Deciding on the Best Investment Planning Strategy
Usually, when people think about investing, they usually think of stocks, bonds or even gold. While that is a good first step, you have to remember that investing is really a comparative exercise. Investing does not focus so much on the investment class on the things that you are investing in so much as what you are investing for. You have to keep that in mind. You can invest in all sorts of things, from businesses to lending, to personal lending, to real estate and so forth. There is so many different ways to invest. There are so many different forms of investments. In fact, if you really think about it broadly enough the only limit to the investment opportunities you have in front of you is the law and your imagination. Think about that for a second. This is why it is very important to focus on strategy instead of being all too caught up into these investment forms. It is too easy to get caught up in the specific form of the investment along with its advantages and disadvantages and fail to see the larger picture. Your key investment strategy, before you start looking into some strategies and other issues related to your overall investing objectives, is return on investment. Every investor should focus on return of investment, and every investor should have a clear idea as to what ROI means. Return on investment really can be reduced into a very simple statement. To get as much money for as little money invested as possible. In other words, how much money can you get for every dollar that you invest in a particular investment opportunity. That must be your overarching goal, which must be your overarching strategy. Otherwise, you do not have a strategy. If you are unclear as to what return on investment is, you are just basically playing the investment game to loose. Moreover, you are going to be in a position where scammers and fraudsters will take advantage of you. Any smart investor must have ROI down solidly. You must understand it thoroughly. Otherwise, you are going to be playing the investing game to loose. Here are some things to keep in mind when putting together an investment planning strategy.
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Who Knows What Is Best?
If you look at picking out your investment strategy in terms of what is the best investment “strategy”, you are setting yourself up to be ripped off. Seriously. Who are the people that constantly use the word “the best”? Let me give you a hint. They are people who mostly do not have your best interest at heart. These are people who are trying to sell stuff to you. These are people who are trying to get you to invest in things. These are people who are basically trying to get money out of you. People who are selling stuff on TV, on the internet, they always keep on saying the word best, best, best. The problem is, the best is such a slippery word. It is a weasel word. What is best to you might not necessarily be the best for somebody else. In fact, it can be a downright disaster for another person. The whole point of even approaching the whole concept of what is the best investment planning strategy should focus on objective standards. What is the best objective standard most people can agree on? Once again, we are talking about ROI. When you are considering what is the best investment planning strategy for you, you must go back to return on investment. Otherwise, you are setting yourself up for failure. You worked so hard for your money, do not let your failure to plan be the cause of you losing all that time, effort and resources put into generating that much cash.
What Are Your Objectives?
Depending on your age, your objectives will change. If you are a person who is finally sitting down at age fifty to determine your investment objectives, those objectives are guaranteed to be much different from somebody who is eighteen or twenty-two years old. That is just the reality. You do not have much time left. However, if you are a person who just got out of college or just finished graduate school, your investment objectives will be a bit different. Why? You have a lot more time. If you have a lot of time, you can take a lot more risks. When you can take a lot more risks, you can get a bigger return on your investments. Now, that is just the fact of life. However, if you are fifty or fifty-five years old then you are sitting down for an investment planning strategy. The top priority on your mind should not be making a hundred percent return on the stock market, instead, your top priority should be how you preserve the assets that you have now so you can stretch them out when you reach your golden years. Retirement can be merciless to people who fail to plan. You do not want to just rely on Social Security. You just do not want to rely on government benefits. They might not stretch far enough, especially if you have grown accustomed to a certain standard of living.
Evaluate Your Financial Situation
A key stage in investment planning strategy, in putting together a sound investment planning strategy, is that you have to be realistic. You have to look at what you have, instead of what you wish things were. If you are always looking at how things should be, chances are the investment planning strategy that you are working on is going to be flawed. It is not going to do its job. It is not going to work. You have to be realistic. You have to look at what you already have in your hand, and what you expect to get fairly soon, with a high degree of certainty. If you base your investment planning strategy on pie in the sky projection, or things that could be, you might be putting yourself in a bad financial straits later on. This is precisely the opposite of what you want to achieve when you thought of coming up with the best investment planning strategy in the first place.
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Another Key Rule, Diversify
Before you even wrap you mind around your investment options and the different classes of investments out there, you should focus on diversification. You must commit yourself to diversifying your investment. The logic behind diversification is fairly straight forward. Not all your investments will go up like a straight line. Some of your investments will be flat, other investments will actually crash and burn. The key with diversification is that you would have more winners than losers so that winners would basically take the sting out of the losses you suffered from investing in losers. Regardless of what you do with investment planning you have to factor in diversification. This is a basic step and it is non-negotiable.
Be Familiar With Your Options
At this stage of coming up with the best investment planning strategy, you should really figure out all the investment options available on the market. Weigh them based on the advantages and disadvantages. Weigh them based on their risks. Once you have all these information, you can then start making an informed decision as long as you focus on ROI.