Quick Tips On How To Invest Lump Sums Of Money – Fast Action Finance
Investing can be a tricky affair for many. There are many decisions you often have to take when thinking of making an investment, and the technical details can fast bog you down. However, the most important thing to remember is that this is one of the few ways for you to actually grow your wealth. Of course, you could try out other measures such as saving, but remember that the value of the money you save is likely to reduce with time. When you make an investment in instruments such as stocks or bonds, you are more likely to reap profits in the long term.
The minutiae of such a plan are what will make or break you. It’s important to be critical of exactly what you want out of the investment before you make it. Some of the issues you have to address include:
The level of risk you are willing to tolerate
This is one of the most important and most basic issues to consider when thinking of making a financial investment. The easiest way to think about this is by asking yourself: how comfortable are you losing the money you have put in the investment? Of course, no one is ever comfortable with losing money. However, if the loss of the money will have major ramifications in your life, then it’s wise to choose a low risk investment. When thinking about this, you also have to note the fact that high risk will always yield high returns.
A common strategy that people use is to have a combination of both. You could invest a proportion of the money in a low risk investment, and the rest in a high risk one. This way, you get to benefit from both security and the chance of having a massive payout in future.
The source of the money
You also need to pay close attention to the source of the money you will be using for the investment. For instance, you could decide to borrow money with your car rather than taking a bank loan and then using it for the investment. The latter is usually very expensive, since the interest rates are likely to be very high. With a car title loan, however, you get to benefit from significantly lower interest rates as well as the ability to get the loan on time.
If you have to borrow money to make an investment in the financial markets, you need to assess whether the net effect will be beneficial or not. This is done by assessing how much you will spend on the loan compared to the total amount of money you will make on the investment. You should always try to make sure that the net is a profit for you.
The investment horizon
If you have access to a lump sum of money from a facility such as a car title loan and you need to invest it, also consider the horizon. This refers to how much time you are willing to let the money accumulate interest. If you are going to need the money in a few months, you would be better suited to pick an investment vehicle that is more short term than long term.
Short term investments are also great for those who are holding off on making other major investments. For instance, if you think that you will need to buy a car in the near future and have the money with you, you could invest it in a low risk investment. By the time you finally decide to buy what you wanted, the value of the money will have increased owing to interest. You may even have some money left over after the transaction.
The economic climate
Different investment vehicles will have different amounts of value depending on the nature of the economy. For instance, when you live in a country where the government heavily depends on domestic borrowing to sustain its operations, you could opt to invest in treasury bills and bonds. However, this will only be beneficial if the government has strong financial institutions, in which case the risk of defaulting will be minimal.
For most people, assessing the economic climate and then deciding what investment to make can be tricky. If you are particularly keen on doing it, you could opt to consult an investment expert for further guidance.
In summary, investing a lump sum of money that you have is a great idea, provided that you go about it the right way. The key to minimizing your loss is by always paying attention to the details above. It’s also critical that you learn as much as you can about the investment vehicle you are thinking of using, and also work with parties that are trusted in the industry. This makes the process a bit more labour intensive, but all the more worth it!