How to Choose The Right Investment

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With the wide variety of investment options available, choosing the right investment is not straight forward. Put it simply, there is no single investment that fits everyone’s needs. What is the right investment for you depends on your needs and what do you expect to gain from it. This article provides a step-to-step guide to picking the right investment.
1. Assess your financial situation
First question you need to ask yourself is how much money do you have to invest, and how much can you set aside every month for investment? Certain forms of investment require a lump sum payment, such as bonds and property, while others are more flexible such as stocks and Forex trading. It is advisable to put your age and future plans into consideration because if you are young working adults with no family commitments, you might have more loose funds to spare compared to a married adult planning to have children. Knowing how much you can afford now and how much you can commit in the future is a good starting point.
2. Determine your goals
What kind of investments suit you depends on what you want to achieve from it. If you are investing for your own retirement or your children’s education, then you might want to opt for long term investment. Meanwhile, consider short term investment options with lower risks and more certainty of earning profit when you are investing for a holiday trip or a house for instance.

3. Understand your risk tolerance level
Everyone tolerates investment risk differently. For example, if the thought of the stock market going up and down keeps you awake at night, then stock investment is probably not for you. Understand what kind of investors you are, so that you are always investing at your comfort level. This will give you a peace of mind and more confidence with where your money is going.
4. Assess the investment options
Explore the different investment options available to you, according to your answers in Step 1 – 3. Cash and cash equivalents (e.g. savings, fixed deposits) offer the lowest risk yet lowest return whereas government bonds, mutual funds and blue chip stocks are considered low to moderate risks and potential high rate returns in the long term. Look at their past trends and performance and speak to those who were involved.

5. Reivew your portfolio and be balance
As you build up your investment portfolio, review them regularly. Pick a mix of investments rather than just sticking to one, because not all investments grow at the same rate. This will allow your overall portfolio to grow while keeping any losses in balance.

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