There are many ways for people to grow their money through passive income, and one of the most popular these days is to buy shares, cryptocurrencies or other investments. This comes as a result of a plethora of investment products coming up on different markets each day which is what makes it so much more accessible to average people around the world.
This means that investors could come from anywhere at any age and even any culture. A college student, a stay-at-home mom, or an ordinary Muslim doing their daily prayers through Muslim Pro could become an investor right now. The problem is that there is a lot more that goes into investing than just placing your money on a market.
If you’re looking to make your first investment, here are some crucial considerations before starting up your investment portfolio.
Having Financial Goals
No investor simply places their money on a market, an industry, or any asset for that matter without a real reason to do so. It is irresponsible to make any sort of investment without having goals and a vision, especially for how you want to grow your finances. You have to remember that this is money that you will not be able to touch for an extended period.
Financial goals do not have to be grandiose or extreme. What matters more is how long you plan to invest and how much. Generally, these can be classified as short-term, mid-term, and long-term. This matters because the rate at which an asset can grow your investment varies per market, and you have to be sure which one you are ready for.
To illustrate, long-term investments tend to gain at small yet steady rates, meant to be left alone for at least ten years. These include money markets and even simple savings accounts with interest rates. On the other hand, short-term investments can spike in value within weeks to months, which is a trend often observed in the stock market.
Levels of Risk Tolerance
Once you’ve decided your financial goals, you can understand what level of risk you are willing to take with your money. Although there are stories of individuals making huge sums overnight, these people are likely aggressive investors who were ready to lose that money in the first place. Especially for a beginner, you do not have to handle your finances like this so soon.
Briefly, low-risk tolerance means that you are geared towards safer, more guaranteed growth in your investment, though this means that it may be small and steady. Opposite to that, high-risk tolerance means being prepared to lose everything if the potential earning is high. Moderate tolerance lies in between, often balancing risky investments with safer ones.
This is important because different markets can be volatile and unpredictable. You have to be ready for how much you want to commit, and you need to understand how you can emotionally handle losses. It is worth mentioning that your economic circumstances play heavily into this since some people can afford to lose their investment, while others are depending on returns for their future.
There is much more to investing than how much money you can make, and this lies into what your assets stand for. Some of the best companies to invest in from a financial perspective may actually operate using unethical practices or questionable objectives, but others may be small and growing due to admirable goals and a real vision.
Just because other investors overlook these concerns does not mean that you should compromise on your beliefs as well. For instance, you can look into investments that promote environmental sustainability or fair trade. If you are a devout Muslim who uses the Muslim Pro app for your daily routines, you must also make sure that your investments are halal and Shariah-compliant.
While this sounds like a lot more to think about, it all boils down to research. Again, Islamic finances are not a matter to be taken lightly, so every decision you make with it should be responsible. The only way to know how your potential investment will perform or if it is alright to support it is to research thoroughly beforehand.
Developing Your Portfolio
With the thrill of having made your very first investment, you may be tempted to put more money into it. However, more experienced investors would tell you that one of the most important rules is not to put all your eggs in one basket. While you do not have to rush it, consider including other types of assets to expand your portfolio management.
The idea is to have a cushion so that in case one investment starts to lose, your other assets remain unaffected. This also reduces net risk while increasing overall gain over a longer period. Still, it is important to make the same considerations for each new investment even after the first.
Hopefully, these considerations turn out helpful for newbies who are anxious about taking the first step. It isn’t accurate to say that investing is easy money due to the risk and commitment required, but making the right and responsible decisions can lead to big returns.