When the market is performing poorly, inexperienced investors become weary of the financial markets, and rightly so. Having the proper financial knowledge at your fingertips separates a speculator from an investor.
Investing is a gamble
if you need to know what you’re doing.
Not only do you need extensive knowledge and experience, but you also need time and a lot of it.
But let us go back to the original question,
Why Should You Invest Your Money in Today’s Market
The first and most obvious point is it’s your best chance of beating inflation. Inflation erodes the absolute value of the money you have sat in your bank account; take Italy, for example; current inflation figures show 9.4%, long term interest rates in Italy currently sit at 4.14% (at the time of writing) according to the European Central Bank.
That means leaving your hard-earned money in the bank will decrease in value by over 5% each year. Now that doesn’t mean you should take all your money out of the bank; you need readily available funds to pay liabilities in case of emergencies. However, investing a proportion of your income can be a step to building wealth for the future.
Beyond preserving wealth, the main incentive that leads individuals to invest money is to generate wealth. With the right portfolio or investment product, you can provide yourself with passive income. This can grow your retirement savings or pay for monthly groceries.
The fundamental principle is that your money is working for you. If we look at the S&P 500 index, despite dropping by almost 20% over the last year, it is still 46% higher than it was five years ago. Patience is the name of the game.
Best To Invest?
So how do you go about investing? What products are the best to invest in? These are two questions you may be thinking about. Unfortunately, the answer isn’t always black and white, so the first action is to speak to a professional. Find out what products are a good fit for you by speaking to an advisor and investing under solid advice.
Suppose you choose to allocate some of your earnings to an investment portfolio. In that case, it’s essential to diversify your investment as much as possible so that a better-performing section of your portfolio will compensate you if one security performs poorly.
Achieving adequate diversification as a single investor is almost impossible; it requires a much more significant investment spread across selected securities.
To keep your investment as low risk as necessary, a collectivized investment scheme is usually most effective; it allows you to become part of a bigger pot, managed by an experienced and qualified professional, and gain access to assets you would not have been able to otherwise, there for achieving diversification.
An investment portfolio is a personal venture; everyone is different. Therefore you should tailor it to fit your financial requirements and attitude to investing. This can include the accessibility of your money once supported, transferability or the level of risk you want to take in pursuit of growth.
It doesn’t just have to be a managed fund either; some investors prefer a fixed-term lump sum investment that can return a regular coupon payment with downside protection; these specialist products can be a welcome alternative when markets are down.
Qualities Of a Professional Investment Manager
A good investment manager will always keep you updated on how your investment is performing, which is why Fremont Management sends regular reports regarding your portfolio. Any changes or adjustments are highlighted, so you feel in control of your money.
Remember, investments go up and down, so it’s vital to allocate your funds accordingly. Have readily available cash in emergencies, and don’t put all your eggs in one basket.
If you want to talk more about this, I’m always happy to have a short call to answer any questions. Please email me with any inquiries.