Your Investment Journey: A Roadmap to Financial Growth & Success

Your Investment Journey

Investments mean the creation of financial assets or instruments with the objective of generating revenue over a period of time. The main objective of an investment is to get your funds to grow to enhance your wealth & financial security. Investments allow you to increase your wealth over a period of time & help you achieve long-term financial goals, like planning retirement, purchasing a house, ensuring children’s higher education, etc. 

Also, we all know that with the passage of time, the buying capacity decreases because of inflation; hence, investment opportunities help get returns higher than the rate of inflation to increase your wealth.The investment journey is quite exciting but challenging, too.To get an estimate of potential returns & get your portfolio optimised, an Investment Return Calculator is an important tool that can be used.

Golden Rules of Investing

Provided below are the golden rules of investment:

Step 1: Before you Invest

  • Pay off your debts first

One should pay off all his debts or loans, if any, before making any investments.

  • Have emergency savings

One should target to save enough to cover at least 3 months of expenses, ensuring there arises no requirement to sell the cash on an immediate basis.

Step 2: Prepare To Invest

  • Develop an investing plan.

Identify the financial objectives, risk appetite, & investment horizon that best suit your requirements.

  • Research different asset classes

Identify the potential risks & returns involved in different asset classes to analyse how to achieve your financial targets. 

  • Understand what you’re investing in

Consider the advantages & disadvantages of all your investments.

  • Beware of investment scams

One should be aware of the warnings, scams, or alerts related to investments.

  • Consider getting financial advice.

Seekprofessional advice to make an investment plan & discuss the financial objectives with them.

  • Diversify your investments

Always diversify your portfolio & invest your money in different classes of assets to reduce the risk.

Step 3: Monitor Your Investments

  • Keep track of your investments.

Document your paperwork to keep track of all investments made by regularly reviewing them.

  • Have an exit strategy.

Conduct proper research about the exit strategy.

Steps to Begin the Investment Journey

If an individual is wondering How to Invest Money &wants to begin your investment journey, the below-provided guide will assist you:

Step 1: identification of financial objectives

The first step is to identify the financial objective of your investment; once it is done, consider the below-mentioned things:

  • Financial situation:Analyse how much your monthly expenditureis & how much your savings are to meet the financial goals.
  • Time horizon:Consider the time required to achieve the financial goals. The longer the tenure, the more benefits there will be due to compounding factors.
  • Risk tolerance:Ascertain the amount of market volatility, acceptable loss & your risk appetite 

Step 2: Pick the type of investment account that suits your goal

  • 401(k) plan:This plan is provided by the employer & allows you to save a part of your income before taxes.
  • Individual retirement account (IRA):It is a retirement account with tax advantages that provides flexible investment options, helps diversify funds, & increases savings towards retirement.
  • 529 plan: This tax benefit account is meant to save on education, offering flexibility & benefits.
  • Brokerage Account:This account allows one to buy & sell multiple investments, which include bonds, stocks, funds, etc. 

Step 3: Select your asset allocation

  • Asset Allocation:Now that the financial goals are identified & the right investment has been chosen, it’s time for the allocation of assets amongst bonds, stocks, & cash. The allocation of assets will depend upon time horizon, objectives, &risk appetite. 
  • Investor Questionnaire:This questionnaire depicts the allocation of assets depending on the financial objectives, risk appetite, investment horizon, etc.

Step 4: Select your investments

Ensure the diversification of the portfolio by choosing different investment types, which will help lower the risk & help achieve the objectives. 

  • Invest in different asset classes:A portfolio that includes cash, bonds, & stocks could help decrease the losses in case one of the class underperforms.
  • Invest in different sectors:There are different sectors available within each asset class; hence,by investing in those different sectors, the risk can be further reduced.
  • Invest in different geographical regions:These investments can help you to reduce the risks in case the economy of a country is underperforming.

Step 5: Open a new account

There are many methods to open a new account, but some things should be kept in mind while doing the same.

Step 6: Rebalance your portfolio

As per market fluctuation, the allocation of assets can also be changed. Hence, to align the portfolio with the target asset mix, one should rebalance the portfolio once a year. 

Choosing the Investment Strategy

There are 2 options available for choosing investment strategies; let’s know their pros & cons:

  1. Investing on Your Own
  • Pros 
  1. Full control on which plan is to be chosen & flexibility to change it afterwards.
  2. This is reasonable, as no professional payment is to be made.
  3. It helps increase your knowledge & market understanding.
  4. As no third party is involved, the trading is executed faster.
  • Cons
  1. Time has to be invested to conduct proper research & management of investments.
  2. There may be errors as no professional advice is involved.
  3. There may be a lack of expertise.
  4. It may become stressful to manage your own funds.
  1. Investing with Professional Advice
  • Pros 
  1. Get customised professional help.
  2. It helps to handle complex planning easily.
  3. It helps maintain discipline.
  • Cons
  1. They are quite expensive.
  2. One should choose the professional carefully considering the quality & effectiveness.
  3. It requires time & effort to meet the financial advisors & discuss the plans.

Conclusion

Choosing the right investment plan that fulfils all your needs is not an easy task, but when you get to it, it will help you make wise decisions along with creating wealth & increasing funds.