As you go through your financial journey, you will inevitably discover investments you love. These often stand out to you as incredible opportunities to make a decent return and grow your wealth.
But, of course, as with anything involving money, you have to be careful. There are all sorts of hazards on the way to the promised land.
For that reason, we’ve written this article. It looks at the things you need to do after you find an investment you love.
Think With Your Head, Not Your Heart
Before putting your money into something, start by thinking with your head, not your heart. Yes, you might absolutely love an opportunity, but you also need to think about whether it will serve you.
For example, let’s say that you’ve found a property you love. It’s overlooking a lake and would be the perfect place for family get-togethers.
In a situation like this, it’s easy to get carried away. But if you are investing, you need to look at the numbers. Sure, the location might be idyllic, but it could also be out of your budget range. The property could also see a falling value in future years, simply because it is in the wrong place or money is moving away from the local area.
Even something as simple as a travel trend could affect its valuation. Some destinations become more fashionable, while others are less so.
Therefore, always do your financial due diligence before putting money into any asset. Think about what you’re doing and whether you’re likely to make money.
For example, if you’re thinking of buying a company, research its financial statements. Look at market trends and read expert analysis. See whether it has any up-and-coming competitors that could potentially steal its thunder.
Set Clear Goals
The next step is to set some goals for what you want your investment to achieve. Ideally, you should have a figure in mind for how much you want to earn.
Meanwhile, you should also check whether the investment aligns with your values and time horizon. Do you have enough years before retirement (or whenever you want to do something) for it to pay off?
Also, consider your risk tolerance. Some people are okay with volatility, while others hate it, so be careful.
The amount of risk you’re willing to take will usually depend on your financial situation. If you already have a lot of money, you can usually risk more. Meanwhile, if you don’t have much, you have to risk less.
How much you can absorb if you make a loss is also a consideration worth mentioning. You don’t want to lose so much that you risk your lifestyle.
Develop Your Strategy
Developing your strategy should come next. This is where you follow tried-and-tested practices that worked for people in the past.
Depending on what you want to invest in, it is sometimes worth reading guides and columns. For example, the alternative investment community often writes blogs with titles like “3 steps for people new to whisky investment.” These can be helpful if you’re stepping into something new.
Of course, if you’re a genius, you can ignore a lot of standard investment advice. It is sometimes possible to find mathematical hacks or modelling approaches that allow for market predictions. However, these require massive intellectual leaps and aren’t always something the average investor can achieve.
Keep Track Of Your Investments
Keeping track of your investments (and how they perform) is also critical. Ensuring that they live up to expectations lets you know whether you made a good decision.
Some investments, like stocks and bonds, are easy to sell if they underperform. As such, you can try them for a while to see whether they suit your approach.
Unfortunately, others, like property and private companies, are more challenging to exit. These often imply high transaction costs, leaving you out of pocket and cutting into your returns substantially.
If you have a portfolio, you can monitor it using investment apps. These provide you with alerts and keep you up to date every day.
Every few months, you can reflect on your investments and ask whether they are fulfilling your goals. Sometimes your approach will work, but other times it won’t.
Stay Educated
Lastly, educate yourself. Ensure you learn everything you can about the investment you love. Sometimes, opportunities are long-lasting, while others come and go quickly, depending on trends and the regulatory environment. The trick is to have an eye for what works, and what doesn’t.
