Today’s economy has given rise to the importance of making decisions regarding what the future holds in financial matters.
In addition to the economic imbalance that caused the global pandemic by COVID-19 (coronavirus), this issue is even more worrying if you belong to an economically active generation that lost the right to a pension.
Today, young adults who were born between 1981 and 1994 – millennials – must ask themselves what to invest in or what is the best strategy for a good investment.
The fear of investing is greater than before and financial anxiety increases as time passes. Every person of productive age should start preparing for retirement, even if it seems a long time away.
To start building a wealth – personal or family – it is important to learn about the best investment strategies and not get carried away by fads that promise a quick and effortless return.
There are hundreds of books, studies and articles on the importance of investing in our most productive years. For this reason, below Blue World City will talk about the most important investment tips that cannot be missing in your financial planning.
Investment tips to increase your capital
The path to achieving a future of economic stability begins by listening to and assimilating the knowledge of others who have made a career in the subject, and who can teach a lot about it.
One of them – perhaps the most famous – is the investor Warren Buffet for whom an investor is not one who does extraordinary things, but is one who is able to avoid a greater number of mistakes.
These tips are undoubtedly a great way to start building a future:
1. Look for information about the investment options that exist
The financial market offers a wide variety of options, for those who want to put their money to work and obtain returns.
Among the options that are listed as the favorites are fixed income investments, equities and mutual funds.
One way to choose the type of investment that suits you according to your age is the Rule of 120. This aims to calculate the risk obtained from an investment according to the age of the investor.
To start investing in the future, the first thing to do is:
- Gather all the necessary information about personal finances.
- Know the relationship between income and expenses.
- Establish percentages to allocate to necessary expenses, savings and investment.
- Find other sources of income.
2. Know the financial behavior of the chosen market
According to the study “Financial culture of young people in Mexico” carried out by Banamex-UNAM, 56% of the economically active population goes through financial problems to make ends meet, with little or no possibility of saving or being candidates for bank loans.
However, a significant part of this generation does have savings, most of which are stuck in debit accounts.
Knowing financial behavior allows you to apply a strategy according to the possibilities and willingness to take risks, as well as terms that are appropriate to your investor profile.
You should not invest in what is not well known and not understood. Taking the time that is necessary, to understand the financial behavior of the markets where we are interested in investing, will make the difference between a successful performance or a loss of capital.
The financial market —as well as its different products— is constantly changing, so you should not base yourself on current figures, but rather review the history of a few years to confirm that said company or product has remained stable over time.
Peter Lynch, one of the most successful investors, advises investing only in what you know. This means that, in addition to being clear about the financial possibilities, you have to continue investigating; Not because Bitcoin or a new business is in vogue, does it mean that it is the best investment.
3. Establish investment objectives and goals
It is important to chart a path when it comes to investing. The first thing is to start with an objective, for example, investing in real estate.
For Eric W. Anderson – a renowned financial analyst at RBC Wealth Management – time is the most important factor to consider.
The sooner you start to walk towards your goal, the greater the chances of generating profits and reducing risks.
The first thing is to reflect on the objectives, the deadline and the tolerance for risk. You have to be honest and think about whether the idea of volatility and risk creates discomfort, or whether you are willing to invest in high-risk assets.
Identifying goals, expectations, and anxiety-causing points helps you make a better decision.
The next thing, in the case of investing in the real estate market, would be to analyze the possibilities of paying with the money saved or applying for a bank loan, either individually or combined with that of another person or persons, for example with real estate crowdfunding .
4. Consult a specialist
Although large investors have more experience, it is always good to consult with a financial specialist when it comes to investing money.
The help of a professional in the field can help resolve doubts that remain after the investigation, however, although the opinion of the advisor is important, making the decision – how to invest the capital – is your own.
Having specialized advice will give you the security of taking the right path.
On the subject of real estate, you can find real estate companies – such as BMF Inversions – with a lot of experience in the field, as well as evidence of successful projects that generated great returns.
5. Make a budget, don’t go into debt
One of the basic principles of investing wisely is not to go into debt to do so . It seems simple but many make the mistake of requesting loans, in order to make an investment that is out of their budget and profile.
To prevent this from happening, the ideal is to prepare a budget based on the information you have gathered in the previous research.
If you decide to acquire financing to pay for your investment, choose plans with payment facilities. In the real estate sector, you will be able to find viable options —for example BMF Inversions— to acquire land at a good price and with high levels of profitability.
6. Don’t invest just to follow trends
It has become fashionable to invest in digital assets such as cryptocurrencies and others, which are attractive for adapting to the digital world. However, they are still very unstable markets. The money invested can be lost in the blink of an eye, and without knowing how it works one hundred percent it is difficult to make predictions.
Another type of biased investments are the so-called pyramids, which promise a high return in the short term, only to end up being fraudulent schemes that enrich those who organize them.
7. Don’t mix personal and business finances
To have your financial life in order, it is necessary to separate personal finances from those of business or investment. This will allow you to clearly see the real status of your investment, as well as the gains or losses that arise.
Keeping accounts together can give a false sense of having more capital and as a result there is the possibility of incurring expenses that were not contemplated causing a financial imbalance.
8. Learn about risk management to make smart decisions
Todd Presider, financial coach at Financial Mentor, says that no matter how much you gain from a successful investment, it is what you lose from a failed investment that determines investment intelligence.
Real Estate, for example, has a great advantage, since the security and trust they offer is genuine — especially — those companies with diversification in their portfolio of properties.
In addition, the capital gain in this type of investment is always greater and less risky, taking into account that the location and profitability of the chosen property is well investigated.
To reduce risks in any type of investment you have to:
- Researching the company in which you want to invest, its reputation and experience in the market will make a difference.
- Be aware of the ability to pay and manage that investment.
- Ask experts in the chosen topic and industry.
- Get started as soon as possible, timing is everything in financial matters.
The fear of investing for the first time is experienced when there is not enough information and the goals are not clear. Knowledge of the chosen industry and management skills are required for the investment to meet one’s needs and expectations.
9. Diversify your investments
As we have seen, each type of investment carries a risk, and as the popular phrase says, “you should not put all your eggs in one basket”, so diversifying will be a strategy that helps you manage or reduce risk.
If you have the financial solvency to invest in more than one project, do not hesitate to do so. You should never bet too much on a single project.
Diversifying your investments will allow you to reduce risk and obtain extra income from different assets.
Why Invest in Real Estate?
As we mentioned at the beginning, the financial imbalance caused by the pandemic affected many markets, however, the real estate sector remained stable in times of crisis, making it clear that it is an excellent option to invest and protect your money in bad times.
Real estate is a safe bet because, unlike other assets that depreciate, they increase in value over the years; especially, if they are located in areas of high added value.
Investment lots are the best option for retirement, especially if it is commercial land with which you can obtain extra income in many ways, for example, renting them to franchises.
If you want to know more about the benefits of buying land in a commercial area, we invite you to read the article we have on this topic.
Investing in real estate is a safe bet
Despite all the panorama that it paints in the Mexico of the 21st century, there are positive trends that should encourage future investors to start a journey along the interesting path of investment.
Today’s investors —whether they are small merchants, entrepreneurs or businessmen— will be the protagonists of the future economic development of the country. And it is important to take note of those who have gathered enough experience to learn from their trajectory.