Things to look out for before choosing an investment

Investing is essential for saving enough for retirement, especially because bonds offer historically low rates of return. Stocks, while historically providing high rates of return over long periods, are not without risk.

Here are three hazards to avoid when choosing the finest investments:

Investing without a strategy

Don't make the mistake of focusing on your vacation rather than your financial future. Numerous studies suggest that persons who are disciplined enough to write down their investment strategy can expect to beat their rivals by multiples, not just a few percentage points.

There are many various investing methods, but they all require rigorous implementation over a long period to ensure that you end up with a profit. That implies you should never "invest" in rumours, insider information, stories, conjecture, future predictions, or the expectation that the market would rise.

Investing with money you'll need soon

?If you don't need the money right away, the stock market is an excellent place to keep it. Any money you'll need in the next several years should be stored in a readily accessible savings account or invested safely in a certificate of deposit. Only invest money in the stock market that you can leave alone in the event of a downturn. You can start investing in money market funds if you want to liquidate your investment within 24 hours.

If your investments suffer a significant loss, you'll be in serious financial problems if you need money soon away. Stocks grow at a far faster rate than most other assets, but their long-term average annual returns of around 10% have been achieved over decades.

There are years when the market lowers and years when it soars, and you should stay involved for years rather than being compelled to sell when the market reaches a trough, so you may ride out the lows and profit from the highs.

Volatility

Also known as "market risk" or "involuntary risk," volatility refers to the price variations of a securities or portfolio over the course of a year. Market risks, which include occurrences outside an investor's control, affect all securities. These events have an impact on the entire market, not just one company or industry.

The following are some of the risk factors:

Geopolitical Events - Because the world's economies are intertwined, a recession in China can have disastrous consequences for the US economy. The United Kingdom's exit from the European Union, or a new US administration's rejection of NAFTA, may spark a global trade war with disastrous consequences for individual economies.

Economic Events - Monetary policies, unanticipated restrictions or deregulation, tax revisions, interest rate changes, and weather all have an impact on a country's GDP and international relations. Businesses and sectors have been impacted as well.

Inflation - Also known as "purchasing power risk," inflation is the danger that the future value of assets or income will be diminished when the cost of goods and services rises, or because of purposeful government action.

if you're not sure how to invest or what type of investments you should make, you can speak to our financial advisors on 07000330330 or send us a WhatsApp message on 08055100010