7 Guiding Principles You Must Know While Investing
One should start investing from an early age to allow money more time to weather the ups and downs of the financial markets and show real growth. If you haven’t started yet, now is the best time to think about it and act after creating a thoughtful and strategic investment plan.
When it comes to long-term investment planning and higher returns, one should focus on guiding principles instead of chasing for cheap tips and tricks.
So, today, we are sharing fundamental guiding principles that will pave your way to successful investing in Dubai.
Determine Your Goals and Create a Financial Plan
Your financial goal is the cue to what kind of investments will be beneficial for you. You can have any financial goal, such as savings for retirement, funds for the college education of your children, and buying a new home. Once you know what you want, get expert advice to create a financial plan to achieve your financial goals. Remember that people who have financial plans and stick with them can save several times higher than those who don’t.
Start Saving and Investing Right Away
There’s no better day than today when it comes to saving money. Since time plays the biggest role in how much wealth you will have by your retirement age or set timeline, you must start investing as early as possible. The earlier you start with your financial goal, saving, and investing, the longer you benefit from the magic of compounding. You can read more about compounding: the eight wonder of the world here.
Learn the Basics of Asset Allocation
In general, you should know about two types of investments: stocks and bonds. While stocks are considered high risk with high returns, bonds are more stable with lower returns. To diminish the risk exposure, divide your money between these two options and try to find the equilibrium between risk and stability. Your asset allocation depends on your age and lifestyle. For instance, you can take more risk on your investment portfolio while you are younger than in your 40s or 50s. There are many other types of investments such as commodities, cryptocurrencies, property, etc. One should seek consultation with a financial advisor on these more complex types of financial products.
Create a Portfolio for Diverse Investments Depending on Your Risk Tolerance
The investment market is volatile, and things can change even before you realize it. Smart investors take precautions by investing in at least two areas. Based on current savings and earning, determine how much risk you can take because the level of risk increases exponentially as the expected return increases.
If you are a low-income earner and planning to save money for your children’s education or stress-free retirement, you need to find what allocation of mix investments can keep possible risks down and stabilize your returns. However, if you are single and do not have any major debts to pay, your options can quickly change when it comes to diversifying your investment portfolio.
Build Protection against Crisis and Major Losses
While many businesses didn’t forget the global financial crisis of 2008, a large number of businesses and individuals faced a severe crisis due to the coronavirus pandemic. They are finding it extremely hard to recover from losses, especially because the majority of them had not any funds for backup. If your business or livelihood is also impacted by this crisis, you already know how difficult it is to manage and recover from such hard blows. In such scenarios, you can recover faster with ease when you hold cash, have defensive assets, and/or invest in money market instruments or securities.
Reassess and Balance Your Portfolio Regularly
As mentioned above, the investment market is subjected to volatility, and hence, the market keeps changing. Besides, life is also unpredictable which can eventually bring a change in your goals and risk tolerance. So, work with your financial planner in Dubai to keep your financial goals aligned with your diversified investment portfolio.
Follow the Buy and Hold Strategy and Ignore the Market Noise
The Buy and Hold Strategy is meant for investors who buy or invest in securities and schemes for a long time to achieve higher returns. Since your investment plan is a long-term saving plan, avoid knee-jerk reactions and ignore the noise. The investment market will always fluctuate for short-terms. So, you must stick to your plan and keep working towards your goals, unless there is a substantial change that transforms the whole scenario of the investment market.
New Age Insurance Brokers LLC is the leading insurance and investment consulting firm in Dubai that emerged at the time of the global financial crisis of 2008. Since then, we’ve helped numerous businesses and individuals gain a strong foothold with our best-in-class services and comprehensive support. We love to guide our clients and create reliable investment plans for a safer, better, and financially strong future. For any assistance with investment portfolio diversification, please feel free to contact us.