Building a portfolio of quality investments is one of the best ways to help you get ahead financially and achieve your long term financial goals. If you are wondering what investment is all about, here is everything you need to know about investments and how you can get started to be able to make the right financial decisions.
People mistakenly think of saving as investing. While these two often go hand in hand, they work differently. Investing money is more than building rainy day savings.
Saving is a practical way to set aside money for use in the future. The saved amount of money is subject to no risk and, therefore, does not help you earn any profits or returns. However, it can also be considered as a sensible starting point in investing since it provides funds that can be used to purchase a range of different assets.
Investing goes beyond this.
What is investment?
Investment is an act of allocating your money with the intention of allowing it to grow in value over time. This can be done by starting a business or purchasing a property to invest with the hope to resell it at a higher price to make a profit.
The money obtained from investment can be used for a variety of purposes such as meeting shortages in income, saving up for retirement, or fulfilling specific obligations such as repayment of loans, payment of tuition fees, or purchase of other assets.
Investment may generate income for you in two ways - if you invest in a saleable asset, you may earn income through profit and if you invest in a return generating plan, then you will earn an income through accumulation of gains.
What are the investment categories?
1. Ownership Investments
Ownership investments pertain to assets that are purchased and owned by the investor. Stocks, business funding, and real estate properties like condominiums are some of the assets that fall under this category.
2. Lending Investments
When you invest in lending instruments, you are somehow behaving like the bank. Corporate bonds, government bonds, and even savings accounts fall under lending investments.
The money you put into a savings account is basically a loan that you give the bank. This money is used by the bank to fund the loans it gives out to its clients.
3. Cash Equivalents
Investments like money market instruments are highly liquid and can easily be converted into cash. Cash equivalents typically generate low returns but the risk associated with them is also negligible.
Why should you invest?
You may be wondering why people nowadays give so much importance to investment, when they can work towards saving more from their earnings instead. But come to think of it, taking a portion of your income and saving it each month will only create a reserve fund, which may be inadequate in covering your family against an emergency.
While saving means setting aside part of today’s money for the future, investing means putting your money to work to potentially earn a better return over time. Investing your money will lead to wealth generation and life goal achievement.
There is a potential to earn capital growth over the longer term as well as an ongoing income return like dividends from shares or rent from a property.
Investment can also help beat inflation. Inflation is the ongoing rise in the cost of living over time, which can also impact one’s financial wellbeing.
One way to help beat inflation and generate positive returns over time is by investing in assets that are not just capable of delivering higher income returns but also offer the potential for capital growth.
Another benefit of investing is the opportunity to earn additional income if you invest in quality assets. The return on your investments might be used as a source of passive income or you may also choose to reinvest the money to grow your wealth.
When should you invest?
A lot of people waste many years of their life thinking about investment and how beneficial it is. Many hesitate to invest because of the risks involved. But there are also risk-free investments or those with low to moderate risk that can be considered.
It is best to start young - learn and understand what investment is and start early, experiment with different investment instruments, and leverage on those. Investing early will also give you the compounding benefits that would help you grow your money.
With more years ahead, you can grow your money longer and reap maximum benefits on your investments.
How should you invest?
Now that you have a brief understanding of investment, the next important thing is to understand how to invest. Here are a few tips to help you get started in investing.
1. Check your financial needs
Before you start investing, you should first check your financial situation, investment objective, as well as your risk tolerance. Seeking advice from a financial professional may also help you determine the best investment options for you. He/she may also help in clarifying any of your doubts or misperceptions on investments.
2. Diversity your investment portfolio
Build a diversified financial portfolio by putting your funds in different instruments to be able to maintain the right balance between risk and returns.
Having a well-diversified portfolio combined with an investment horizon over five years can help you weather most storms. You can diversify your portfolio through a number of ways: spreading your wealth by investing in a handful of companies that you know, trust and even use in your day-to-day life; adding index funds or fixed-income funds to your mix; adding to your investments on a regular basis; and being up to date with your investments, staying abreast of any changes in the market condition, and knowing when to get out.
3. Consider the time period
You should also consider the time period when investing. You have to know what time you have before turning your investments into cash. Depending on your requirements, you may choose between short-term or long-term funds.
4. Reassess your investments periodically
Since funds are influenced by market forces, it is important that you closely monitor your investments periodically. You may also consider readjusting your investments if your portfolio is not generating good returns.
You might probably be asking yourself now as to where you should best invest your money. One of the most stable and secure investment options in the country is real estate.
Real estate investment can be exciting and lucrative, but it takes practice and a lot of money.
There are also a number of options when it comes to real estate, so you will also need to think through which investment would be best for you before making the big decision. You can start by checking out some popular property listing sites such as AllProperties, Lamudi, and Dot Property.
If you want to know more about real estate investing or if you are keen on purchasing a condominium as your first investment, you may check out Vista Residences.
For first-time investors or those looking for an entry-level investment, condos are a great way to start. Investing in a condo can yield high returns if done right. You just have to choose the right location, know the market conditions, and choose a trusted developer.
Vista Residences is the condominium arm of the country’s largest homebuilder, Vista Land & Lifescapes, Inc., which offers ready for occupancy and pre selling condominium projects in Manila and Quezon City that are strategically located within inner-city areas, in close proximity to premium universities and developed business districts.
Vista Residences is part of Vista Land’s roster of vertical housing brands that cater to millennials and young professionals. The other vertical brands include Camella Manors, COHO, and Crown Asia.
For more information on Vista Residences, email [email protected], follow @VistaResidencesOfficial on Facebook, Twitter, Instagram, and YouTube, or call the Marketing Office at 0999 886 4262 / 0917 582 5167.