Good investment planning can turn your objectives from dreams into realities. How you allocate your money among different kinds of investments can have a greater effect on investment success than the individual investments you choose. So, your first step in investing toward your goals must to work out an asset allocation for your investments. Following are the two important factors to be taken care while going for an Investment planning.
Asset allocation is the process of deciding what percentage of your money to put in the different investment avenues such as: stocks, bonds, money market instruments, and other investments, like real estate. Your asset allocation may depend on your investment time frame, your savings goal, and how much risk you are willing to undertake to achieve that goal.
After you decide on an asset allocation, the next step is to diversify your risk by investing the money in different investment platforms. By putting your money in dissimilar investments, you can spread the risk. Rather than investing in one stock, you could invest in a variety of stocks. That way, if one stock performs poorly it will not affect the performance of the entire portfolio because it represents a smaller portion of your overall stock portfolio.
Before setting an asset allocation and diversify your investments, you need to know about the choices that are available for you such as;
While choosing investment avenues, potential return should be given key consideration. The higher your return, the quicker your investments will grow and the earlier you will attain your goal. But be conscious that the annual percentage returns and yields you see published in ads, prospectuses, and articles don't take into account inflation or taxes, two factors you must consider in your investment planning. And one more thing is that if higher the potential returns investment risk also will be higher.
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