The pros of having multiple types of investments
Planning your investment portfolio is one of the biggest steps in ensuring financial freedom. After all, this is where we begin to invest for our financial future. The best part is that starting off isn’t as hard as it sounds and you can even get started with as little as 10 USD.
Why it’s better to diversify
Considering the kind of money we’ll eventually invest, we have to make sure that we understand how our investments should reflect our financial goals. Factors here include your time, budget, and projections.
There’s a popular saying that you’ve probably heard before—don’t put all your eggs in one basket. The reasoning here is that if you do, losing the basket means losing all your eggs. The same should go for your investment portfolio. What we have to consider is that when we invest, we face certain risks.
Each investment option will have a different level of risk which usually corresponds to the potential earnings you can gain. Simply put, the more risk you face, the more you can possibly earn from that investment. Safer investments, meanwhile, are much more guaranteed to net you earnings, albeit at a much slower rate than high-risk investments.
Investors will sometimes try to balance low-risk with high-risk investments in their investment portfolios. Alternatively, they can act more aggressively or conservatively based on the strategy they want to take.
Strategies for building an investment portfolio
Fortunately, you can be a little flexible when it comes to building up your investment portfolio. This means you can invest in a way that fits your goals. This way, you can avoid the frustration of not seeing as much gain as you expected or not seeing earnings soon enough.
Taking an aggressive stance will have you choosing high-risk investments since these will be the likeliest to give you a high return on your investment. Investments of this sort tend to be more susceptible to market fluctuations whether they be for better or worse.
A more conservative approach to investing focuses on assets that can do relatively well in both bad and good times. Unlike aggressive options, investing in assets that fall in this category won’t be as susceptible to market fluctuations.
Balanced investment portfolios will try to get the benefits of both strategies. The mix will depend on the investor’s goals—would you rather focus on claiming earnings sooner or are you willing to wait? How much are you willing to risk and how much are you looking to gain from it? These are just some of the questions you should ask yourself if you’re trying to determine your goals.
Investments you can choose from
As we mentioned before, it’s pretty easy to dip your toes in investing thanks to the fact that we now have more accessible options available. What usually intimidates people now is the sheer number of investment opportunities which can be a little overwhelming to the uninitiated.
To help you get started, let’s break down the different types of assets you can invest in and see which one fits your preferences best.
Traditional stocks are still the most common investment, representing the number of shares an investor owns in a company. These shares are sold on the stock market and are limited by the company releasing them. Earnings here usually translate to dividendswhich are paid out either quarterly or yearly. These dividends are proportional to the number of shares you own.
When it comes to finding the right assets, gold and oil are assets that most of the world still has a large demand for. Because of that, investments in gold and oil are projected to only increase in value over time, at least for the foreseeable future.
These days, you can find gold and oil investments in exchange-traded funds or ETFs. These are investment options that act as a fruit basket of different investments traded as a whole on the public market.
Cryptocurrencies have recently become a popular option in recent years thanks to the accessibility they offer and offer a few other advantages as well. Buying any of the cryptocurrencies is convenient, converting currencies like ETH to BTC is easy, all while letting users access their money anytime and anywhere.
Investing in bonds is sort of like lending money to a government agency or bank. Here, the bank or government agency gives investors a bond where a predetermined interest rate and maturity date are stated. Once the maturity date has been reached, the principal amount (the money you invested) is returned along with a nice interest as your earnings.
Work the numbers, reap the benefits
At the end of the day, investing properly only means taking your needs into account. With all the options we have on our hands, getting started with investing is a lot easier so it pays to put more effort into learning as much as we can about the market.
These decisions shouldn’t be rushed so it pays to spend time learning as much as you can first. Once you feel comfortable enough to begin, ready your secure crypto wallet and bank account—the world of investments is meant for everyone and everyone has a chance at earning something for themselves.