Investment is not a cup of tea for all. It is an art and it has to be mastered. However, this does not mean only the financial experts and juggernauts can invest their money and earn lump sum profits. Investment in the markets is open to all the public. It just requires some understanding of basic principles and a strict financial discipline to see good profits on your investments. You need not be a financial master to invest your money. This article will tell you the basics and fundamentals to start with your investments on a smaller scale.
Identify Your Limits
It is important to know your asset worth before you can start investing. It will give you an idea on how much you currently have in hand and how much of the amount is surplus. There is no point in investing money when you have so much of liabilities. And even if your surplus is very minimal and you are committed with series of future expenses, it is of no use to invest the money as you will have to withdraw in a very short time.
Consider Your Dependants and Forth Coming Financial Requirements
The number of dependents in the family will determine the risk appetite borne by the individual. If the individual is the lone bread winner of the family, then he/she has to think a lot about investing money. It is equally important to analyze the forth coming expenses in the family before investing. It will be a blunder to invest the money that was allocated to meet the emergency requirements of the family.
Nature of Your Job
If you are a salaried person who can predict the jump in salary or about hikes, then you have the luxury of stretching your limits by a thin margin level. A steady income flow will allow you to take the extra bit of risk. However, if you are a business person then you should have a large amount of buffer to meet the unexpected jolt in your business or income.
Diversify Asset Allocation
If you want to invest a good amount of money, it is highly recommended to invest in different funds from various categories. Asset diversification will help you to overcome a loss in a particular fund. Suppose if you have invested all the money in a single fund and if it is going to fail, you will have to suffer a huge loss. On the other hand, diversified asset allocation will help you to overcome the loss in a particular fund. Loss is minimized here.
Trim Your Losses
By any chance if your fund is not performing well and is making loss, take immediate steps to pull out your money. Do not wait for the fund to move up again unless you know it for sure. The thumb rule is to set up a stop loss when you invest the money. This will minimize the loss and help you to get rid of the problematic funds.