While no single investment strategy is guaranteed to result in success, individuals can follow some simple steps to help achieve their goals.
The first step in any investment plan is to pick out objectives. A recent college graduate may be saving for retirement, while a person further along in their career may want to put money away for the college educations of their children or grandchildren, according to NewsCore.
The next task in investing is determining one’s risk tolerance. The factors that affect the risk tolerance of an investor are personal preference, investment horizon and the amount of capital available. A 22-year old college graduate planning for retirement will have a much longer time frame to work with than a sexagenarian who wants to retire within the next ten years. An investor working with a larger time frame could tolerate more risk than someone working with less time. Young investors need to be aware of the benefit that time is providing them. Their portfolios can suffer the fluctuations that the use of aggressive assets will entail. After waiting out the volatility, these investors might enjoy much higher returns than they would by using bond funds.
One crucial step in picking out a portfolio designed to meet one’s goals is diversification. Risk is inherent to investment, but diversifying one’s portfolio by including different asset classes or stock market sectors can help limit volatility.
One final consideration for investors is working with professionals. Even savvy professionals can benefit from getting another perspective on their plans.