Many consumers turn to investments to save for retirement, achieve financial goals, and get out of debt. Although it may seem obvious to research before investing, many people don’t. Therefore it is important that you understand the investment basics.
Investing Basics with ACCC
Investing can be a valuable way to achieve future financial goals. However, it’s important that consumers arm themselves with tools and knowledge about investment basics. Types of investments include retirement, stocks and bonds, annuities, and so much more. Your investment basics should revolve around:
- Knowing your goals
- How much time you need to achieve those goals
- The amount of risk you are willing to assume
ACCC provides basic principles of investing.
Consumers should get a good grasp of their financial situation and figure out their risk tolerance as well as the goals they wish to achieve. It is essential to determine if their financial goals are short or long-term because it will help decide what kind of investment should be made for the best return. Your investment personality will impact how, when, why, and for how long you choose to invest your money. To get the most out of the principles of investing, it’s important to identify your investment personality by reviewing the following.
How much risk are you comfortable with?
Every investment involves some level of risk. When investing in bonds, stocks or mutual funds, it is important to understand that it is possible to lose some or all of your investment. While high-risk investments can achieve higher returns, they can also lead to more significant losses. Low-risk investments usually mean slower earnings, so the chances of losing money overnight are slim.
Do your homework
Buying and selling investments cost money, so it is important to do all the necessary research. Never purchase an investment from a solicitor or based on an advertisement. Be aware of the investment’s volatility; meaning does it tend to fluctuate dramatically or not.
Don’t invest in one place
Diversify your investments, spread your money out in different types of investments, and consider both low and higher-risk options.
Pay off high-interest credit cards
Paying down credit card debt is a guaranteed money return. The faster consumers pay down their credit card debt, the more money they have to invest rather than paying interest to the loan company.
Employer-sponsored retirement plans
If a consumer’s employer offers employer-sponsored retirement plans, such as a 401(k), it is important to make contributions. With these plans, many employers offer to match some or all of the employee’s contributions. Don’t miss out on ‘free money.’
The ‘teach yourself’ approach is not ideal for everyone. If you have tried and failed or you don’t feel comfortable, seek out a financial planner to help lead the way.