One of the biggest investment mistakes that many people make is to choose something that doesn’t suit their personality. Doing this increases your chances of getting it wrong and losing money.
Before diving into any investment, careful research and due diligence are essential. And with that, investors generally spend weeks to months researching the best investments on the market. They also take their time knowing which investments are volatile, what’s the advice of the best inventors and financial advisors, which investments offer low risks and high rewards, and the like. And while those steps are necessary, you shouldn’t overlook not getting to know yourself. This is because the most vital part of investment planning is knowing your relationship with money.
How you spend and manage money can say a lot about your investment personality. For instance, if you’re a financially adventurous person with extra money to spare for other wants and luxury and investments, a high-risk investment like cryptocurrency can be an option worth exploring. Meanwhile, if you’re a conservative person who strictly sticks to a budget, starting with low-risk investments resonates more with your money personality.
Yet, by taking a few minutes to consider what kind of wealth archetypes and investment suits you best, it should be possible to make a smart move that makes sense.
Nice and Easy or Complex
Perhaps the first question to ask yourself is how easy or complex you want this investment to be. Naturally, this comes down to how much you can dedicate to it as well as to your own personal taste in the matter.
Do you want something that requires very little of your time? Some kinds of investments are very simple and will take up next to none of your time like check Stash and you can earn while you spend. Others can turn into a time-consuming hobby that almost feels like a part-time job.
Perhaps you would like to go in-depth and really sink your teeth into your new investment with a lot of time and research. In this case, world-famous investor Warren Buffet recommends reading 500 pages of research on the markets each day.
No Risks Involved
Do you want the chance to grow your money with as little risk as possible? This is a common strategy for people who are close to retirement age, as well as those who are naturally averse to taking chances. Furthermore, such investments with low risks and rewards may also be recommended for beginners. Since you’re only starting with the basics of investing, you’d want the most financial cushion possible, so you won’t lose a lot of money from making any beginner mistakes.
Typical low-risk investment approaches include bank saving accounts, Government bonds, pension funds and money market funds. Property is also generally seen as a low-risk investment in the long-term, although, it may fluctuate wildly in the short-term and requires some hard work.
You are unlikely to make a fortune with most of these methods, but you will earn steadily while keeping your capital nice and safe at all times. If you want to keep your money out of harm’s way and don’t mind modest returns, then these approaches might be right for you.
Bold and Thrilling
There is no denying that it can be tempting to consider higher risk investments. These are the ways of attempting to turn your initial sum into a far higher amount while taking a few chances with it.
This can be done by buying shares, investing in hedge funds or buying cryptocurrencies. These are all ways of potentially earning huge amounts of profits if you are comfortable running the risk of losing the money that you put in.
A good example of a high-risk investment that can bring huge rewards is with Forex. While no investment is guaranteed when Forex trading, many investors turn in impressive profits by taking this risk.
Does Your Current Situation Allow You to Follow Your Personality?
As we have seen, there are different kinds of investment for each personality. Yet, your final choice won’t just come down to whether or not you like the idea of a certain way of investing.
Instead, you will also need to take into account whether your current financial situation allows you to follow the approach that you like. For instance, maybe you love the idea of trading on the markets but currently have too many commitments to give it a try.
By taking some time to think about your preferences and your situation, it should be possible to make the right choice for your future as well as for your present. You may find the ideal solution lies in diversifying, with both high and low-risk investments in your portfolio.
This article is for information and educational purposes only and does not form a recommendation to invest or otherwise. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.