Broker Check

Investment 101

March 05, 2019

Investment Management
Mar 5

Investment is the process of placing something valuable, expecting in return income or profit from the use of what you gave another party. This second party might be a company or an individual.

The valuable (in this case, money) you give out (spend) is called capital, and what you place your capital on becomes your portfolio.

A portfolio is a group of assets held by an individual. In other words, it is like putting your money into something so, as they say, your money grows more money. You should know that Investment is simply another way of saving.

Like all other saving methods, there are basic ideas you need to know.

“investment stables your future and provides you with more possibilities.”

The Importance Of Investment

Investment is important to everybody.


The easiest answer is: it helps you save your money.

However, unlike a traditional savings account, an investment portfolio allows your funds to grow beyond a fixed interest rate. In other words, the growth with an investment portfolio is technically limitless.

Therefore, investment stables your future and provides you with more possibilities.

Now, imagine investing at a very early stage. Say you just got out of college and started your first job. Would you rather think about how much you need to save up when you are only 5 years from retirement, or would you rather get prepared early on?

When you start early, it’s common sense that you can save up more.

All that you invested, along with your profits, will work out for you at moments when you don't have the strength to work. If you are also looking forward to getting out of debt, an investment can go a long way. With a little investment, you will be able to manage and get out of debt.

Start Your First Investment Portfolio

You might be wondering about how to go about this investment aspect of life. All you have to do is just follow some tips on how to benefit from an investment portfolio as a young person in generation Z.

Early investment

As a fresh graduate or a young person, it is obvious that you still have a long way to go. Investing your money early helps you plan better for the future. Most people invest in the latter part of their life, sometimes when approaching retirement age. Though they make some money the question is still the same, how long will the money made from their investment last them. Investing early helps secures the future for you. It helps you sustain yourself and your family all for a long period of time after retirement without much bother.

Invest with more capital

As a young graduate, you don't have much responsibility. No wife and children to worry about. This is the best time to invest largely. You should pump in more capital at this stage of your life but have to be careful. However, in case you want to be too careful, then you should invest the little amount you can afford. Invest it into a higher-risk portfolio, which can return higher profits to you.

Never put in all your capital

In case you want to invest largely, never make the mistake of investing all. You can invest 60 percent if the remaining 40 percent of what you earn is enough for you. People often make this mistake, forgetting what has an advantage also comes with disadvantages. Some over ambitious people put all that they have into investment telling you it worth the risk or that investment is all about taking risks. Yes, of course, it is all about taking risks. However, you should not take risks that will make you think of committing suicide or you suddenly get depressed. When investing, you should put in what you can spare, because sometimes things don't work according to plan. So before investing, have a proper plan and invest what you can spare, don't take unnecessary risks.

Begin with one of these objectives

1. Paying off debt

Yes, paying off debt. You might be wondering about this kind of investment. It is used for paying off your debt, increases the chances of saving more for the future. You might be thinking about why you should invest to pay off debt, but you should now that the earlier you pay your debt, the lesser the interest placed on it. To be on a safer side, it is necessary to start paying off your debt immediately you start earning something. If you have so many debts, you can start by paying off the smallest one then progressing forward. Owing debts, sometimes bring problems in the future. This advice is best for people whose debts require accumulating interests, the longer your debt, the larger your debt. You see paying off your debt is actually a way of investing too because the main reason for investing is to worry less about the future. Pay off your debts and secure your future.

2. Index fund

When we talk about investments, the best place to invest will be the stock market. Index funds are types of stocks that help you track the market and know what type of portfolio to invest in. Index funds also help beginners build a portfolio with a very low fee. Many just dive into the stock market without making inquiries on how things are done there, making them sometimes lose a huge sum of capital. Index funds are the best for beginners who are new to the market.

3. Property

Owning an apartment is not much of a bad idea for you as a young graduate. However, you must consider the fact that having your apartment warrants you to do certain things. Before you get an apartment, you should sit and calculate the costs of renting and owning yours. Sometimes renting an apartment is the best idea, because the cost of maintenance will be handled by another person. While owning your own apartment requires that costs will be handled by you, forcing you to spend more. Though at some point you will have to move to your apartment since you are still young, you can relax and settle for a rented apartment, and you can start investing for the future maintenance money. If you recall investing in large and affordable capital, this is the best way to start. After some time you can get your place, but by that time the profit would have accumulated.


Risk Tolerance - a word at the end.

As mentioned earlier, all financial decisions come with risks, and so does investment. Therefore, understanding your risk tolerance is critical to a building a sustainable and successful portfolio. When you begin the conversation with a financial advisor, make sure you are being honest with your financial reality.

Think about the following items:

  • What amount of debt do you have?
  • What are your nearest financial goals?
  • How much “emergency funds” is needed if anything were to happen to you?
  • How long do you plan on holding this investment portfolio before “cashing out?”
  • What are your life goals when it comes to relationships, starting a family, and building a legacy?
  • When do you want to retire?
  • What is your ideal retirement lifestyle?

All these are important questions to think about before building an investment portfolio because they can significantly affect your portfolio structure.

And most importantly, just remember:

Play it safe, stay informed, and make sure you are in good hands. Not all financial advisors are the same, and it’s important to find one that can share your vision and help you align with your goals and stay grounded.