Investing is an appealing lifestyle for many people. Investments offer the chance to grow savings more quickly than leaving cash in a bank account would do, for example, while investments are also good ways to get your retirement planning underway and ensure that you’ll have enough to live off in your old age. However, it’s not nearly as simple as setting up an investment account and waiting for the returns to trickle in.
First, you need to ensure that you’ve thoroughly looked over all the opportunities available in the market, while you also need to be careful that you’ve thought about the risks involved as well as the rewards. This article will explain where to start looking when you’re seeking out new investment opportunities – and how to sort the bad options from the good.
Different asset classes and instruments
The term “investment” is often used as a catch-all, but the reality couldn’t be much different. There are lots of different “asset classes”, or groups of investment instruments, out there. One of the most famous types of investment is stocks and shares: by purchasing segments of ownership of a firm (or a place in an index, which tracks a particular group of firms), it’s possible to benefit as the company’s value rises – or, indeed, to lose out as it drops. Other asset classes include property, as well as bonds, which come with a “fixed-interest” rate of return – meaning that you’ll be able to know in advance how much you can expect to receive. Other specific instruments that are available include foreign exchange pairs, commodities such as gold or oil, and more.
Doing your research
Once you’ve identified what the different asset classes look like and what each one does, it’s time to get started. The internet can help here, though it’s important to only look for trustworthy websites. Publications such as the Financial Times often contain full articles on emerging asset classes as well as snappier stocks and shares recommendations. Specialist professionals, such as brokers, can also help you if you would prefer to have a face-to-face conversation.
Don’t rely on word of mouth
Sometimes, you might find out about an investment opportunity from another investor. Perhaps this person is a friend or a colleague, or perhaps someone you speak with on an online investment forum. While it’s always a good idea to keep your ears open to investment opportunities and to learn from the many forums and communities out there whose members have been through the investing process before you, you also need to ensure that you are satisfied that the opportunity is fully legitimate.
Perhaps this person is a genuine investor but hasn’t researched their own planned investment destinations thoroughly and is exposing themselves to inordinate market risk. In a small number of other cases, the person may be deliberately involved in a scheme that could harm your investment goals rather than advance them. By listening out for opportunities like these and then doing your own research, you’ll be protecting your own investments.
Key risks to manage
There are other risks to contend with too. Sometimes, you’ll find a great opportunity for investment that is legitimate and above board, but if you choose the wrong broker, then you may find yourself losing everything. Doing your research is therefore once again very important. FXPro is a broker with a number of benefits, including over a decade of experience. Looking out for accreditation, meanwhile, is also wise: in the UK, the normal regulatory body to look out for is the Financial Conduct Authority.
Ultimately, investing can in the worst-case scenario lead to dramatic and negative outcomes such as a total loss of capital. It is therefore wise to prepare yourself for this eventuality, and to ensure that the cash that you invest is an amount that you can afford to lose – or that you’d be happy to leave untouched in order to give the markets time to correct.
Investing is an alluring world for many reasons – not least because it can lead to high returns that can set you up for life. However, they’re not guaranteed, and you need to take steps to defend yourself. By performing due diligence, looking out for accreditations, and ensuring that you’re as well-read as possible about instruments and asset classes, you’ll be able to handle your investments well during market fluctuations and defend yourself against problems.
