As the great philosopher, Socrates, says, that knowing yourself should be your starting point in doing everything, including your first investment. After that, before making your first investment, you should also learn the investing basics. That consists of safety, growth, and income.
Once you master those two things are essential to creating a perfect investment, that will generate income, provide safety, and also growth.
The Most Important Aspects
The first step is to decide whether safety, growth, or income is the most important to you. If at your starting point you don’t have an emergency fund, then you have to focus on safety first.
On the other hand, if you have that emergency fund and are planning to invest for your retirement, then the growth should be your focus. Lastly, if you will retire soon, then you have to focus on income.
If we are talking about the perfect investment, then you should get all of those three. That should provide you safety, bring you a huge income that can keep pace during the inflation while growing your principle at the same time.
Yet, the saddest truth is, that perfect investment doesn’t exist in our world. Try to think of it as a triangle. If you move further forward to one corner of your triangle, then you go further away from the other corners.
You have to make a trade-off. If you want a safe investment, then you have to sacrifice the big income and growth. If you chase the investment with consistently big income, then that will not grow much and give you a higher risk. If you want your investment to grow faster, then it will not be as safe as other investments.
Determine Your Time Frame
Your investment time frame should be decided based on when you will likely need that sum of money from your investing. We have a three-time frame for you to choose, they are:
Short Term
Choose this time frame if you will need the money in the next one or two years. For this type of time frame, you have to choose the one that is safe.
Mid Term
This time frame allows you to get the money in three to nine years. For this time frame, try to consider a balanced fund.
Long Term
This time frame will let you harvest your investment in the next 10 years or more. With this time frame, consider growth investment, such as index mutual fund in stocks.
