When investing, at some or other stage you are going to ask yourself what type of returns you want and how long it will take to reap the rewards from your investment. Investing for huge profits can have splendid rewards but will also come with a large amount of risk. On the other hand, wanting to invest for security will mean less risk but also less reward.
There are so many variables when it comes to investment:
- How much money will I put down?
- What are the current financial or investment trends?
- Should I invest local or offshore?
- Which investment houses have a good reputation and who can I trust?
- What investment vehicle should I be using?
It is important to have a goal for your investment, a reason as to why you want the investment in the first place. The goal or desired outcome will have a large influence in terms of what your investment will be.
Here are a few examples of goals:
- I want to set up an education fund for my children;
- I want to make sure I have enough for when I retire;
- I have some spare cash lying around and want to make it work for me;
- My business is taking off and I want to set some money aside to cover for the bad times;
Your goal or reason for investing will determine the vehicle you make use of.
At this point it makes sense to consult about what investment vehicle you choose. Making use of a broker is never a bad option but also be sure to consult any family or friends who work in the financial profession, be they accountants, traders etc.
Having a sounding board will ensure that you are asked the right questions and then are able to make a more informed decision as to what you want to achieve and how you are going to get there.
In addition, you will also get a feel for what type of investor you are by understanding your risk profile. Do you like to take risks, or would you rather sit back and let your money accumulate over time? By speaking with a financial consultant, broker or specialist, you will be able to ascertain this.
Now that you have consulted and realized that you want to go large and investing for huge profits is your goal, you need to be aware of the pros and cons:
- By taking the risk your returns will be far greater than lower risk profiles;
- The more you invest, the larger your return will be;
- You do not have to tie your money in for too long to see a great return;
- If you catch the markets at a downward point, you stand to gain massively when it spikes up;
- Because you stand to gain a large return, you are also at risk of losing large;
- Your return is dependent on market sentiment and therefore at huge risk;
- If you get in at the wrong time, even if the market is low, then you may lose initially before you see any upturn;
Depending on your risk profile will depend on whether you will be investing for huge profits or not. At the end of the day, you want your money to work for you, not disappear before your very eyes.