Every individual or investor’s situation is different, and this leads to different investment choices. We need to first consider situations economically, socially, by age, and other factors. After we answer these questions we will be more able to answer the previous question: “What is a good investment?”
Firstly, we need to understand that investment brings a risk with it. There is never a 100 per cent guarantee that a profit will be the outcome from that investment. The second, is that the appropriate amount of risk taken is usually measured by age, amongst other factors. The usual chart states that individuals should hold a percentage of portfolio, which is dedicated to stocks, equity, or higher risk investments, equal to 100 minus their age. The remaining percentage of the portfolio should then be dedicated to lower risk instruments like bonds. One needs to understand that risk and potential profit go together; as one increases, so does the other one.
Investors start by giving an advice to find an advisor, that can analyse your situation and help you assess what the best portfolio distribution is with regards to your scenario, as well as helping you invest in the right instruments. The second advice is to keep in mind “long-term Viability”. It takes time to make money. One shall stay away from equity, or stocks if he doesn’t see himself owning them for at least ten years. They are most likely to give high return to an initial investment, but this will take a long time, and thus there will be a lot of volatility.
The third aspect of every good investment is the diversity of the portfolio, which is of the utmost importance. Even if you believe that an instrument will be extremely successful, do not invest in one area. Diversify between types of business, countries, industries, currencies, etc. Finding out that your portfolio, which was only investing in one type of instrument, is not doing well because of unforeseen circumstances is definitely not a nice situation.
When looking into an instrument investment, compare to similar ones in the market. For instance, when you are looking into buying an Apple stock, research everything about Apple, as well as comparing them to similar companies like Samsung, Huawei, Nokia, etc. This step is important because it can tell you whether the investment price is appropriate or not.
Something else that is worth looking into is whether the company is buying their own stocks. If a company does this, it is showing that they are confident in their equity, and nobody knows a company’s future better than themselves. At the same time, if a company buys their stock they can raise the stock price, as demand or supply ratio will be larger.
And lastly, but maybe the most important thing is to take into consideration your situation: do you have enough money to lock some away? Do you have any short-time obligations that may need that capital? Are you able to invest and leave the money locked for a long time? Investing is really rewarding, but you need to make sure we do it the right way, or it can get rough and painful.
Disclaimer: This article was issued by Bernardo Serrano Vazquez, Investment Management Support Officer at Calamatta Cuschieri. For more information visit, www.cc.com.mt. The information, view and opinions provided in this article is being provided solely for educational and informational purposes and should not be construed as investment advice, advice concerning particular investments or investment decisions, or tax or legal advice. Calamatta Cuschieri Investment Services Ltd has not verified and consequently neither warrants the accuracy nor the veracity of any information, views or opinions appearing on this website.