Last week, we encouraged you to examine your retirement plans. You should have done some research on your expected Social Security and pension benefits and have a sense of how much money you will need to build up in your saving and investment funds to meet your retirement goals.

Investments have the potential of growing considerably to provide you with a good source of money during your retirement years. They can also help you to accomplish other long-term financial goals.

When you invest, you purchase assets, such as real estate, stocks, bonds and mutual funds, that you hope will generate returns for you over time. It is important to note that returns are not guaranteed. There is always the chance that you may lose some or all of the money that you invest.

With investing, knowing your risk tolerance, or “your willingness to take risk” (Investopedia) is very important. The greater the risk you take, the greater the chance you have of earning more money back. However, you also have a greater chance of losing your money.  If you have a low tolerance for risk, you may be more comfortable purchasing investment products like bonds, which are low risk compared to stocks, which are usually higher in risk.

The risk associated with investing is one of the main reasons why many people do not invest. The idea of losing hard-earned money can be alarming. However, careful research maximises your chances of investing your money strategically to ultimately generate a profit in the long run and earn the money you need to accomplish your goals. When it comes to investing, it is important to build a portfolio that you are comfortable with and let time work in your favour. The earlier you invest, the less risk you have to take and the more time you have to make your money work for you. (But remember: no investment is ever guaranteed.)

When it comes to investing, knowledge is key. Some important points to note about investing:

1. Establish your savings before investing – it is unwise and dangerous to put money you cannot afford to lose in investments. Work on building up an emergency fund first.
2. Diversify your investments – diversifying is a common risk management strategy, where you purchase different types of investments (some high risk, some low risk).
3. Be wary of “investments” promising extremely high or quick returns – any “investments” promising high or quick returns are usually investment scams. (For more information about investment scams, click here.)

Your prescription for Week 10

If you have never invested before:

• Knowledge is power. Take some time this week to do some careful research about investing (e.g risk and return, different investment vehicles and how they work). You can start here.
• After you have done your research, carefully consider how investing could possibly improve your financial situation and help you reach your goals.
• If investing is something that you are interested in doing, talk with a reputable financial advisor or other investment professional for more information.

If you already investing:

• Review all your investment paperwork to make sure you understand your agreements.
• Take some time this week to evaluate your investment portfolio – look at each of your investments and see how they have performed over time. Determine if you need to make any changes in order to meet your goals.
• Evaluate and determine if you need to diversify your portfolio.
• If you have any questions about your investments, or wish to adjust your portfolio and want some advice, talk with a reputable financial advisor or other investment professional for more information.