Having a sound knowledge about investments and financial management is the key to building your wealth. While some people know the basics of their finances, most fall short of applying industry insights to their investments and portfolio management. Unfortunately, a wrong move in financial management can cost a lot, which is not you need with your hard earned money.

When it comes to all your questions regarding the right investment choices and portfolio management, you need to hear it from the expert. Sami Raja, Managing Director of Sami Raja Consultancy, a business consulting firm headquartered in Dubai and London.

In this article, Sami Raja talks about the basics of investment that a first-time investor should know and the importance of hiring the right financial advisors for your finance management.

How Does Investments Turn To Wealth?

Any type of investment is the first step to asset building. Experts define investment as anything that is valuable, which is capable of generating an income. One of the reasons many people fail in the game of investments is because of proceeding without fully understanding the rules that govern it. This is why we believe in educating you before you start with your first investment.

Every investment, as we defined before must be valuable. It must be something significant, having monetary worth. This can be a material thing, a piece of land or property or liquid cash itself.

The second attribute of investment is its value generation. Every investment must have a wealth creation capacity that guarantees the owner returns. Now, there is another kind of investment, which most people are unaware of. This investment does not generate money but rather saves it. Although it doesn’t drive in returns, it creates wealth by saving the owner from his expenses that can incur otherwise.

Now that you have some clarity over the basics, here are some of the things you should know before you make your first investment –

Investment Goal

Every investment you make should have a goal. All your ventures will require money in different ways, which is why each investment should be made for a specific reason. For instance, if you are making an investment for your retirement plans, then it will be a long term process, requiring you to wait for reaping its benefits. On the other hand, there are short term investments, which can provide you returns for a near-future expense, like for instance, for sending your kid to college. So have a goal before you invest.

Risk Tolerance

Your risk tolerance depends on the degree of variability in returns you can tolerate or withstand. If you have a realistic understanding of your monetary capabilities and can withstand for large swings in your investments, then you may have a good chance of doing well in stocks. However, if you are not a high-risk taker, investing in long-term investment is the best idea to go for.

Taking Risk

One thing is quite simple and straightforward – there is no profit without some risk. If you are looking for high returns, you have to build risk tolerance. Usually, the new investors are encouraged to put in common investment schemes, which promises returns at a low-risk rate.

Time frame

Your investment time frame is the time you allot for enjoying the benefits of the investment. Retirement plans, for example, requires you to put aside resources for decades before you actually get to use it. Short term plans with great returns are always an option depending on your risk tolerance.

Investment firm

It is extremely difficult to judge the character and capacity of an investment firm. But looking at their past records, reviews returns history and reputation can help you decide whom to trust with your hard earned money. Once you decide to invest with a trusted firm, you can hope for good dividends and great turnover.

Managing Investments

Although it is not impossible, managing one’s own investments can be challenging. If you do not have enough energy to follow the market’s ups and downs and find it extremely confusing, it is best to leave it at the hands of an investment expert. As a novice investor, it may prove difficult to identify good investments from the bad, what to invest in and what time to invest. So with all things considered, it is a good idea to go for an expert opinion on the matter.

By putting your resources into a number of varied assets, like global bond index funds, ETFs and index-linked funds, you significantly lessen the unpredictability and risks associated with the investments, while ensuring consistent results.

Remember. investments are the smartest and most practical thing you can do with your resources. By consulting an expert financial advisor, you can be on your way to building an managing a better portfolio.

Contributor

Mr Sami Raja, Managing Director of Sami Raja Consultancy is a market leader and visionary in the field of Business Consulting and Finance Management. As the head of a consultancy firm headquartered in Dubai and London Sami leads a team of business analysists, investment sales specialists and marketing professionals. His areas of expertise include Investment sales, Business Marketing, Branding, Corporate structuring and strategising, procurement and portfolio management.