4 Ways To Become A Smart Investor

The average American has $17,135 in investments or savings. In fact, more than half of all households have some level of investments in the stock market, while a rapidly increasing percentage of people are getting into the real estate investment game. However, there is also an equal amount of people who are scared or reluctant to invest due to the risks that come with it. It is true: investing can be scary and risky. Yet it can also come with great rewards for your financial future. Being smart in investment revolves around being proactive and understanding where you stand. Whether you are a novice investor or a skilled investor, being a smart investor revolves around a few simple principles – like the use of investment trackers and understanding your investor persona.

Determine Your Risk Appetite

Your risk appetite or tolerance will play a significant part in your investment decisions, including the ventures you choose to invest in. Simply put, your risk tolerance refers to how much money you are willing to lose, or the amount of risk you are comfortable taking on in exchange for potential returns. If you’re unsure about where you stand with risk levels, speaking to a financial planner can help. There are also lots of resources and tools available online that can help you gauge your risk tolerance as an investor, such as this risk tolerance quiz from Rutgers University. A quick note: your risk appetite will change as your priorities do. Remember to regularly check in and adjust your investments as it does.

Work Out Your Investment Goals

Everyone has different investment goals, timelines, and investment knowledge. Before you begin investing, get to know your investment persona – think of your risk appetite, what you are looking for from investments, and the returns you would deem acceptable. Also, evaluate the level of your investment knowledge. If you’re new to investing, think of what is driving your investment decisions. Are you hoping to establish a passive income stream for retirement? Alternatively, are you investing to make a quick profit?

Pick The Right Tools To Monitor Your Investments

Investment tracking apps are a great inclusion to help you keep on top of your investments and follow the market. Being aware of the market trends is critical when investing, as it is ever-changing. Some of the trending investment tracking tools on the market include Personal Capital, eMoney Advisor, Morningstar, and Mint.com. Also, subscribing to stock newsletters can help you expand your investment knowledge and stay up to date on investment trends. Your choice of investment tools will also be influenced by your investment goals and investor persona. Based on an Everlasting Stocks review, the newsletter focuses on long-term and serious-minded investors who are interested in buying stocks to hold for years. If you want to be more casual about your investing, SoFi or Robo advisors could be a better option.

Plan Your Investments With Diversification In Mind

Whether you prefer to hold stocks and cryptocurrency or opt for real estate investment, every investment decision comes with risks – some higher than others. To balance the risk to your capital and increase your potential returns, always diversify your investment portfolio. Balance it out with high and low-risk investments in different industries. For instance, stocks are generally seen as higher-risk investments, while bonds are longer-term but more stable.

Keep an eye on upcoming industries to invest in, like renewable energy and alternative reality. While these are tipped as emerging industries for 2021, trends shift all the time, so you need to continuously track the trends and adjust your asset allocation accordingly. Asset allocation simply refers to how you divide your investment capital. Younger investors or those with higher risk appetites tend to put more towards high-risk investments like stocks in pursuit of higher returns.

Finally, keep updating your knowledge. Being successful in investments depends on your ability to continuously embrace the trends and shifts within the market. The market is always fluctuating, and you need to be ready to react to it if you want investments to play a positive role in your financial future.