3 factors that determine your investment strategy

You may be wondering which investment strategy is right for you, but without knowing anything about you, any advice on which investments are right for you may, in fact, be wrong. Basically, there are three factors that determine which investments are right for you, they are:

1. Your age

2. Purpose of money

3. Your risk profile

Starting at your age. It would be pretty foolish of you to invest all your money in growth funds if you’re 65, because if the market goes into a tailspin, as it did during the stock market crash of 1987 and, to a lesser extent, the global financial crisis at the beginning than 2000 you have less time to recover from these setbacks while young people have time on their side.

The purpose of money is the second factor.

Decide if you need the money in the short, medium or long term.

In the short term it would be up to a year.

The medium term is from 1 to 5 years

Long term is more than five years

Short-term expenses would be, a bank account for emergencies, vacations within a year, dental expenses or paying the children’s school for a year.

In the medium term it would be savings for a car.

In the long run it would be your retirement fund, saving for a house deposit or saving for the trip of a lifetime.

Your risk profile is a determining factor in where you invest your money. If the thought of the stock market crashing is giving you sleepless nights, investing growth stocks in the stock market is not for you. A better option would be managed funds where you will be given a choice between growth, balanced and conservative funds.

It is important not to get into debt because the debt has a cost and it is the interest. Interest adds to the cost of goods purchased with borrowed money, and this adds up to a fortune over a lifetime of consumer goods loans. This is called a bad debt because the value of the item decreases over time.

There is good debt though, and this is your first home because the property values ​​go up over the life of the loan, but even this isn’t always a good fit for some people if they live sort of a transient lifestyle.

“Each to his own”, so only you know what moves you, so your personal circumstances are the determining factors that govern where to best invest your savings.

You should do your homework before investing in anything, be it the stock market, managed funds, or gold. There is so much information available on just about everything, and that includes finances. It’s just a matter of learning the ropes and having a financial strategy that suits your personal circumstances.