Whether you are starting from scratch, or want to make more of money you’ve already put aside, there is always time to become a “Do It Yourself” investor in today’s age. If you have the right knowledge and the right tools, you can simply work towards making the right investment choices, on your own quite easily.
People generally assume that investments are time consuming, expensive, and may not yield the kind of financial results that you’re looking for. But these are deterrents that people assume, especially when they don’t have the right information or don’t know which steps to take towards making the right investments.
Some key questions that a potential investor could have in their mind while looking to invest would be, when should one start investing? How to invest and where to invest?
The following can help you as a basic guideline towards making these right investment choices.
- WHEN SHOULD ONE START INVESTING?
There is an old saying that goes by ‘never invest money that you can’t afford to lose’. Working on that basis is a little misleading, however, as most of us wouldn’t say that we can afford to lose any money at all. A better rule is not to invest money that you may need quick access to for essentials or a minor emergency. When opting to invest, it is also always worth evaluating whether the potential return you will get from it is worth the extra risk that you are taking over putting it in a savings.
You also need to think about what you are investing or saving for. If you are looking to hit a set goal over the short term, such as a house deposit or wedding, risking your precious funds may be unwise.
- HOW AND WHERE TO INVEST?
For your very own personal D.I.Y investing, a brokerage firm or a mutual fund company could be great help. They provide tons of investment options, and research that you can go through, to make your own investment choices. With a brokerage firm, you have the option of investing in the stock market, and mutual funds, you can invest in a mutual fund that helps you invest in a rather diversified portfolio.
A lot of brokerage firms and mutual fund companies also have online platforms that you can use. Some charge an administration fee and fees for buying and selling, while others opt to earn their money from fund commission and offer ‘free’ dealing.
The most important question that needs to be addressed when going for your own personal D.I.Y investment is where to invest. Investments for your own personal sake could be made in funds, investment trusts and shares and bonds as well.
Shares: Investing in shares directly has long been a popular option and can be very rewarding, but is a path laid with traps. If you do decide to pick individual shares then make sure you research companies very carefully, learn to understand how to read their balance sheets and financial statistics. Shares that could be invested upon can be found on the Pakistan Stock Exchange.
Funds and Investment Trusts: The crucial difference between investment trusts and funds is that investment trusts are listed companies with shares that trade on the stock market, while funds simply rise or fall in value in line with the assets they hold. A simple way around this is to invest in either active funds or investment trusts through various commercial banks or mutual fund companies widespread in Pakistan, where a fund manager chooses a basket of shares for you, or in passive tracker funds.
Bonds: Funds are also a popular way to invest in bonds. These are essentially a signed document acknowledging a debt (IOUs) issued by companies and governments to borrow money from investors over a period of time in return for a set repayment each year and their money back at the end of the bond’s life. Picking individual bonds is possible, but once again investors need to be careful to spread their risk.
Apart from financial intermediaries, if an individual would want to go for complete personal investments, they can consider:
Opening a Shop: The best investment with a little amount of money is that you open your own shop even if you are educated. Every business starts from zero and grows from there. Taking that leap involves a lot of variables therefore, be sure to make a comprehensive investment plan before you move ahead with this option.
Buy a Franchise: If you have money then you can buy a franchise as well. There are popular businesses, which have franchise options; in which you won’t have to start from scratch like your own shop, but you can definitely use the principles and guidelines of an established business to run your own business.
Buy and Sell Vehicles: Vehicles are purchased in Pakistan by the bucket loads. Global sales of vehicles have shown a record-breaking year in 2016 while 2016 and 2017 showed similar vehicle sales trends in Pakistan, a surge by 19% from the previous year. You can purchase a bike or a car which needs a little polish, finishing or repair, and then sell it through different mediums like through personal network or through online platforms like OLX or PakWheels.
Consider Alternative Investments: People forget that there are several alternative investment options to choose from like insurance plans, property, gold, and the latest, alternative currency like bitcoins. You can even consider side earning options like Careem and Uber to make savings count for more.
At the end of the day, the primary way to make the right investment choices to evaluate risks, and return profiles to see which investments give the best returns, based on the kind of risk you’re willing to take.