Investing is a great way to handle saving and an effective way to plan for retirement. You should consider some things when evaluating which investment vehicle is best for you.
1. Leverage
Be particularly cautious of investments with leverage. Leverage is the act of increasing the percentage of your money you can use to make a profit on an investment. For example, if you put $100 into an investment, but with $50 invested in options that have only a 2% chance of making you money, you have a 100% chance of losing everyone’s money.
2. Volatility
Volatility measures how much a price temporarily changes after purchase. More volatility means more risk. It would help to look for low-volatility assets unless you are trying to make money in high-risk investments.
3. Liquidity
Liquidity is the ease with which you can access your money. Liquid assets can be sold readily and easily. Illiquid assets may take a long time to liquidate and be challenging to sell at fair value. It would help if you considered your liquidity needs when choosing investments.
4. Risk
Differences in risk tolerance among investors mean that one person’s safe investment is another person’s risky investment. Risks are involved in any investment, but some carry more risk than others. Investors have become comfortable with many threats in the past few decades. On the low end of the scale are investments that can be sold quickly. Interest rates and inflation are good examples of investments with low risk.
5. Capital
When making an investment decision, an important consideration is what you intend to do with your money. Some investments are better suited for long-term growth than others; others are better for short-term income needs. Consider your investment needs and goals when selecting an investment vehicle.
6. Potential for Income and Capital Growth
Many investors mistakenly consider the potential for capital growth in a given facility as the only factor that should influence their investment decision. Still, income can be a more critical consideration.
