Buckle Up Because It Could Be A Bumpy Investment Ride
Making the right decisions about investments can be life changing.
But investing requires a great deal of thought and planning. The biggest issue you’ll face as an investor is the amount of investing risk you’re willing to take.
Why Risk Assessment Is So Important
Every investment- from owning stock in a startup tech company to buying US Treasury bonds- has some degree of investment risk. Investment risk is the risk that the investment will decline in value over time. An investor may see the value of a stock or bond fluctuate by 10% or more from year-to-year, while the value of the investment may grow slowly over a 10 year or 20 year period.
You need to decide for yourself how much investment fluctuation you’re comfortable with. If your investment increased or decreased by 10% in one year, is that something you could live with? How about 20%?
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The answers to these questions will determine which types of investments are suitable for you. If, for example, you’re comfortable with an average fluctuation of 10% a year, you may purchase common stock shares in a well-known company. On the other hand, if a 30% annual change in price is OK, you may buy stock in that startup company.
Factors When Choosing Your Investments
Once you’re decided on your risk tolerance, you can look at specific investments.
Whether you’re investing in the stock market or a rental property, research is essential for success.
If you’re interested in common stock, you can read stock analyst opinions on the performance of the company and its stock price. Instead of purchasing shares of an individual stock, you may buy shares in a mutual fund. Mutual funds invest in hundreds of stocks and bonds on behalf of investors, and you can read research on each mutual fund’s performance.
Investing in rental property, on the other hand, requires a different form of analysis. You need to know how much it will cost to maintain the property, and research how much renters are paying to rent similar spaces. Check on the vacancy rates for similar rental properties in your area. These steps will help you determine a rental price to charge for your property.
Insure your investment
Your property investment must include the purchase of insurance on the property. By insuring your property or commercial space, you’ll receive compensation for any damages and theft. It may be a monthly expense you could do without, but it’s a vital step to take.
If you have a claim and your insurance company disputes your claim, get an expert to help you. Take the time to read about Miller Public Adjusters and others like them. These firms can help to resolve an insurance claim dispute in your favor.
Why Monitoring the Market Is Critical
Once you purchase an investment, you need to monitor its performance. A change in market conditions, or a downturn in company performance, will impact the price of your stock investment, and economic changes affect your property investments.
The result is that you should always keep one eye on stock prices and predictions, and you can find mobile apps to monitor your investments. Stay informed about economic news by reading online publications and news sites, and pay attention to rental prices and vacancy rates.
Invest the time to manage the risk and volatility in your investments.
This post is for educational purposes only.
Ken Boyd
Author: Cost Accounting for Dummies, Accounting All-In-One for Dummies, The CPA Exam for Dummies and 1,001 Accounting Questions for Dummies
Co-Founder: accountinged.com
(email) ken@stltest.net
(website and blog) https://www.accountingaccidentally.com/
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