Why You Need to Have a Solid Financial Foundation to Invest Correctly
Whether you are a working professional or an athlete, we often thank our coaches or mentors for guiding us in achieving our milestones or successes. No matter how good or knowledgeable we are in a particular industry, we won’t be able to make it without our mentor’s guidance in bringing out our best potential.
Most of us get used to receiving advice either from experts, professional gurus, or our family and friends. We often seek advice when we’re not familiar in a new journey we’re entering or when we’re having a hard time arriving at a decision.
While we acknowledge we need advice every now and then, it turns out that’s not the case when it comes to the financial world. If anything, most of us are hesitant to seek good financial advice when it comes to our investments.
Tackling our financial goals seems like a sensitive issue we’d rather not discuss with other people. But before you ditch the idea of not getting any financial advice, the financial experts suggest you think first. Here’s how having a good financial advice foundation can help you in managing your investments correctly.
The Complexity in Investments
One of the main reasons why most financial experts want their clients to have a good foundation for managing their finances is because of the complexity of investment products. Before, most investors only had to avail of traditional fixed deposit in banks if they want to invest their money.
You only have to know the return rate (which was incredibly high before) and the tenor of investment. You don’t need to get involved in the decision making. You can just relax and let the bank do the work for you and wait for your money to grow. Easy peasy, isn’t it?
Except, that’s not the case anymore 20 years down the line. Today, most fixed deposits only offer you less than a 1% return, and your money can barely grow in the bank. This forces most investors to find alternative ways of investments like bonds, forex, mutual funds, and equities. The problem with these investments is they cater to different asset allocations, credit qualities, cap ranges, tools, and methods to let your money grow.
There are higher risks associated with these long-term investments, which can make or break your finances. The same is true for new variants in mutual funds like balanced advantage funds and arbitrage funds. If you’re investing in equities, you also need to determine which companies perform well to start investing. Aside from that, you need to compute how much shares you can keep investing based on the price per share.
Since most investments nowadays have risks, you need to be wiser when it comes to decision-making in your investments. Most financial experts note how investors panicked when the stock market goes down, causing them to go into panic selling since they think they’ve lost more money. While this is true, the financial experts claim it’s only “paper loss” and you can still recover from it if you keep holding onto your investments.
This scenario, along with other mistakes such as following the trend, is just one of the few mistakes you can commit if you don’t have a good financial foundation. What’s worse, it may even cost you to lose more money when you commit these mistakes!
According to financial experts, most investors get swayed by what they hear on the news easily. For example, they are interested in real-estate investments because everyone is doing it, or they know it has huge potential returns. While hearing stories from past investors how they skyrocketed their investments in 2007, but later on redeemed at the bottom in 2008 after the recession.
Or, how they missed investing in the bull market in 2013. Having a good financial advisor can help you step back from these hurdles and lets you focus on investing as you achieve your financial goals.
A Life-long Journey
Last but not the least, the financial experts say that investment isn’t done by just having a single transaction. Our investment begins in the early 20s, usually when we start working up until the golden years of our retirement.
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