The topic of personal finance and investing is a very big one. Most personal investors do not have a lot of money to start with and so it is important to make each cent count. Following are some tips for aspiring investors who need to decide which investments to include in their portfolio.
Choose a Time Frame
Some investments, such as buying bonds or annuities, involve committing the investment principal for a long term period. While a person will receive a small sum of money each month, the principal cannot be withdrawn at will. This means that one will not be able to access these funds even if they are direly needed.
On the other hand, some investments can be sold off at will. These investments include stocks, gold and any investments made in the Forex market. An investor should consider how long he or she can afford to have money tied up before choosing an investment type.
Some types of investments are very risky. Tilting to small cap and value stocks is a popular trend these days, but it is not a particularly safe investment. There are also certain stocks that are very risky to purchase, as their value can be quite volatile.
The advantage of high risk investments is the prospect of making a lot of money quickly and easily. The riskier the investment, the more money one can potentially earn. However, a first time investor will need to beware of greed and make sure at least a sizable portion of his or her investments are low risk. While low risk investments do not bring in a lot of money right away, they do bring in steady income and the risk of losing a lot of money on these investments is very low.
Choosing a Sum
How much money one wants to put into any type of investment depends on various factors. One should carefully analyze his or her finances and determine how much money can be invested in any given type of fund. If the investment type is high risk, one should make sure that he or she can live without the sum of money being invested should the investment not work out as planned.
A newbie investor should also find out more about investment types before creating an investment portfolio. The website amateurassetallocator.com has a lot of helpful information that can help a person learn the ropes. By taking the time to learn as much as possible, a first time investor can avoid common mistakes and pitfalls and create a successful and profitable portfolio.