Choosing how to invest your money can be a very hard decision. Just how do you get the return you need and keep your funds safe? How willing to take risks are you? What can you afford to invest? So many choices face investors today; with the recent upheaval in the Markets, investors are afraid of the changes that stocks can quickly go through. How do you best prepare for the future?
To be successful with long-term investing, you have to embrace diversification. Why? because bad things happen. Sometimes large-cap U.S. stocks don’t do so well. Remember 2008, when stocks tanked? You’d have been safe if you’d put some of your funds in gold at that time. But, in 2013 US stocks had one of their best years since the 1990’s, and the price of gold plummeted.
Investing needn’t be limited to the purchases of stock and precious metals. Real estate investment is another option available. Again, you must realize that real estate also faces times of growth and times of readjustment.
The Global Market
It is interesting to note that India is now overtaking China as the fastest-growing large economy in the world. Why is this important to you? Because as you invest, you need to understand the consumption of all the world markets. With India, it is important to understand that the Indian people love gold. In fact, they love gold so much that the entire nation of India imported nearly 150 metric tons of gold in 2013. The Indian government was quick to place a duty on imported gold to protect its national currency. However, India still consumed a full one-quarter of the world’s gold supply last year. The demand doesn’t seem to be diminishing.
Risk: Know Your Limit
Unfortunately, all investments come with some kind of risk. Market conditions affect stocks, bonds, and mutual funds. Certificates of Deposits issued by banks and credit unions even have inflation risk. However, you can manage risk and find a comfortable spot for yourself.
Some risk can be eliminated by knowing that you are not putting every last penny in a highly volatile investment. This is tied back to diversification; investing in a variety of volatilities will allow for some rapid growth, while providing the comfort level you may need to feel at peace.
In addition to asset allocation, you can also purchase insurance on your investments or do something called hedging. This is when you purchase a security to offset any potential loss another investment could suffer. These both add additional costs to your investment, which can diminish your returns. Hedging usually involves higher risk activity like short sells. You have to decide if the potential return is worth the risk.