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Investing is the number way to make your money work harder for you. Whether it be through bonds, stocks, or options, there are a plethora of different ways to make your money make money. But jumping straight into the investing game can lead to you losing all your money.
Here are five factors you should consider before choosing an investment.
1. How Long Are You Investing For?
Most people will get into investing for one of two reasons. The first is the most reasonable, and that is to invest for retirement. This is why investing accounts like IRA’s and Roth IRA’s are created.
These IRAs are set up to not be touched for long periods of time. A traditional IRA will use pre-tax dollars, but you’ll have to pay taxes and penalties if you pull money out before retirement. Roth IRAs use post-taxed dollars and will allow you to pull money out with little to no taxes and little to no penalty.
The other reason to invest is for making money. This is where day-trading and individual stock ownership comes into play. These are much riskier moves.
2. What Type of Investing Are You Comfortable With?
This is where you figure out your risk vs. reward. You need to know what type of investing you are comfortable with.
If you’re going for retirement, you typically do not want all your money to be gone in one day of poor investing decisions.
If you’re going for making money, you need to realize the money you are utilizing is expandable and can be lost at any moment.
3. Know the Different Sectors
When choosing an investing, realize that investing falls into different sectors that follow different indexes. Technology, healthcare, real estate, and banking are all considered different sectors of investing.
It is important to know how sectors perform and then determine which ones you would like to perform in.
Tech and healthcare will have higher volatility because companies are always coming and going, but have chances of higher returns. Real-estate and banking are less volatile, but typically do not offer that same high chance of return.
Gold and silver are also considered a sector. For those looking to buy silver and gold, be sure to check out the link.
4. What Is the Company’s History?
When investing in companies, you need to look at their history and stock performance. If they offer great profit for their shareholders year-over-year, it should be a great option to invest in them.
If a company is major in debt and has a history of underperforming, then it might be good to turn a blind eye to them. These companies usually offer low stock prices in hopes of attracting more investors.
5. Is Your Brokerage Account Suitable For You?
Don’t go throwing away money unnecessarily with brokerage fees. Shop around and find the best investing account for yourself.
One firm may over the best retirement account, but offers terrible trading fees for individual stock ownership. You may need to open individual accounts in different firms to make sure your money is working the hardest for you.
Choosing an Investment: Key Takeaways
Regardless of how you go about it, choosing an investment strategy is necessary for ensuring a safety net for your money. Don’t just go around investing in every little start-up or hot market in hopes of big returns.
For those looking to learn more about living their best life, be sure to check out our other articles. If you know someone that is looking to get into investing, be sure to share this article with them first.