Returning to the subject of investments we will deepen the concept of investing in security, especially now where the great majority of analysts and financial experts recommend investing in riskier products. There are now definitely a number of investment opportunities, such as investment funds, equities, bonds, among others. However, the mere fact that such opportunities are presented to us by our account managers or by a friend’s recommendation does not mean that it is a good investment.
Your risk profile will tell you the best investment for your portfolio because there are products where fluctuation can condition your investment strategy and your ability to maintain and make decisions. So here are some golden rules to invest your money that are universal to all investors and that work clearly when your investment strategy is accompanied with discipline and rigor.
NEVER Go to Investment Credit
We have already heard several stories of investors seeking to increase the amount of capital they have to invest in credit. Even at the level of retail banking there are several operations that were “married” with actions in order to get better conditions.
When an investor or potential investor resorts to credit for investment, he or she is simply making a decision based on the expectation that your investment will value or pay more than the cost you will have with the credit. However low the credit interest rate, your investment strategy will have a high price and your break-even point in that investment will not be zero profitability but profitability equal to the cost of your financing.
Know the Risk of your Investments
Simple concepts that we all understand and even know which financial products fit into these classes. However, this does not mean that we only have to own financial products of one of the classes. It is the famous recommendation of “Do not put the eggs all in the same basket”.
Ideally you should make an efficient allocation of your money to various financial products, for example products without risk (term deposits and savings …), moderate risk (mutual funds and bonds …) and high risk (equities, futures. ..).
Don’t Disperse Too Much of Your Investments
Keep it simple … Fall like a glove on investments. One of the biggest mistakes of investors is to confuse the concept of diversification. Many believe that diversifying is to have several assets and several categories with different risk classes.
It is true, however, it will hardly control or monitor the evolution of a hundred investments. You will hardly be able to be informed about a hundred investment options. Look for a few assets for your portfolio and with good prospects for evolution and keep the constitution of your portfolio simple.
Investing for the Long Term
Historical data demonstrates a balance in the valuation of various financial products, especially products involving risk. Those who like stocks can simply buy a stock fund with an investment strategy appropriate to their risk profile, or simply invest in an ETF and replicate the evolution of all stocks that make up a certain index.
What is important is to define your concept of liquidity and risk. What for your financial life means possessing liquidity and security and to what extent or even how much of your assets you want to take risks. Knowing these characteristics of your portfolio can begin to build a portfolio with a view to the long term, without devaluing the importance of liquidity in your financial life and the security of it.