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Investing for newcomers: useful things to know

Perhaps you are considering investment formulas to put aside a nest egg and face the future with more peace of mind, or you are thinking about how to integrate your pension, or you want to have an extra income. Whatever your case may be, it is important to know a few things before you take your first steps into the world of finance and investment.

Identify and quantify your financial goals

Although saving can help achieve various financial goals and increase wealth, it is good to be prudent and have clear ideas before making certain choices. Firstly, in order to pick up the investment product you think is right for you, it is important to quantify your monthly cash flow: knowing exactly how much money is coming in and how much is going out will help you create a sound financial plan.

For example, you can make a list to prioritise your financial goals, according to their importance and urgency, so that you can focus on a single goal at a time. In addition, you should also estimate how much you need to save to achieve a certain result. Do you want to buy a house for your children, or would you rather put something aside for retirement, to travel the world?

You can include both short-term and long-term financial goals in your list of objectives, but it is crucial to quantify how much money you will need and how much return you will get from your investments. Here, for example, you can find a useful calculator that allows you to have a forecast, not a guarantee, on how your return will be choosing ISA’s a tax-free saving account.

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Find the best way to manage your finances

As a newcomer to the financial world, it is interesting to ask yourself whether you prefer to manage your finances yourself or you want to take your first steps in a safer and more secure way. Undoubtedly, in the first case, if you become your own financial manager, you will be able to save money, but if you are just starting to invest, relying on a professional advisor will cost you a little more, but should be the best solution to avoid nasty surprises.

As a cost as a value-for-money alternative, you can choose to entrust the management of your finances to a robo-advisor, an internet tool that uses artificial intelligence and offers computerized financial services and advice. Nowadays, are becoming a popular option for financial management and there are different types based on certain factors such as  technical competency, scope and revenue.

Know your attitude to risk

Needless to say, every investment involves a certain amount of risk. However, knowing what your risk tolerance is important if you want to start investing. Indeed, in the financial sector, making mistakes can be dangerous because it is the same as losing money. Some diversified funds allow you to choose the level of risk that suits you best, or maybe you are interested in some short-term investments.

Anyway, it is better to have a cash reserve on which to rely on if unforeseen events could happen, such as unplanned expense, health problems or dismissal. This means that, in the event of problems, you do not have to use the invested capital, which will instead represent a source of income

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Since unfortunately there is not a secret formula for investing, choosing a solution that is as tailored as possible and in line with your needs, in terms of financial and life objectives, affordability and risk, is certainly an optimal idea.

Phil Schwartz

"Food expert. Unapologetic bacon maven. Beer enthusiast. Pop cultureaholic. General travel scholar. Total internet buff."

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