an option. No one is putting a gun to your head to make you do it. There are a number of other things you could use your money for rather than make an investment. And some of these things could even be a better option when you judge rightly. For example, if someone has a $20 debt with a monthly interest rate of about 2%, it will not make sense to invest that $20 into a business that offers just about $1 interest per month because when you do the math, it will be clear that the investment will only keep your money busy but no real profits coming in. And your debt on that money will keep on increasing through out that time.

There may be wiser ways to use your money at the moment than investing it. It is better to find out before you invest than put in your money and regret it. Even saving your money is sometimes better than putting it into some business. Remember some savings actually pay interest on your money. The interest rate may really be small, but if you are not sure investing is a better option, then it is preferable you save. Young people, especially, are usually triggered by the possibility of having an investment of their own that they forget this does not make a person financially responsible. Some people simply need to first learn to be financially responsible before they can make profitable investments. For example, someone have their financial situation in a wreck as a result of poor spending and irresponsible financial decisions. Now he or she is looking for a way out spontaneously thinks making an investment is the way. After all, it is going to bring in more money. First, it may not bring in more money. The investment decision may only be another financial mistake you are about to make. Secondly, if the there are actual profits from your investments, the person’s financial status wouldn’t change since the root of their problem is not a lack of money but lack of financial wisdom.

How involved will you have to be?

Some investments require no participation on the part of the investor except, of course their money. Once the investor is able to give in an amount of money, they can go to sleep and just expect returns. Other investments options will mean the person putting in their money will have to run the business and make it work for themselves. Not everyone has the time or interest to be in the second group and not many people have enough money to be in the first group. So under which group do you fall?

Dormant investors usually have to put in a lot of cash. It may not require as much money to be an active investor. I suppose your participation should make up for the difference in financial requirement. If you have enough money to comfortably be a dormant investor, then you can get involved in that type of investment.

For those who are like my father and love the thrill and pressure of being an entrepreneur, you must be prepared to get in actively in order to make your investments work. This means putting in time and effort. It does not matter how much you have, if you don’t have the time and effort to put in, you are not ready to be an active investor.

The next option will be to make the investment and hire people or someone who can run it for you. This will mean an increase in cost. That person will have to be paid. So you want to check your budget and make sure you are financially up to the task. I must remind you again that making profits on an investment may take some time. Consequently, you should have enough money are means to pay your employee through out the time it will take before your investments begin to bring in something reasonable. If not, forget about that particular investment decision.

Count the daily cost of your investment

Before you invest, you must consider the daily cost of your choice if you are interested in being an entrepreneur or active partner with a company. This is especially important for those who decide to be actively involved with their investment choices. Like I already mentioned, it is going to take a lot of time and effort on your part to make things work out. More important is the fact that the sacrifices that would have to be made must be made on a daily basis. It cannot be a one time effort. What is your life like at the moment. How good are you at managing your time and keeping a balance between work and family. Your investment choice could even be a second job. So if the family is currently strained because of your job, it wouldn’t be wise to make an investment decision that takes more of your time and pulls your further away from family and friends.

Some days, you will not feel like doing what needs to be done in order to make that investment pay off. You must have enough motivation and the will power to still wake up and push on those those day like on any other.

Your reason for wanting to invest

when deciding where to invest, you need to check your reason or motive. There are different reasons why people decide to invest. Your reason for an investment decision will invariably guide you into making the right investment decision. Two of the most common reasons why people make investments are to either increase their earnings or prepare for retirement. Those who are looking to increase their earnings may need to be more keen about how much potential interest the investment can bring and the time frame it is going to take. Depending on other factors like age, those who are investing for retirement purposes may be less concerned about fast or high returns. Which brings us to our next point of interest.

Consider your age

Those who make investments do not have all the time in the world to see it work out and enjoy the proceeds. Your age could also be connected to your reason for investing and therefore affect your decision. Taking into consideration the age factor can therefore help you make wise investments. Younger folks who want to make an investment for retirement have enough time to be patient and watch profits increase their retirement status. This means they can choose lower interest rate investment option and still meet their target. You can see how important it is to consider your age when deciding where to invest.

On the other hand, those who are older have less time to prepare for retirement. Naturally, they will go after investment choices with higher interest and faster returns. This may also mean high risk. So if you are older and have just decided to start building your investment funds, you have to be more circumspect. There are not many chances to correct your errors if any are made.

For those who are about seventy and above, unless you are investing for posterity, there is really no need to risk the money you should be using to make the last parts of your years brighter. Maybe you can instead get yourself a retirement home and spend some of that money to have great moments with your children and grand children. You could also want give away whatever you have to your children and grand children to make the investment.

How much do you know about what you want to invest in?

One way to make wise investments every time is to learn about what you intend investing in before putting your money into it. Believe me, too many people have lost a lot of money because they invested in business they knew very little or nothing about. They did not know how to make it work out so the whole thing went down with their finances. Things like stocks and gold are high risk investments. One day you may be on the top of your game with tremendous profits coming in and the next day your investments are worth nothing at all. Take out some time to study and learn about what you intend putting your money into. The more you know about what you are investing in, the better prepared you are to judge the risk involved. More so, you will know exactly what to do and the things to avoid as you move from one stage to the next on that particular investment journey.

Creating an emergency fund

Even when you invest and begin to get some earning from your investments, you will need money from time to time to solve personal issues. You cannot just get money out of the business or investment to take care of such emergency needs. It may wreck the whole business altogether. So what do you do? Create an emergency account and save some part of your income into it every month. That way, you have something to fall back on when an emergency arises.

Creating an emergency fund is also particularly important for those who want to invest for retirement. You cannot keep using your investment money now and expect to still have it when that time comes. If it means cutting down on expenses, do it so you are able to keep things under control financially.

Consider diversifying

If you have enough money to invest in more than one venture, why put all your eggs in one basket? Diversification is one of the most effective ways to handle two investment problems simultaneously. It should therefore be one of the options on the table when deciding where to invest. When you put money in two or more investment, failure in one could be covered up by success in the other. So do not have to worry about risk of failure as much as someone who is investing in a single business. Secondly, you get more profits or returns on your investments coming in at the same time. That means more money and less risk of crumbling. Cool right? Remember this when next you are about to put a large sum of money into a single investment deal. Diversification is the better option.

Make the plan

There are some risk factors associated with certain investment decisions that can only be noticed and prevented or prepared for when you draw out a clear plan of the investment you are about to get into. Plus, making a plan is clearly one way of making wise investments. After making necessary finding, use the information to come up with long term and short term plans. Remember the plan has to be realistic. Use it to make a projection into the future state of your business. This will give you an idea of how long it is going to take for you to reach your investment goals. It may also give you some insight into the challenges that may be faced along the way and how to either avoid or handle them.

Bonus; Highlights of Investment scams

On the Internet, you are going to find all kinds of investment opportunities, each of them making very enticing promises and claims. It would look like it is much easier to make an investment and profit from it than is actually the case. Because of the ease of making on-line investment and the possibility of watching their progress real time, many people now prefer to invest on-line. The fact that it is not very easy finding an investment opportunity in the real world also makes things a lot more difficult for those who are not Internet inclined. Sadly, the opportunities available on-line come at a cost. You may fall into the hands of dealers. So here are some highlights to help you stay out of trouble while you look for something to invest in. you should take them into consideration before you invest.

if an investment decision sounds too good to be true, it probably isn’t. No one has pilled money up somewhere to simply use it to double yours. Forget about investment opportunities that promise very high returns on very low investments.

Avoid investment opportunities that come with a little too much pressure to oblige. If something is going to be of real benefit to you, no one is going to pressure you into it. Those constant mails, calls or text messages to get your consent are a signal that something is wrong.

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