Depending on your level of experience, making an investing decision can be a time of uncertainty. After all, the choice that you end up making could have a big effect on the money you’re trying to earn for your future.
Even if you’re not putting in (or taking out) a large amount, you might still cause changes to the final outcome. That’s why you shouldn’t come to a conclusion on what you will or will not do without careful consideration.
Here are the things to consider before making any investment decision.
Your situation
Referring to your situation will help you understand which of the choices would increase your chances of having a good outcome.
Your goal will let you know if the decision may make it harder to reach the amount that you’re trying to earn.
From your time horizon, on the other hand, you can learn if that choice will make it necessary to stay invested for longer than you originally expected.
Meanwhile, your risk tolerance can help you see if the decision will require you to expose your money to more risk than you’d be comfortable with. Don’t forget to check your income and expenses, so you know the impact that choice would have on them.
How things work
Having a good knowledge of investing basics can keep you grounded no matter how your investment is doing. Of course, it also comes in handy when you’re about to make an investing decision.
When you know how things work, you’re more likely to figure out the next steps that are right for you. It would also allow you to avoid the unnecessary fear and confusion that can appear when you don’t understand what’s going on.
Further, this knowledge helps you stay away from emotional investing. This is what happens when you make investing decisions based on what you feel instead of just the facts. Needless to say, it almost never ends well.
The state of the market
You should also factor market conditions into your investing decisions, because they can do so much to affect how your portfolio is doing and may do in the future.
If, for example, the central bank is increasing the key rate to manage inflation, there’s a big chance that the stock market will tumble. That’s because fixed-income instruments issued by the government may attract investors with their substantial yields and lower volatility.
So, you should think twice before buying shares while that situation is ongoing.
Remember to also consider the market’s potential future as well, possibly through looking at how it responded to similar situations in the past. That way, you may get an idea of what is yet to come and use it as the basis for your investing decision.
Don’t forget that despite all your preparation and analysis, not every decision you make will deliver the result you expect. Similar to health-related concerns, it wouldn’t hurt to seek a second or even third opinion when it comes to your plan of attack.
The more insights you get, the better it is for you to make an informed investment decision. You’ll need to be able to move on when you stumble, and just learn from your experience.
