Start Investing Today: 3 Simple Ways to Find Your Investment Path!
Investing tools can feel lost for beginners who are just getting into the field of investing! If you want to make a profit, in addition to understanding the concepts of investing, it is more important to establish your own investment thinking framework and think about how you can help yourself achieve your investment goals. In this article, we simplify investing ideas into three steps, hoping to provide a basic framework to help you who are still exploring the investment novice village, systematically think about your own investment planning, and find your own way of investing!
Step 1: Assess the risk you can take - ask yourself these three questions!
Before you start investing, the most important first step is to assess your risk tolerance. For risk tolerance assessments, ask yourself the following three questions:
Do I know my payment status?
Different investment instruments, different risks, and the threshold for getting started is different, so we need to first calculate how much money we can use to invest. If we find that there is no available funds, then we do not recommend “downsizing” from others, such as savings or emergency reserve gold, which can result in not only no profit from the investment, but also affect one's own life. Having encountered this problem, you should first evaluate and adjust your financial situation, if there are any remaining ones to plan.In other words, the investment should not affect the use of other types of funds, such as living expenses, savings or emergency reserves. If there is no money left, you should start by adjusting your finances.
How much risk can I take?
Different investments have different risks, and while high risk usually means high returns, it is relatively possible to incur greater losses when faced with risk. That's why it's important to know our own risk tolerance, so we can choose investment instruments that match the returns based on our ability to take risks. To explore our risk tolerance, we can start from the following directions:
1. How much capacity do I have to invest?Competence here refers not only to the amount of money, but also the ability to understand and use investment tools.
For example, if the main market information for an investment instrument is primarily presented in English, do I have sufficient language skills to understand and analyze it? Or do I have enough time to observe and react if the market for an investment instrument changes rapidly? And so on.
In other words, competence is not only about how much money you can operate, but whether there is a way to use your knowledge and resources, operate and take the risk of investing tools.
2. How much risk can I take mentally?Even with almost no ability, some people are more adventurous and can take higher risks and losses, but some people are intolerant of minor losses. Therefore, it is very important to know your psychological tolerance for risk.This not only allows us to sleep soundly when the market fluctuates, but it also helps us make more rational and informed decisions.
3. “Rolling Assessment” in Investment ExperienceEven if we determine the level of risk we are suitable for taking according to the previous two directions, but the risk assessment is not completed once and is suitable for life, at different points in time, various aspects of our abilities or attitudes can change.
Therefore,We want to record and analyze our past investment experiences and results to better understand our current situation, and continually refine and optimize investment strategies that meet our needs and goals.
What investment goals and timetable do I want to achieve?
Investment objectives and completion times affect the amount of funds and the choice of investment instruments required, as well as rewards and risk tolerance. For example, if we want to maintain a pension, while we need a lot of money, but also have more time, we can choose investment instruments with lower rates of return, less risk, but stable; on the contrary, if we want to buy the next house within 5 years, we must seek higher rates of return. At the same time, there is a higher risk.In other words, investment objectives and short duration limit our investment strategy and risk tolerance and cannot be ignored when conducting risk assessments.
Step 2: Research the different investment instruments
After knowing yourself, the next step is to get to know the investment tools. In this section we have to pay attention to the following points.
Understand how investment tools work and how they work
If you want to invest in stocks, you should first understand what stocks are? What is the profit principle of stocks? How to get shares and more. Simply put, it is a matter of knowing the characteristics of each investment instrument and how we should access and use them.
Understand the three key elements of an investment instrument - Risk, Reward and Liquidity
In addition to knowing how each investment instrument works and how it works, we must evaluate the three aspects of each investment instrument - risk, reward and liquidity.
1. The meaning of the three main elements
Risk and reward should be familiar to us, and we often hear “the greater the risk, the higher the reward” indicates a positive relationship between them. Liquidity refers to the ability of an investment asset to convert quickly into cash. Highly liquid investments can convert assets into cash at any time, while low-liquidity investments can take additional time, handling fees, and other costs to materialize. For example, stocks are highly liquid investments, because they have a large trading demand on the exchange, so they can be sold at market prices and receive cash at any time; but if they are real estate, since they require finding buyers, signing, paying taxes and brokerage fees, etc., it may take months or years to do so. Selling, liquidity is lower.
2. The relationship between the three main elements
Liquidity and risk are more closely related. Highly liquid investment instruments that are easier to switch to cash when risk occurs, there is less risk of loss of funds, for example, stocks can be sold quickly to reduce losses; but on the contrary, low-liquidity investment instruments do not get out of hand quickly when at risk, loss of capital The risk is greater.
However, liquidity does not have an absolute relationship with remuneration. Real estate transactions can take weeks or months, and liquidity is not high, but many people still profit from the housing market, so low liquidity does not mean low returns.
Step 3: Find the right investment strategy for you
In the first step, we understand our risk tolerance; in the second step, we master the operation of various investment instruments, as well as the characteristics of risk, reward and liquidity. Now we can put this information together for investment planning! When planning, we first identify our risk preferences before adjusting our portfolio based on our asset usage. For example, if you find that you can take on higher risks after analysis, you might consider high-risk, high-return investment options such as cryptocurrencies or short-term stocks; but if you have an idle asset that you can hold for a long time, consider investing in low-risk, stable returns, such as real estate。 OF COURSE, WE CAN ALSO ADOPT A DIVERSIFIED INVESTMENT STRATEGY, THAT IS, BY DISTRIBUTING FUNDS INTO INVESTMENT INSTRUMENTS OF DIFFERENT TYPES AND LEVELS OF RISK, TO SPREAD RISK, INCREASE PORTFOLIO STABILITY AND RETURN. For beginners or beginners with less capital, we recommend starting with stable, low-threshold, easy-to-use investment tools such as deposits, funds, ETFs, etc. Until you have accumulated a certain amount of money and experience, try out other different types of investment tools and record these investment processes and results, and then use these experiences to gradually adjust to the investment strategy that suits you! But in any case, we should listen more and more to ensure that the information we receive is correct, and be sure to do our own research to really make a plan that fits our own.
epilogue
Investing is not a two or three day thing, so a sound investment plan is needed to make a steady profit from it. Follow the three steps in this article, and if you have a clear understanding of your risk tolerance and investment goals, and are familiar with the use of investment tools, you'll be sure to find an investment plan that works for you with confidence! I wish all of you reading this article to reach your expected investment goals early!
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