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The Elements of Investing
You can either work for money, or have your money work for you. Investing, in a financial sense, involves putting money into some type of activity with the intention of generating a profit on that money in return. Many investment opportunities exist to help us achieve that goal. Stocks, bonds, mutual funds, real estate, even starting a small business can all be considered viable investment options. Investing however, is both an art and a science. Here are a few things to consider when deciding to invest.
Know What You’re Investing In
Before making any decision to invest, it’s important to know and understand in some detail what you’re investing in. Unlike saving, which is primarily focused on capital preservation, and ensuring that we have access to what we put in, investing involves pursuing opportunities with the potential to multiply our money. It also involves risks that can potentially cause us to lose money and, in some cases, everything we put in. Thus, having deep knowledge of these opportunities and the associated risks is critical. Ultimately, the more you know, the better an investor you’re likely to become.
Seek Professional Guidance
Even if we are knowledgeable about specific investment opportunities, it’s important to seek the advice of professionals working in the particular space in which we would like to invest. Their insight, experience and advice can help guide us along the right path and provide some necessary perspective on things we may or may not have considered. They can also provide some peace of mind as they are able to answer questions and address any concerns one might have. Bottom line: professional advice matters a lot when choosing to invest.
Be Patient And Disciplined
No one gets wealthy from investing overnight. Central to being a prudent investor is the ability to be both patient and disciplined. Being patient allows us to survive the inevitable peaks and valleys we will experience during the investment process, and being disciplined allows us to keep a steady eye on our investments in both good times and bad. When it comes to investing, how we manage ourselves is just as important - if not more - than what we invest in.
Know When To Call It Quits
The reality of life is that things don’t always go according to plans. It’s no different with investing. Knowing when to exit an investment can be just as crucial as knowing when to start, and can help save us both time and money. While the desire is often to at least recoup what we put in, sometimes in that process, we can end up doing ourselves more financial harm than good. Sometimes, the best thing we can do as investors is simply to call it quits.
The Elements Combined
By no means is this an exhaustive list of elements to consider, but it’s a good place to start the investing journey. Ultimately choosing to invest is one of the best decisions we can make to help us live well, beyond payday.
COMING NEXT WEEK
... Retirement Considerations
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