Creating a smart attitude to your money requires you to research, think and act like an investor. Think of the greatest investors of our time – people like Warren Buffett didn’t get there by accident. They achieved their legendary status by being prudent with money and understand how to allocate assets and capital. The next step to sorting out your personal finances after getting out of debt is saving money for your short-term needs, long-term savings such as retirement and cash allocation for investing. Follow these tips on how you too can have the investor mentality:
- Assess your risk for capital: Risk is a critical feature in investing. You need to understand how much you can risk in your financial portfolio. If you are averse to risk, don’t invest all of your money because if you lose it all, you don’t have an insurance policy. Once you know what your tolerance for risk is, you can look at the available cash in your account and see how much you want to invest in mutual funds, interest-bearing savings accounts and other products.
- Know what you want to invest in: The types of investments that are available include cash, bonds, art and property. As an investor, you should know what type of investments you want and try for a balanced portfolio. When you allocate cash, choose by what you want to grow in the investment sense. People who believe in real estate should choose properties while investors who like liquidity should stick to cash.
- Always have money saved: Don’t use all of your cash for investing because if the investments don’t work out, you won’t have cash to fall back on and this might lead you to use high interest short term loan services.
Allocating cash for investment should come when you have paid down your debt and you have emergency savings. Start your journey as an investor with these tips.