When it comes to investing, there are no hard and fast 100% guarantees. Even some of the most sound investments can turn south in an instant. Just because there are no guarantees, however, does not mean there are not hard and fast rules when it comes to investing wisely. Here are 5 tips on how to make a good investment.
1. Do your homework
Good investments require careful planning and decision making. The old adage “buy low, sell high” is dependent on knowing where certain commodities sit in the market right then and an understanding of which direction they are heading. Pay attention to the news and world economics. This requires careful planning and research. Comparing rates and returns is also a strategic part of making good investments. There is no substitute for sound research and study. The harder you investigate, the wiser your decisions and ultimately, your payoff.
2. Be wary of inflated claims
Talk is cheap. Anyone making super inflated claims, more than likely, is lying and is not the norm of a sound investment. Part of doing your homework is understanding what a reasonable return on investment is in the current market. While there are certainly investments that are slightly more risky and therefore provide a slightly higher reward, be very wary of anyone offering you an excessively high ROI or a low risk/ high rewards investment opportunity.
3. Start small
Whenever you are dealing with a new investment opportunity, it is never wise to invest a significant amount of money at the start. Start with a small portion of your bankroll until you start churning a profit. The wisest course of action is to start small and see what happens with a small investment. Also be wary of getting too big of a return too quickly. Many scam artists will encourage you to make only a very small investment, which they will quickly double or triple, which encourages you to invest more. Be patient. Wait and see what happens to a small investment over a long period before you invest any more. If it is a good investment now, it will still be a good investment in 6 months to a year.
4. Explore non-traditional options
Sometimes making a good investment involves utilizing lending tools that may not seem like the best on the surface. Payday loans and cash advances can come with fairly high fees and interest rates which may make them seem like a bad idea at first glance. However, those fees and interest rates may actually turn out to be far less than what you would pay in late fees if you fail to pay your bills on time. In addition, while you may have investments you can draw upon to cover any temporary shortfalls you may experience financially, sometimes the penalties you will pay for early withdrawal would be more than the fees and interest you might pay on a short term loan. Good investing means dealing wisely with both short-term cash flow issues as well as developing the best long-term strategies. Depending on the situation, high interest loans can work. The better option is long term strategies with low interest rates as part of a sound plan of action. Draw out your goals. With your research and homework, put the plan into action. If you have to borrow, determine the best option going forward and work your plan.
5. Diversify
One of the most critical aspects of any good investment strategy is to diversify. If the last decade has taught us anything, it’s that there really is no such thing as a “sure thing” when it comes to investing. Diversifying means investing in a wide range of products and services. From real estate to stocks, bonds, and 401K’s. The best and most sound portfolios will contain a wide range of products so that if one goes south, the rest provide a safety net with which to rebuild.
What it means to make a good investment is going to be different for everyone. Some investments are best in the short term, but not necessarily for the long haul, while other investments produce the best ROI over time. Some investments require a great deal of vigilance while others are a little more “set it and forget it” for a bit. While there are certainly good guidelines that apply to everyone, the most important thing is to find the right investments for you. Do not start your plate out with so much that you get overwhelmed. Once again, keep it small and manageable. Once you perfect your strategy on a small scale, then you can loosen up and take on larger goals.
