Investment Thinking - 5 Points
1. Understanding your risk profile
Know your risk appetitie for investments, are you conservative (hope not to loose money), balanced (can lose some money) or aggressive (can lose majority of your money)? Shares and investment funds are risky but can lead to quicker returns. Bonds and fixed deposits are comparatively safer but have low returns. Do a risk profile. However, risk profiling does not consider your ability to take risks or risk capacity. If you have a lot of debts, you are unable to take high risk no matter how 'aggressive' you are as an investor. Risk capacity indicates one does not need to do high risk investments because he or she may be close to meeting their financial goals. Do know how much returns is good for you and do not invest beyond your risk appetite or risk capacity.
2. Do dilligently review your investments
Review your investments and read the fine print on an investment contract. Avoid contracts that say you may loose your 'shirt and shorts' (in the fine print).
3. Not all debts are really bad
Debt is only good when one can use it to earn a return higher than the debt interest. Debt is good for housing, and education to be a better person of a higher value. Debt is not good for consumption like cars. Debt servicing ratio should not be more than 35% of disposable income. If you earn $1000, do not pay more than $350 to service the debts.
4. Cut your investment losses
Do cut your losses on your investments. Do not hang on. Just admit your mistakes. Start anew and rebalance your investment portfolio.
5. Know your insurance
Do know your insurance policies. Health insurance is important to all people. It is good to have money to buy things, but it is much better to check up once in a while and make sure you have not lost the things money cannot buy.
Know your risk appetitie for investments, are you conservative (hope not to loose money), balanced (can lose some money) or aggressive (can lose majority of your money)? Shares and investment funds are risky but can lead to quicker returns. Bonds and fixed deposits are comparatively safer but have low returns. Do a risk profile. However, risk profiling does not consider your ability to take risks or risk capacity. If you have a lot of debts, you are unable to take high risk no matter how 'aggressive' you are as an investor. Risk capacity indicates one does not need to do high risk investments because he or she may be close to meeting their financial goals. Do know how much returns is good for you and do not invest beyond your risk appetite or risk capacity.
2. Do dilligently review your investments
Review your investments and read the fine print on an investment contract. Avoid contracts that say you may loose your 'shirt and shorts' (in the fine print).
3. Not all debts are really bad
Debt is only good when one can use it to earn a return higher than the debt interest. Debt is good for housing, and education to be a better person of a higher value. Debt is not good for consumption like cars. Debt servicing ratio should not be more than 35% of disposable income. If you earn $1000, do not pay more than $350 to service the debts.
4. Cut your investment losses
Do cut your losses on your investments. Do not hang on. Just admit your mistakes. Start anew and rebalance your investment portfolio.
5. Know your insurance
Do know your insurance policies. Health insurance is important to all people. It is good to have money to buy things, but it is much better to check up once in a while and make sure you have not lost the things money cannot buy.
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