When people begin to build an investment portfolio, they are immediately confronted with a number of choices and difficult decisions. These include, how much money to invest, where to invest, and how long to invest. The contributing factors in this investing road map must work in partnership to help investors to achieve their financial goals.
When determining how much money to invest, investment-seekers must pay close attention to their immediate financial health. It is essential that any money set aside for investing should be free of any monthly or annual expenses. That said, the amount invested each year should be based on financial goals. Having investment goals is important. It not only provides investors with a target at which to aim, they also provide the motivation necessary to stick to an investing plan.
There are several categories of investments, and many of those categories have thousands of choices within them. So, finding the right investment is not a trivial matter. The single greatest factor, by far, in growing long-term wealth is the rate of return received on an investment. The challenge for investment-seekers is to balance two things that are diametrically opposed: low risk and high returns.
How long you should invest for depends upon your financial situation, goals, tolerance for risk, etc. Honestly, the ideal time period to hold an investment is forever. Investors should only sell investments if something goes wrong at the fundamental level of the company. If the company has sound management, stable profits, and good growth prospects, then the long-term investor need not worry about fluctuations in the company or the economy.
Making good investments is a challenge whether you are an experienced or novice investor. Although choosing investments that balance risk and reward is at the forefront of people’s minds, there are several other important factors to consider when creating the road map to your investment and financial goals.