Investing – Tips To Optimize Your Returns

Why do people invest money? The general answer is to generate wealth.

But if that’s the case, why do so many people end up losing the money they invest? To answer to this question, you need to know one very well guarded secret that is the guiding principle for any type of investing.

The secret is – goal setting! You need to have a rock solid goal in place BEFORE you start investing.

 

The Importance of an Investing Goal

Most people ask, “How is a goal important here? You invest wherever it seems profitable and rake in the profits.”

It is not that simple. Unless you have a concrete goal in front of you, it won’t be possible to choose the right investment plan. Therefore, you may not be able to seek the proper advice or concentrate on the best performing investment plan.

When your goal is to enhance your retirement savings, you should seek advice on long-term investment plans that might seem riskier in the short terms and bring in assured larger gains in the long term.

Let’s say your goal is to save for your child’s college education. It’s important to seek out plans that will give returns in 5 – 10 years (depending on the age of the child when investing begins).

Perhaps the goal is to take a family vacation next year. This will require a separate type of investment. The investment will need to give high enough returns to sponsor your vacation within one year.

Each goal comes with its own parameters, which determine the type of investment you need to seek. Unless this goal is defined, your investment plans are chosen blindly, and therefore may not result in optimal returns. It’s essentially cheating yourself out of the best deal.

 

When NOT Investing Is The Better Option

There are two specific scenarios when NOT investing is actually profitable for you:

  1. When you have an outstanding loan

    Let’s suppose you get $5,000 by way of a bonus and want to invest it so that it will generate wealth for you. However, you’re repaying an outstanding loan of $7,000 at a 10% interest rate. Should you invest the money or repay the loan? Experts would advise you to repay the loan. Why? Realistically, if the money is invested in order to profit from it, it would have to earn more than 10% interest, which is rather unlikely. Hence, paying back the debt is the best way to “invest” the money, as it gives you the highest return.

  2. When you have little knowledge about investing

    Do not for one moment think that investing is, by default, a great way to multiply your money. Very often little knowledge or misconceptions about investing will actually cheat you out of your money instead of multiplying it. Unless you really know what you’re doing, always consult a professional before you invest. It simply makes sense to know all the options in order to rake in the highest returns before you invest your money.

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