Before you invest, it’s essential to evaluate your present financial situation. This includes assessing your income, expenses and savings capacity to understand how much risk you can afford to take with your investments. It also determines how accessible, or liquid, you need your assets to be — which can influence the types of investments you choose.Source :theinvestorscentre.co.uk
The next step is to define your investment goals and objectives. These can be as simple as growing your savings to pay for retirement or as complex as creating a regular stream of income during your working years. Several investment options offer dividend payouts, steady income growth, tax* benefits and more. But each type of investment comes with different levels of risk.
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Your risk tolerance, which is how much you’re willing to lose in a given market cycle, will also play a role. Younger people, for example, may be able to handle more risk because they’re closer to retirement and have a longer time horizon. But if you’re already living on a fixed income or have other responsibilities, you may want to limit your exposure.
To help minimize risks, financial experts typically recommend diversification and a long-term investment strategy. Diversification spreads your money across stocks, bonds and other asset classes, so that if one investment performs poorly, others can make up the difference. It’s also important to diversify within those categories, as some stocks and bond funds can respond differently to market conditions.