Some people assume that investing requires a big sum of cash and is usually practiced by wealthy people. However, this is very untrue as investing can be done by anyone, no matter your wealth size. Investing is very important especially when you work hard for the money you earn. The money you save can be used to grow your wealth exponentially over the years, which offers some financial security. Your investments can become another stream of income for you or be used for your retirement so you can live comfortably. Not only can you invest your own savings, but you can also create a steady payout by finding the best personal loan in Singapore to help in your investment plans. While anyone can begin investing, a beginner might find it a little daunting as there are many types of investments and certain things to note before diving into it. Here are the basics of what you need to know before creating your first investment portfolio.
How much time and money do you have?
When starting your investment portfolio, you have to consider the amount of time you want to put into investing. There are active and passive investments and they reap different rewards but choosing which type to get into depends on the amount of time you have. Active investing will require a lot of research on your own to find out the different opportunities that work for you. It will also involve analysing the stock market which requires some knowledge in investing. As these active stocks are constantly changing, it will require you to closely monitor them, which can take up a huge chunk of time in your day. Active investing is a riskier option but it can incur a huge amount of returns when done right. On the other hand, you have passive investing, which can be done through a trusted financial advisor by depositing a lump sum of cash into your investment of choice. You will not have to touch your money as it steadily grows on its own over the years. The longer you leave your money in the investment, the more return you will receive. Passive investing is a hands-off approach that can get you moderate profits.
Next, you have to think about the amount of money you have to put into investments. Once you receive your monthly income, you should pay off your expenses and loan repayments before using the remaining money to invest. Even a small amount of $100 can be used to invest but what is more important is that you set aside a long-term budget as investing will require consistent funding. While some investments can also profit from getting the best personal loan, it is still important to set aside your own investment fund.
Assess Your Risk Tolerance
Investing inevitably comes with some risks but deciding your risk tolerance can make it easier when choosing the right investment plan for you. Not all investments have a huge return and most of the time riskier investments will get you the big bucks while low-risk plans have a much smaller profit. To find out your risk tolerance, you can ask yourself some simple questions. Firstly, are you able to take risks? This largely depends on your current income, loan payments, and other expenses. If you have a high income but just a few liabilities, you are most likely able to take risks. Secondly, do you need to take risks? This correlates to your financial goals of how much you would like to earn from your investments. If you need higher returns in a short span of time, you will probably need to take a risk. Lastly, are you willing to take risks? This is a personal decision that depends on your comfort level.
What should you invest in?
The big decision is deciding what type of investment to dive into and this should depend on the above factors. If you’re looking into an equity portfolio with high returns but high risks as well, stocks would be your best bet. If you’re looking to maximise your income and gain a medium to high profit, dividend-paying stocks are a possible investment option. If you prefer a low-risk plan for capital security, bonds can help with that.
However, investments don’t just stop there. There are also mutual funds, exchange-traded funds (ETF), and even real estate investments. Investing in property and renting it out can provide a steady income. As purchasing a property can be hefty, finding the best personal loan in Singapore is a viable option. Local banks provide such loans and once you’ve bought a home with these funds, you can then rent it out. However, even if you’ve managed to get the best personal loan deal, you need to charge a rent high enough that it covers your monthly mortgage loan while also collecting a profit. These are just some of the ways you can diversify your investment portfolio to ensure financial security and independence.
