Understand your financial priorities to define your goals and decide the best investment options for you. Learn how to start investing your money.
Even with numerous bank and brokerage options out there, it is still common for people to feel lost when it comes to investing.
The lack of a solid financial education in Pak culture makes the investment world seem like something totally out of the ordinary person’s reality . There may be people who imagine that this investment talk is just for those famous Shark Tank sharks , just as it is not difficult to find someone who feels calm about taking good care of their own money: everything is already well invested in savings .
It is true that financial investments can indeed open up in an extremely complex universe full of acronyms, rates, numbers and deadlines, but it is also true that even with a more basic knowledge you can invest your money in a smarter way than keeping everything under of the mattress.
To start bringing you closer to this nebulous and confusing investment environment, this text will present some important considerations and guidelines for any beginner who wants to start investing.
Know your financial priorities
The first step to start investing consciously is to understand the general situation of your personal finances . It makes no sense to start analyzing investment options if you have a collector chasing you every other day, right?
If you’ve never done anything to organize finances, it may be that before you start investing you should worry about build a financial reserve. While investments are made with the aim of generating financial returns, the financial reserve is what will give you greater security and stability to make other decisions.
Ready emergency reserve, paid off debts and mapped finances? Great, now it’s time to start preparing to invest for real.
Define investment goals
As I commented just now, the general objective of investing is to obtain some kind of return or financial gain, but what is your final objective for that money?
Objectives are usually categorized according to the time window, which can be short (up to 2 years), medium (from 2 to 5 years) or long term (more than 5 years). It may seem a long way off to think about something 5 years from now, but listing all these goals will help you stay motivated and focused during the investment process.
Traveling abroad, buying a car, starting a course, having a wedding party, in short, understand what your goals are so that you can really plan how much money you will need to reach a certain goal in a certain time .
To give you a practical example: guaranteeing retirement. To know how to invest in order to have a comfortable retirement you will need to know when you want to retire and how much money you need to have peace of mind.
Discover different investment options – How to start investing
Great, organized finances and defined goals: time to invest! But invest in what ?
A very important thing to choose any investment option is to know what your risk profile is , which can be conservative (low risk accepted), moderate (medium risk accepted) or bold (high risk accepted).
Any type of investment carries some level of risk, and generally speaking, the greater the risk, the greater the return . Riskier investments should generally have long-term windows, as over time they tend to outperform more conservative options.
Here are some examples of investments separated according to different risk categories:
- Fixed income assets pegged to the CDI (Interbank Deposit Certificate)
- Securities protected by the Credit Guarantee Fund (FGC)
- Bank Deposit Certificates (CDB)
- Real Estate Credit Letters (LCI)
- Fixed-rate Treasury Bonds
- Solid company stocks
- Treasury bonds linked to the CDI
- Assets indexed to inflation
- hedge funds
Diversify your investments
“Now yes! I know that my profile is conservative and I want to redeem my money in 2 years. Give me everything in that CDB there!”
No one is able to predict the future – 2020 made that very clear – and imagine if, suddenly, an accident happens and your investment option goes down the drain. It is better to ensure some security by spreading your money between different investments.
The above example is pretty exaggerated, but generally speaking, diversifying your investments helps protect your money from general market volatility. Thus, if one of your investment choices is bad or is doing poorly, the tendency is for other better investments to compensate for this disadvantage and maintain a positive average health.
Study different options, different terms, different rates and different investment conditions. It can be tiring and time-consuming work, but it is very important for you to make smarter investment decisions.
Each person has their own investment goals and unique financial situation, so don’t think that there is a magic formula that will guarantee spectacular financial results for everyone.
It is also worth considering that investing in your studies and professional training can be a very valid alternative to bring intangible returns – such as satisfaction and personal fulfillment – and quite tangible ones – such as a promotion at your job.