How to invest money wisely: 4 rules from financial expert
How to invest money correctly (photo: Freepik)
Investments are one of the best ways to grow your capital. However, there are significant risks of losing money. Therefore, before putting your funds anywhere, it is crucial to approach the matter wisely and consider many aspects. Financial expert Natalia Rudevich shares insights into the mistakes made by novice investors in her publication on Instagram.
Incorrect asset selection
It is not recommended to invest funds needed in a year or two in securities. Crises sometimes occur, causing stock prices to decline. It may take several months to several years for prices to recover.
"Therefore, if you need the funds soon, it's better to put them in a bank deposit. If you are investing for the long term (10 years or more), securities can provide a good return," explains the expert.
Inflationary risk
This occurs when the investment income does not cover inflation. For example, you invested 100,000 hryvnias. After a year, your investments have increased in value by 10%, now worth 110,000 hryvnias. If inflation during this period was 15%, the item that previously cost 100,000 hryvnias now costs 115,000 hryvnias, and your 110,000 hryvnias are not enough to buy it. In essence, you've lost 5,000 hryvnias. Therefore, it's important to choose instruments with a return higher than inflation.
Risks associated with financial intermediaries
"This can include bankruptcy, direct deception, high fees, and more. It's important to thoroughly study the track record of a particular broker. And most importantly, look at the size of the commission. If it's significant, it's worth considering," says Rudevich.
Risks associated with the country of investment placement
The financial expert advises against investing all your funds in securities of companies from one country, especially if it is not economically strong.
"In this country, there may be political destabilization or an economic downturn. This can lead to a fall in the securities market of that country, while economic growth may continue in other countries," says the expert.
