Should you invest or shouldn’t you? Remember, the primary goal of investing is to build wealth over a certain period of time. This involves purchasing assets such as real estate, commodities, bonds, stocks and mutual funds with the hopes that these assets will grow over a period of time.
Needless to say, such a decision is based on more factors that you think. Here are some of the many –
Previous Market Trends
There are times when history repeats itself and some investors keep making the same mistakes. However, you can learn from these by understanding the factors that constituted to their failure or how various asset classes worked in the past before you plan your finances.
The Amount of Money Invested
The old adage “It takes money to make money” rings true where investments are concerned. How much funds have you set aside for your particular investment? A simple strategy would be to start off with an investment plan. Of course if you are like most new investors, you might not be familiar with how the economic market works or how you can utilize your investment to get the most out of it. A professional financial planner can be convenient during times like these.
An IRA account that was worth a million dollars offered retirees more lavish retirement plans during the 1980. However, the same rate hardly does the same today. The amount was corrected by the Consumer Price Index according to the state of inflation today and came up to $2.3 million in 2010.
In other words, inflation will be a large factor in your investment ventures. In cases such as these, you will need to need to consider the amount of money that you might require to take you closer to your goals but not according to the dollar rates of today.
Let’s analyze this with an example; if inflation is at 3% and your investment returns come up to 7% over a year, the buying power of your investment will grow by 4%. In other words, you might need to start planning to invest more now if you want your investments to bring you a sizeable amount of profit later.
Your Penchant for Taking Risks
How long can you maintain investments? The general purpose of keeping investments for longer is to acquire greater returns as the said investments mature. The element of risk also reduces with time in cases such as these.
Your expected returns will be a crucial factor in the type of investment you choose. For instance, you can decide whether you want to invest in debt, equities or balance out your portfolio to provide you more diversity in your choice of investments.
Of course, time, risks and inflation are only some of the many factors that can affect your decision to invest or the type of asset you want to invest in. Ultimately, your success will depend on how you choose to handle any issues that arise. Financial investment planners can provide you with a wider range of options in this regard.