Investment is a great way to make money. However, investing money requires planning and purpose. Bill Schantz strongly believes if you invest without a clear objective, it can lead to an unstable financial future. Therefore, one needs to be mindful before investing.
One crucial point to note is that investing should never risk the roof over your head or the clothes off your back. It should not come from your budget for paying the bills or mortgage. You need to invest any surplus income minus all necessary expenditures. To determine this, you need to know exactly how much you are earning, where you are spending this money, and what is left.
In this article, Bill Schantz discusses some important tips to consider before embarking upon an investment.
Draw a Financial Roadmap
Before investing, analyze your entire financial situation. Draw out a financial roadmap that assesses your goals and risk tolerance. You don’t have a sure shot guarantee your investment will make money. But with, intelligent planning and investments can enable you to gain financial security in the long run. You also need to know what you are investing and how much money you need to achieve that goal.
Evaluate the Risks and Your Comfort Zone
Before investing, know the risks involved. If investing in mutual funds, stocks or bonds, proceed with the understanding that you could lose some or all of your money. Decide if you want to tolerate this risk. Also, make sure you don’t invest in something riskier than your tolerance level. Also, evaluate the time horizon of the investment about your financial goal. Figure out if you have a short-term financial goal, midterm or long-term.
Be Efficient with Taxes
You will likely start with a small amount when you begin investing and think tax efficiency is not an issue. Bill Schantz assures that you will start aligning a long-term strategy as you get accustomed to investing. This is when tax efficiency comes into play. In the future, you will want more value for your investment. For example, you might begin investing for your retirement, and by the time you retire, you might have piled up a large sum. So, if you have not invested in a tax-efficient program, you might have to pay a large chunk of your retirement sum. So, it’s best to start being tax efficient from the start.
Have a Diverse Portfolio
Bill Schantz asserts the more diverse your investment portfolio is, the more stable it is. This is because different markets rise and fall over an economic cycle. Investing in different assets and sectors can maximize your long-term returns and reduce potential losses. Investing in a single market or sector can expose you to issues in one area.
Pay off All Credit Card Debt
Before you begin an investment, Bill Schantz advises that you make sure all your high-interest credit card debts have been paid off. No matter the market condition, paying off the balance as quickly as possible is in your best interest.
Bill Schantz’s Final Word
Investing your money and making it grow is a great financial step. However, investing with a clear goal and plan can be detrimental to your finances. So, before you begin investing, take some time and figure out why you are investing, who you are investing for, and your risk tolerance.