Aileron Investment Advisors
[dropcap]A[/dropcap] : There are two major factors you must consider; first you as an investor, and secondly, the characteristics of the actual investment such as its potential upside, risks, taxes and how it may interact with any other investments in your portfolio. However, in today’s column, we will discuss you – the investor.
There are two key questions you must ask yourself before making any investment decisions. The first question is how long do I plan to leave this money invested?
While not guaranteed, typically long-term investments offer a higher possibility for making larger gains. However, many times these extended investments, such as stocks and mutual funds, can be more volatile and have big swings in their resale value.
If you opt for these types of assets, you must be prepared to stay invested for many years. Otherwise you may have to sell at a low point in the market. If you think you may need the money in the next year or so, you should choose a short term investment. Matching your choice of investment with the appropriate time horizon is critical. Unfortunately many investors ignore this basic rule.
The second question you should ask yourself is how much risk am I really willing to assume? A general rule of thumb when considering risk is that the potential upside is usually similar to the potential downside. In other words, if you think a particular investment might go up 25 percent in value, it is probable that it could also go down 25 percent in value.
Make sure you only assume as much risk as you can afford financially and emotionally.
You and your financial adviser should answer these questions before discussing any specific investments.
The views expressed in this article are not necessarily that of Suwanee Magazine.