What is an investment?
An investment is an asset or an item that is purchased with the hope that its value will rise – and may then be sold on at a higher price – or that it will generate an on going future income. That income, for example, can be dividends from shares of stock that you own or from payments on property that you rent.
There is no one right or wrong investment
All investment choices are made with the knowledge you have at the time of the investment and of current market conditions. Understanding exactly how much money you have to invest and over what time frame you will be investing will also inform your investment decisions.
In December, John received a Christmas bonus of $5,000. He knows that, according to his Cash Flow Management system, he will need to pay this out to cover school fees the following September. He should not, therefore, choose “Property” as his investment option.
Susan is 44 years old and inherits $100,000 from a distant family member. Susan is managing well with her day to day finances. She is unsure, however, if she will have sufficient savings to cover her needs in later life. Susan should not think that “Cash” is a viable option for her investment.
Plan your portfolio in line with your vision
Imagine possible investment outcomes that are in line with your vision and your goals. Doing so makes your investment choice much more apparent. It is imperative to look at what your investment will return to you and when you can expect that return.
There are only four places to invest.
All investments are one of these or a combination:
- Fixed Interest
- Shares, and
Being aware of what investments are in your portfolio, of what they are designed to do, and over what timeframe you are holding them can take the stress out of volatile markets.
Having diversity across investment means you can rest more easily at night.
You should keep track of all of your investments, making sure they are still performing to your expectations and that they are still in line with the vision you had when you purchased them.