Anyone interested in their own personal finances should not look at investing as gambling; instead, investments require careful and strategic thought. Yes, there’s an element of risk-taking involved, but identifying favorable opportunities requires deliberate planning, characterized by diligence and research.
At the heart of any investment plan is the question of why to invest. Asking “why?” goes a long way toward determining “how?”, because objectives should be aligned with appropriate opportunities. For example, someone willing to risk some of their capital to achieve a high return will have a vastly different outlook than a more conservative-minded investor whose primary goal is protection of their capital. Both types of investor are going to favor different opportunities.
The current state of the global economy makes analysis of investment opportunities and detailed strategy more important than ever. In 2016, the geopolitical landscape shifted considerably with Brexit and the election of Donald Trump; this influences any investment decision.
In a shifting and uncertain geopolitical climate, here are some key points for investors who are in the hunt for suitable opportunities to consider, regardless of their investment profile:
Know Your Objectives: Is the investment for retirement or is it for a more short-term purpose, such as funding the purchase of a home or for a child’s college education? The answer to this question informs to a considerable extent the type of opportunities that are appropriate. Strategic planning for something such as retirement equates to a broader investment horizon. Typically, a retirement plan will invest in a basket of opportunities, ranging from equities and real estate to government bonds and even cash deposits. The objective is to generate as high a return as possible but to cover the total value as time goes on, using relatively safer options, such as bonds and cash.
Raising funds for a home downpayment may require even safer investment options because the investor will want their capital to be guaranteed. On the other hand, other investors may be willing to risk more capital for the chance of higher returns.
Read the Literature: Knowledge is power — and in the investment world having the right knowledge goes a long way. For instance, the business cycle for something such as pharmaceuticals is going to be very different compared to a sector such as food and beverages. Reading case studies and articles by those who understand the investment sector and have had previous experience in this industry can be a great way of obtaining insight into what works and what doesn’t. For example,building on founder and Executive Chairman Ken Fishers own investment advice guides, the “Fisher Investments on” book series reviews financial topics and investment sectors to help investors become more informed about the nuances of each sector.
Building on this knowledge over time can help an investor understand what differentiates one economic sector from another, whether particular markets are worth investment and identifying the best time to take action on them.
Keep Abreast of What’s New: New investment opportunities are continually emerging which is why savvy investors always try to keep ahead of the curve in that respect. Most business innovation at present is being driven by technology. At the same time, technology is being leveraged to give a new lease of life to the old ways of doing things. For example, delivery drones are now used to transport small packages. Investing in such opportunities can mean taking a chance on an individual company. Of course, there is also an associated element of risk compared to other investment vehicles.
Listen to Professionals: Seek expert advice from financial professionals, even if it’s merely to get a second opinion. Industry professionals have the kind of knowledge and experience that lay investors don’t. As a result, they’re often in a position to spot key market trends before the general public.
Be Patient: In a slow-growth global economy, it’s only natural to assume a gloomy outlook, but there are areas of growth out there. In the longer term, solid investment opportunities are likely to deliver strong returns even if there is shorter-term instability and underperformance.
Remember, a well thought-out investment plan, backed by research and expert advice, is a smart plan for generating strong returns on any assets.
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Thanks for the insightful discussion of investment approaches. I think you hit it on the head with both patience and focusing on your objectives. This is a great starting point for anyone getting started in the markets.