How to Invest

Wednesday, 27 Oct 2010 09:35 AM

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“How to invest” is probably one of the most frequently asked questions by both those who have loads of money and those who do not have much money, but want to make more. Though many people want to invest for higher returns, others are looking for avenues to invest as personal savings for old age, emergencies, or other future needs like children's education, and even for holidays. In other words, people want to know how to invest for purposes ranging from savings to wealth multiplication.
Here are some tips on how to invest:
  • First, you should ask yourself some questions. Ultimately, you have to make your own decisions, but you can seek the help of professional financial advisors. Remember that their interest lies in making you commit to large investments as their fees are tied to it. The questions you should ask first could be “how much do I want to invest,” and “why do I want to invest.” The next question should be “what are my expectations from the investment," and finally, “how much risk am I willing to take.”
  • If you believe that you have a fairly good risk appetite and your primary goal is to earn high returns, the stock market is probably the place for you. You might consider investing in the stock market for high returns, but remember that the risks are also high for the hard-earned money you are putting in as investment.
  • Either debt market or bond market could be the place for those who consider the best investments to be those with a decent return but limited risks. Bonds are generally for the investors who do not want to take risks. The people who invest in bonds generally do not go for generous returns one day and heavy losses another.
  • Traditionally, property investment has also been one of the best investments. Although property investment seems to have lost some of its sheen in recent years due to the subprime crisis and the subsequent downturn in the economy, many investors still consider it one of the best long term investments. With the property prices cooling off considerably in recent years, many people might find it an attractive opportunity to purchase property at a low cost, and then wait for the market to go up.  
  • For beginners and those looking for good returns with limited risk, investment in mutual funds could be the best bet. Here, the risk to your investment is not limited to one single stock, bond, or property. There are funds that invest in stocks, some others invest in bonds, and some in both stocks and bonds. Besides a diversified risk profile, funds also give your investment the added advantage of being managed by professionals. However, this comes with a price in terms of fund management fees and other charges. It is your decision in the end on how to invest your money, but whatever you decide, do so after taking into account the benefits and losses of all the options available to you.

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