Good investment based on a clear and defined structure and plan for financial safety helps, as the availability of a diversified investment portfolio contributes to increasing the financial security of the individual, while having more than one source of income at varying levels of risk helps the individual’s savings grow at the most appropriate pace according to the Emirates Banking Association, which He explained that the investment process includes the purchase of income-generating assets, the value of which may increase over time, and the investments usually involve varying proportions of risks and returns compared to the savings account.
He pointed out that wealth creation has been highlighted by resource assessment, goal setting and knowledge acquisition
5 essential steps for thoughtful investment
Good investment based on a clearly defined and defined structure and plan helps financial safety, as the availability of a diversified investment portfolio contributes to increasing the financial security of the individual, while having more than one source of income at varying levels of risk helps the individual’s savings grow at the most appropriate pace according to the Emirates Banks Association, He explained that the investment process includes the purchase of income-generating assets, whose value may increase over time, and the investments usually involve varying proportions of risks and returns compared to the savings account. He pointed out that in creating wealth, investing part of the monthly savings in the stock and bond market, for example, may increase the opportunity to collect wealth at a much faster rate than relying on savings account returns only, in the long run, pointing out that investment is an important step towards achieving financial goals, such as Buying a house or a car or paying educational fees.
He explained that the advantages of investment are also preparing for emergency situations, as investment is an excellent way to develop an account for emergency situations, such as illness or unemployment, which can lead to an individual’s inability to meet his expenses in the absence of savings funds. There are five basic steps to investing.
1- Financial Resources Assessment
The first step is to determine the savings available for investment, then part of the savings can be allocated to be invested in other options, such as stocks or investment funds. The investments can be made in huge amounts or even in small amounts, and the individual who starts investing early acquires a good knowledge of the various investment strategies.
2- Gaining knowledge about investing
Gain knowledge about basic investment terms to make informed decisions based on sound information. In this context, it is important to learn the basics about stocks, bonds, mutual funds, private equity and certificates of deposit as a first step to understanding more sophisticated terms such as portfolio management, diversification of risks, and the relationship between risks and returns.
3- Setting investment goals
After determining the financial position and gaining basic knowledge about investing, the next step requires setting an investment goal. The long-term goals must be identified and work towards their achievement must be achieved through the formation of a balanced and studied investment portfolio.
4- Evaluating the level of risks
For the purpose of making a meaningful and reasonable investment, the assets with the most appropriate level of risk have to be chosen. Younger investors usually tend to pursue investment strategies that involve a greater degree of risk. A balanced equity portfolio may lose some of its value in the near term, but it is likely that it will generate strong returns over the decades. Older investors should balance their portfolio with fixed income securities, in order to stabilize value and income and reduce risk.
5- Understand the cost of the investment
Making investments means incurring some costs. Therefore, all costs involved must be considered and studied before proceeding with the creation of the investment portfolio. For example, if the investment is made through a broker, there will be specific fees charged by the broker or brokerage firm. All these fees must be calculated and taken into account when making the long-term forecast.