It’s no secret that investing can be a smart way to make money. Investment is basically an effort to allocate our current wealth into another form, so that later in the future the value will be higher. Higher in this term means that it is expected that our investment value will be higher in nominal terms in the future, but it will be much better if the growth of our investment value can surpass the rate of inflation growth, or the rate of increase in the price of goods.
Of course, there are risks we may receive as we grow our wealth through investment. However, we do not have to worry. If we learn and get started the right way, we will succeed to be a good investor.
First, start from now. Do not wait until we get wealthy to start a new investment, but invest in order to become wealthy. For that, do investment as early as possible. If we are old enough, do it now. However, we also need to determine our goals in investing, such as preparing for education fund, pension, or even to take a vacation. The best investment is done in the long term with the aim that we can be financially free in our elderly age.
Second, pay attention to the rate of inflation. If we ignore inflation in choosing a long-term investment, our investment may shrink its purchasing power. For the majority people, investing in stock or mutual funds is one way to keep up with inflation. We need to note that the value of the stock is very fluctuating; it can go up and down at any time. Therefore, stocks are the riskiest investments, yet provide the highest profit potential.
The next step is diversifying. Diversification is dividing the money we have into several different assets. A common example is diversification in gold, stocks, property, and bond. This step is important to prevent a total failure if one asset losses, because there are other assets that are generating a profit.
Do not forget to choose the right investment. There are different types of investments that can be found in financial markets, such as shares, bonds, money market, and many more. Well, choose the type of investment that suits to our goal and our ability financially. Each type has its own advantages and advantages, and of course with different risk ranges. The sequence of investments with risks and the highest returns are stocks, mutual funds, bonds, and finally the money market. Start investing our money little by little, to grow our confidence. Choose a guaranteed investment that has good performance over the last five to ten years.
The last step is to not monitor our investment too often. This one may sound strange, but if we monitor the development of our investment too often, it may actually make us worry and afraid to make decisions. Basically, the main purpose of investing is to build wealth for a long period of time. So what happens to our daily investment performance is less relevant. Therefore, monitor our investment every month, for example.