The word “investment” conjures up fear in the minds of lots of people. It raises images of the 2008 financial crash, for example, and can even lead to people thinking about homelessness, bankruptcy and more. But the risk of problems shouldn’t put you off altogether. It’s possible to approach risk in a systematic way and to use sensible risk management methods to give your cash the best possible chance of working in your favour. This article will explore how to reduce the chances that your investment project won’t work out.
Use time to your advantage
With many investments, the key advantage you’ll need on your side is time. There’s no such thing as a fully secure investment, of course – even with ones which have a long, multi-decade timeframe. But many Australian investment markets have shown themselves to recover even after significant falls. In the foreign exchange markets, for example, the Australian dollar regularly sees rises and falls of a fifth of a percentage point or more. If you’re able to hold off cashing in your investment for a while, it’s possible that time will heal any wounds and reduce your losses.
Do your research – with experts
If you’ve got a cash amount to invest, you also need to speak to a financial advisor who can point you in the direction of products which suit your risk appetite, your timeframe needs and more. In the modern age, some people choose to find out this sort of information on the Internet or elsewhere – but while this is helpful as a starting point, it’s not necessarily always accurate. That is why choosing a financial advisor regulated by the Australian Securities and Investments Commission is a good move.
Diversify all over
Putting all of your eggs in one basket as an investor is rarely a good idea. Concentrating all of your cash on the stock market, say, could lead to high returns, but if the market crashes then your capital could be wiped out. That means diversification, or spreading your cash around different investment options, is a great idea in order reduce the risk that exposure to markets like these can bring.
Consider, for example, investing some cash in currencies. You’ll have to pair your chosen currency (the Australian dollar, perhaps) with another and then speculate on which will perform best, but it can be done with a bit of research. Or if you learn the basics about CFDs, you can discover how these innovative new assets are bringing the power of leverage to even the average retail investor. In short, there are lots of diversification options available!
Investing can sometimes seems like a risky or difficult task, but it doesn’t have to be. On the contrary, it’s possible to approach investment by taking time into account and ensuring that you have a diversified portfolio in place. And by doing your research, you can make sure you’ve got knowledge on your side – and hopefully use it to create a lucrative portfolio further down the line.
