We do not love to take risks. No one does. We want to gain without losing. This is how our brains work. You might have heard that investing can be risky. But not putting your money in the market is riskier. Investing is indeed a little risky. You can never eliminate the risk. So this article aims to help you invest at a minimum risk. Read these 5 tips to get started!
Having a minimum “investment intelligence” is the first step towards making an investment. Investment intelligence refers to some basic prior information that will help you in taking good investment decisions. By reading articles, blogs or consulting with your knowledgeable friend you can self-educate yourself. This will help you to invest without major taking risks.
Make small investments at the start
When you make your first investment, it is always advised to start small. As you make more investments, you gain more knowledge and hence make lesser risks. You can always increase your capital from the returns you get. But never make the mistake of borrowing millions to invest for your initial investments! Many people are left badly in debt because of this grave mistake!
Diversify your investments
By diversifying you investments to different areas, you are mitigating your risks. By spreading your risks, you are actually making lesser risk than you would have done if you would have invested in a single area! Diversification can be categorized into two types:
Inter-asset: Assets are invested in different industries. For example: investing a part of your money in stock market and the other part in real estates.
Intra-asset: Assets are invested in same class of industry. For example: investing in stocks of different companies.
Inter-asset diversification is generally more effective in reducing your risks since your investment is diversified in different industries. Even if one industry suffers loss, you will not face any major risks.
Don’t make investments emotionally
Humans are driven by emotions. But when it comes to making investments, emotionally driven investments can be the reason behind your downfall. For example: a close friend might ask you to invest in his business plan. You might agree in doing so, even if it doesn’t make your finances secure! Hence you should always chalk out your associated risks before making any investment and make decisions logically!
Invest in fixed annuities
This type of insurance contract pays the investor a fixed and guaranteed amount of interest. The best thing is that you don’t have to learn about the complex theories of stock market as you know that you will be getting that fixed amount as long as the company can sustain itself.
However hard you try, you can never eliminate risk. So you must be able to bear some amount of risk. By not being risk tolerant, you might end up with no investments and that might lead to a drain in your financial status. By following these simple guidelines, you will definitely be able to start investing without any major risks!