http://www.investorwords.com/2599/investment.html defines it as “The purchase of a financial product or other item of value with an expectation of favorable future returns” in general terms it is spending money to make money.
Personally
I think investment is one concept that should be knocked into a
person’s head as soon as they start understanding the value of money.
Unfortunately this is not usually the case and most of us go through
life without ever understanding this concept. If we are lucky , we get
in our adulthood and more often than not it is too late.
If you want to invest you must have observed the first golden rule of any successful venture. Plan.
Without a plan you are more or less shooting in the dark and chances of
hitting a target are low. The first step of planning is researching on
what kind of investment is best suited for you. Best suited means affordable; what can you fund comfortably without breaking the bank, rate of return; what kind of return do you want on your investment? Remember the higher the return the higher the risk and finally term of return; are you looking for a short-term, mid-term or long-term return on your investment.
The second step is getting your funds together (I hope you have read the articles on Savings 101 http://v3rcity.blogspot.com/2012/08/saving-101-cynthia.html and Loans 101 http://v3rcity.blogspot.com/2012/07/loans-101-cynthia.html on this same blog to have some clue on how to get those funds). You
have to spend money to make money. I am yet to hear of an investment
that didn’t require money. The most advisable way to fund an investment
is through savings. This is because it is your money and therefore has
no cost (read interest). This is not to say loans cannot be used for
investment. The key here is to ensure the return on your investment is
enough to cover the cost of the loan and also give you a return. I will
not go into inheritances and lottery winnings as sources of funds but
if these ever come your way, think investment as this is also money
without a cost.
On
some occasions it is advisable to seek professional advice before
undertaking investments. There are people who are experienced and
learned in this field and therefore can more or less make sure bets on
your behalf. The downside to this is that you have to pay for this
advice and it cuts into your returns. Nonetheless, if you are investing
in something like shares, bonds, land etc. it is highly advisable to get
the right professional advice. On the other hand if you are investing
in a clear cut venture, advice from family and friends who have
experience in the similar ventures is usually enough and often free.
Thorough research on your own is also less costly. No one knows exactly
what you are looking for except you. Luckily in the current times, there
are unlimited sources of information.
There
are many kinds of investments. They vary from small business ventures,
shares and bonds, land, mutual funds etc. Please note a personal car is
not an investment. This is because the value starts depreciating as soon
as you turn the key to start the car yet as we know from the
definition, there must be an expected favorable future return for it to
be termed an investment. The jury is still out on daughters (with the
dowry and all)…
One
golden rule of investment is diversification. Don’t put all your eggs
in one basket rings very true when it comes to investment. Investment is
a risk, meaning you could win or lose. Therefore it is better to spread
your risk so that if some lose, you have others that are winning. You
can start small with a plan to work your way to the big leagues. If you
have a plan everything else is bound to fall into place.
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