Are you ready to invest? Answer these 4 questions
Investing is the act of putting your money into a company or a given opportunity, with the hope of getting back more than you invested.
Depending on the situation you are in and how much you hope to get out of your investment, the options available to you are many. However, before starting your investment journey, make sure you can answer these 4 simple questions.
1. Why should I invest?
The answer to this question is very simple : so you can make your savings pay off. Investing your personal capital potentially allows you to “grow” without having to work twice as much to get the same result. There are two types of investors:
Type A: High risk, high return
Type A investors are those who are inclined to invest in opportunities or assets with a high possibility that the investment will perform below expectations, or that the invested capital is completely lost. However, precisely because of the high level of risk, these opportunities often offer very high potential returns.
Type A investors are often individuals looking for high returns, or they have large capital at their disposal that they can rely on in case the investment fails.
Type B: Low risk, low return
Low risk investing does not always mean low return , however type B investors are the most likely to invest in assets where the risk of loss is lower.
The flip side of this option is that the returns clearly turn out to be lower than the high-risk ones. Type B investors are generally those who invest with the aim of reaping the rewards in the future, in correspondence with retirement.
2. How much should I invest?
Again, the initial answer to this question is simple : no more than you can afford to lose. Let’s go back to where you need to decide what type of investor you want to be. Remember that if your choice falls on type A (high risk, high return), the invested amount could really be lost, in the face of a very high potential gain. Keep this in mind before deciding how much money you can afford to risk.
If you are more of a type B and prefer low-risk long-term investments, then you don’t have to invest large sums to get a substantial return. Be careful though, low risk is not “zero risk”. No investment is zero risk, so you must always be aware of how much you are willing to lose, before investing in anything.
Another aspect that must never be forgotten is that investments are not savings. Once your money is invested, depending on the type of asset, it may be difficult to withdraw it in case of need. You can’t even be sure that the market will turn in your favor, making your investments grow. All of this means that once invested, you won’t be able to consider that money as a pool to draw on in an emergency.
3. Bonds vs stocks, which are safer?
While a stock represents a share of a business , the bond is essentially a loan. By buying a stock you are (in general terms) buying a percentage of that particular company. With bonds, on the other hand, you are agreeing to lend money to a company.
For this reason, bonds are generally considered a safer investment option. The profit that comes from a bond is essentially the interest the issuing company pays on the loan, just like when you pay your credit card statement.
A different mechanism from that of shares , which grow in proportion to the value of the company on the stock market. This is why bonds are more stable and reliable than stocks, but lack the “high risk, high yield” element.
4. Should I choose the products to invest in myself?
This is entirely up to you. We live in the golden age of the Internet, which allows you to do accurate research and make informed decisions. If buying a certain type of stock excites you, then you should give it a try.
Do not forget, however, that the job of the financial advisor is precisely to know any aspect related to the stock market. On the other hand, which of us would like to operate on our own instead of looking for an experienced surgeon?
The same mechanism applies to the purchase of shares. Why risk buying on your own in a market you don’t know perfectly well, when there are experts who can help you?
In some section of app dedicated to investments, you can invest in different products, divided into categories. For example, the “Women at the table” product allows you to invest in companies with a board of at least 20% women. Perfect for experienced or novice investors, investment section allows you to choose and follow the stocks that best represent your personal values.
Your capital is at risk and past performance may not be a true indicator of future results. marketclasse is not authorized to provide financial advice, expert advice is recommended if you have any further questions.