Let us continue with this month’s discussion, though we’re starting the second part of it, Investment talk. Last two weeks we’ve discussed debt, the good and bad ones, and also how to increase our credit limit, now these next two weeks we talk about investment how to know where to invest and which investment best suits you.
But as usual, we start with a simple definition, shall we?
An investment is an asset or item acquired with the goal of generating income or appreciation. When an individual purchases a good as an investment, the intent is not to consume the good but rather to use it in the future to create wealth, this is the definition according to Investopedia.
Before you decide to invest there are some key questions that you need to ask yourself, answer them honestly then go ahead and evaluate the available investment options, this is key as it helps align your thoughts and desires, which will in the ensure that you’re not disappointed with the choice you make.
This week we’ll talk about the necessary questions to ask yourself, then next week we’ll talk about how to know where to invest to get the best-desired return.
Questions to ask:
Why do I want to invest? – this answers purpose
Do I want a long term investment or short term? – this answers terms of investment
How much return do I want? – this answers the type of risk to take, hence the type of investment to consider
For any investment to hold this pillar questions have to be clearly answered, you need to understand why it is that you want to invest this also enables you to make a long-lasting commitment with yourself to see through the investment to the actualization of the purpose, and one thing I can almost assure is, by the time you actualize that purpose you’ll have birthed another one and hence you’ll continue with the investment habit.
When undertaking an investment you need to clearly understand how long you’re willing to lock the funds that you want to invest, do you want to a lumpsum investment, or a start small and grow the amount with time, after how long do you access to the funds, this will mostly be guided by the first step, the purpose of the investment.
Then decide how much I want my capital investment to have grown by the time I’m either withdrawing or I want to access my amount that way you know what kind of risk you are willing to take, do you a high return-high risk type of investment, which means you’re willing to risk even losing your capital in the worst-case scenario while in best case scenario your capital can grow in multiples or do want a guaranteed return on your investment with a reasonable interest gain.
After you’ve answered all the above questions clearly now you’re ready for the final steps to your investment decision process then you can comfortably make an investment decision. This will be the basis of discussion next week make sure you check at the same time on Wednesday.
Take-home: Right down the questions above on a notebook and answer them, then carry that note to the meeting we will discuss next week.
Mbugua & Associates.