Things You Need To Know As a First Time Investor

First time investor guide

Now a day a lot of people are looking to invest their money. But where to invest?

First time investor guide

First-Time Investor Guide

This and many more similar questions are what puzzle the first time investor. So in order to tackle this problem, this article has been written which contains some of the basic questions that one needs to ask before investing money.

The first question that you need to ask yourself is; what is your preferred time of return for any investment? Experts say that a minimum number of 5 years have been usually a safe bet and you can expect to get good profits after that. The general rule here is that the longer you have your money invested, the greater is the chance for you to earn profits on your investments. This is because over a longer period of time the inflation factor also comes into play and you are able to capitalize on that.

Before making any investments, it is imperative that you are aware of your ATR, which Stands for Attitude to Risk profile. There are several tools available in the modern day that can help you analyze not on the prospects of any business but also your own personality. Financial clients are well aware of this fact and make it a priority to have the customer analyzed for their ATR before looking to invest their money in the market.

Another thing that you must be aware of is that how much money you can lose in the short term for the investment to remain viable. There is nothing worse than losing your savings on an ill informed decision so you must choose carefully. Always know the amount of risk that you can comfortably handle before jumping in.

It is always good to realize what phase of life you are in and then accordingly make the decision of choosing between growth and income. Usually, a good financial agent prefers that the younger investors aim for growth while those in the later stages of their lives would be better served by looking at income options with additional tax saving benefits. Many new investors fail to keep track of their taxable income and hence do not earn as much as they would have liked through their investments. So it is always a good idea to keep track of your tax status.

Being a good investor often requires that a person is a good planner and knows how to effectively use the money at hand.

For this purpose, these people often divide the investments into three categories and allot a certain amount to each category. These comprise of the low, medium and high risk investments. Low risk investments are usually the fixed deposits while medium risk might include gifts and bonds. Venturing into higher risk investments means investing in the stock markets. A good practice here would be to keep track of the business that you have done previously. Make a note of all the things you did well and where there is room for improvement. This will go a long way into helping you in reaping the maximum profits.

Maintaining your portfolio is also a key element of becoming a successful investor.

Make sure you take some time out of your schedule every week in order to go over how your investments are panning out. In case there is some anomaly, like a sudden rise or fall in a particular investment, you need to have a contingency plan. This is what will separate you from the rest of the crowd. Experts say that smart investors usually invest their money in a range of options that are available in the market. This helps minimize the risk and allows you to get some valuable experience of the market.

Finally, it is needless to say that whenever in doubt, it is most advisable that you consult an experienced financial agent. These people will help you in making smarter decisions and capitalize on options that most of the investors won’t notice such as deferrals, tax reliefs and allowances etc.

Here are the top topics that an investor should master according to the experts at Old Mutual Skandia:

1. What are the different types of assets with which investments can be made?
As we said earlier, investment assets can range from a property to shares. In general, the main assets that are in the market are:

• Actions: generally when people hear the word “invest” they relate it to actions. A share represents a proportionate share of a company’s property, that is, the shareholder owns a piece of the company, and as such, is entitled to the economic benefits generated by it. In mature companies, the profitability of the shares comes from the profits of the company that are distributed in the form of dividends.

In companies that are growing, dividends are not so common, as the company uses its profits to reinvest them in its operation and expand. These types of companies register a growth in the price of their stock, which is where they come from the investor’s profits.

• Bonds: Bonds are certificates issued by the government, by financial institutions or by companies to be financed. In its most basic form, a bond is a loan you make to the issuer of the bond, which agrees to pay you back the capital invested in a certain time, while in the interim you are paying the interest, which are called coupons .

The latter may be a fixed rate – interest will be a stable sum over invested capital – or variable rate, generally tied to inflation indicators such as the CPI or interest rates such as IBR or DTF.

How long is recommended for an investment?

There is no single answer to this question, since each investor has a different objective with his portfolio. However, in simple terms, investments can be divided into three periods: short-term, medium-term and long-term.

An example will help us clarify the concept of the optimum horizon for each investment: if you are saving for vacations, you should think in the short term (about 1 year), but if the investment is to finance the university education of a newborn child , It is clear that the investment is long term (more than 10 years).