Investing is one of the most popular methods for employees to build wealth or earn extra income. Ideally investing should be adopted by those who can afford it because investments can bring lucrative returns.
However, how and where do you start? Just like in business, investments also require initial capital. The capital normally corresponds to the chosen investment option. Rest assured there is no correct answer for how much is sufficient capital for investment.
If you’re interested in the property market, a comfortable initial capital would be 20% to 30% of a property’s price. You can then pay the minimum 10% down payment and use the balance of the capital to renovate and/or furnish the unit. A housing loan can take care of the remaining 90% of the property’s price. This amount is not a must as some people even make do with just the minimal 10% and others put in more to reduce the loan tenure.
For most employees, the biggest obstacle is building up the capital. Well, different people will apply different strategies but the most secure and conservative option is regular and consistent savings. However, always remember that savings for investments should be distinct from savings for emergency funds and other expenses. It should be money that you put aside for some time before you can actually enjoy the returns.
Other than capital, you must be well educated about the available investment tools so that you can obtain the best returns. You would be able to understand the overall investment opportunities lying ahead. Say, if you are interested in stocks, it’s important to know the relevant rules and regulations as well as applicable ratios.
It’s an advantage if you beware of the risk factors, have an idea of how the market operates generally and the factors that influence share prices. Investors with sound knowledge of their preferred investment tool are also less likely to be affected by inaccurate information or rumors. Many believe that investing in shares is the best vehicle to become wealthy but beware; due to its volatility, this option is more suitable to those with high risk appetites.
Property, on the other hand, is one area in which investors need to really work out their finances before making investment decisions. Property is not as liquid as stocks and bonds, thus when purchasing property for investment, make sure the returns exceed the loan repayment amount. If the rental return is way below the loan repayment sum, then you can’t enjoy a good return.
So how do you tell which investment matches you and your objectives best? By and large, people choose to invest in a certain sector because they are knowledgeable in it or it matches their risk profile and required rate of return. Some people also decide to invest in a particular plan based on professional advice.
When you have the investment capital, it’s advisable to find the right professional to assist you with sound advice like where to invest, the risks involved, the buying and selling procedures and what suits you best.