When investing for your future, it’s vital you plan and understand what’s involved in building an investment portfolio for your finances. Investing can be a minefield where your blood pressure rises with a falling market. Luckily, if you know a few tricks of the trade, investing can be a lot less daunting. Homeowners looking to invest in real estate can avoid stress and worry by keeping these considerations in mind.
Prior to any investing decision, you should evaluate your financial situation fully and research other options as well. While you may know you want to invest in the future, you might not be sure about all your options, or what’s best for your situation. Real estate should be a good option for most investors, but you should think about what kind of investor you’ll be. Ask yourself candid questions about your intentions. Will you rent the property long-term? Are you going to upgrade and sell? Will you diversify into other areas of investing?
While you’re evaluating the type of investments you want to make, you can meet with a financial services company to discuss options. This professional will help you evaluate options and discuss alternatives you might not have considered.
Risks and Comfort Zones
Any investment comes with a bit of risk. Securities like stocks, mutual funds, or bonds are not guaranteed income down the road. Real estate isn’t always without risk either. There are many situations where something can go wrong. The rewards are great if you succeed with your investments, but you should be aware of your comfort zone as well as where you’d like to take risks.
Mix of Investments
When you invest in a few different revenue streams, you’re less likely to suffer a devastating loss. It reduces your risk when you can offset a loss in one category with a win in another. Allocating assets in a variety of areas can help you save for your long-term goals whether that’s retirement or a child’s college fund.
When you have the opportunity to invest in your employer’s company, you might consider that a fantastic investment with no risk. But investing in one company or stock always has risks. Never put all your money in one stock, even if you believe highly in the company. If your company goes out of business, you’d be losing your job as well as all your money.
While you want to invest your money to see a return, it’s a good idea to have an emergency fund available in case there’s an unforeseen issue with a real estate purchase or you lose your job. It’s important to have at least 6 months’ worth of savings before thinking about investing.
Credit Card Debt
Paying off your high interest credit cards can instantly give you more money. Before investing in a home or stocks, pay off those credit cards. Once the cards are paid, you’ll have extra money to start your investment portfolio.
One of the best investments you can make is with an employer’s retirement plan. The employer will often match amounts you invest in the fund. If you’re not taking advantage of this perk from your employer, you’re giving away free money.
Dollar Cost Averaging
To avoid some risks when diversifying your portfolio, you can increase the average amount you’re investing into each category over time. Regular investments over time mean you’re following a consistent pattern. You’ll be buying less when the prices are high and more when the prices are low. It’ll eventually even out and be less of a risk.
Investing in your portfolio, whether it’s real estate or stocks and bonds, means that you’ll need a good plan at the start. Draw up a financial roadmap and meet with a professional financial services company to help you make smart decisions.
About the author: Eileen O’Shanassy is a freelance writer and blogger based out of Flagstaff, AZ. She writes on a variety of topics and loves to research and write. She enjoys baking, biking, and kayaking. Check out her Twitter @eileenoshanassy. For more information on investing in real estate be sure to talk to professional investors.