The current market outlook is shaky and there is an on-going debate around saving your money vs. investing your coins. Yes, cash is king. But, inflation is it’s detractor. If you have a starter emergency fund, three to six months of expenses in savings, and work to consistently minimize your debt ratio, you should be investing. To do this successfully, you must formulate a plan for financial growth, have a realistic forecast, and consider the potential range of outcomes.
“The plans of the diligent lead to profit as surely as haste leads to poverty.” - Proverbs 21:5
“Invest in seven ventures, yes, in eight; you do not know what disaster may come upon the land.” - Ecclesiastes 11:2
Define your goals.
What does financial health look like for you? Are you planning to invest short-term or long-term? Ideally, what is your desired rate of return?
There are many thought provoking explorations that can sharpen your vision of what you want to accomplish with your money. Notably, you cannot measure success without a specific goal.
Determine the appropriate account type.
There are multiple acccount types that you can open (Brokerage, Education, Retirement (401k, Traditional IRA, Roth IRA, Rollover IRA, etc.) As each account has it’s own set of privileges and restrictions, choose the one(s) that best suit you.
Assess your aggregate risk ranking.
Because this is an essential element of successful financial planning, I recommend that you conduct a personal risk assessment. Although financial advisors include risk profiling as a part of the investment process, you can improve your probability of making wise investment decisions by proactively gauging your financial ability, need, and willingness to take risks. Here is a link to a risk profile assessment.
Once you know your risk level, you can consider the different types of investments (equities/stocks, bonds, mutual finds, ETFs, etc.) and begin to sift. (i.e. If you have a low risk tolerance for experiencing fluctiations in the stock market, you should have no more than one, if any, equity investments within your portfolio.) Recognizing your financial and emotional capacity for risk is the groundwork to having a tailored financial portfolio with the appropriate asset allocations.
Determine a suitable volume.
A practical approach in selecting the appropriate amount to invest would be to evaluate your current financial responsibilities, savings, net worth, possible tax-advantages and the ungodly reality of inflation. From a holistic prospective, you will be able to determine the appropriate amount to fund your investment account.
Conduct organizational research.
Investing goes a lot smoother when you are with the right organization. As there are numerous entities and platforms that you can choose to partner with, I’ve highlighted a few components that have helped me in my research:
History: Reviewing the history will give you a glimpse of their values, ethical standards, customer orientation and ascension rate for growth.
Fees: Compare the fees to open, maintain, and/or close the account.
Commission/Additional Charges: Be aware of the hidden print. There is an evident range of charges for trading, penalties, and several things in between. Also, do not neglect the possibility of a company receiving commision on their recommendations.
Services: There may be company specific offerings that are solely operated to promote successful planning without additional costs.
Consider a financial advisor.
Honestly, you do not need a financial advisor to invest. However, an astute financial advisor is an essential resource (and complimentary at certain companies.) Essentially, they merge the aggregate of your current financial state with your desired financial goals to craft a holistic financial plan.
The key is having someone that is passionate about what they are doing. If they are passionate about it, then they strive to sharpen their skills and engage in professional development opportunities to excel in their competencies. Hence, you should not select a long-term financial advisor or adhere to one’s recommendations without considering their financial background/certifications and compensation structure.
Stay in the game.
As life changes, your diversification and/or goals may need to change as well. You should ALWAYS own your decisions: especially when it comes to investments. Even if an advisor / financial resource makes a recommendation, this is your money. No one will care about the results as much as you. For this reason, you must use your goals to fuel decisions that will lead you into reaching your desired level of growth.
“..if riches increase, do not set your heart on them.” - Psalm 62:10
“He who trusts in his riches will fall, but the righteous shall flourish as the green leaf.” - Proverbs 11:28
As you know, there are scriptures, books, articles, and experts that can assist you on your journey to financial freedom. In the end, self-education is invaluable. Capitalize on this.
Blessings,
LaJoia