If you are considering investing, it is because you are ready to put part or all of your savings to work to obtain a profit in the future and make your money grow. So following are the tips to invest in the best way.

Clarify concepts

Before starting to invest, it is important to strengthen your financial education by clarifying the meaning of certain concepts. Here are some of the most commonly used in the investment market, such as the following:

Investment instrument: Means through which you invest your money.
Yield: Profit obtained from the investment of your money.
Risk: Probability of loss associated with your investment.
Liquidity: Ease with which you will be able to dispose of your money. For example: daily, monthly, every 3 months, annually, etc.
Term: Time during which you keep your money in an investment instrument.

• Short-term investments, which are less than one year;
• Medium-term investments, which last between one and five years;
• Long-term investments, which are options of more than five years.

Based on these concepts you will be able to identify and better understand the instruments offered by the market to invest, compare products, and diversify your options to reduce risk and take care of your liquidity.

Initial considerations

Do not put your financial stability at risk because you want to invest. Remember that the money you use should always be separate from the amount you spend on living.

Define how long you want your money to be invested for. Once you are clear about this, you can define investment terms in instruments in which you cannot withdraw your money to access better returns.

A higher risk instrument usually provides higher profitability, which is related to the availability of your cash. Remember, the longer the term in which you leave your money intact, the more profit you will obtain.

Know your level of tolerance to risk, to avoid stress and anxiety during the time your money remains invested, the important thing is that you enjoy and are really convinced of the investment you make.

Establish an investment plan

How do you know how much you want to earn, in how much time and how much you are likely to invest if you don’t make a plan?

Three steps are essential to start your investment:

• Set goals to give a purpose to your investment. So you will define what you want to invest for and when you will need your money.
• Determine an initial amount to invest so that with your savings you can gradually maintain or even increase it.
• You do not need large amounts to start investing. You can start with just a part of the surplus or savings that you achieve per month. Initially start investment in small amount and then make efforts to contribute even more.

Remember that you can balance your finances with credit products that allow you to invest in goods paying in more accessible and comfortable terms for you, without losing the opportunity to increase your personal assets.

Author Bio:

I am Nikesh Mehta, owner and writer of this site.

I’m an analytics and digital marketing professional and also love writing on finance and technology industry during my spare time. I’ve done online course in Financial Markets and Investment Strategy from Indian School of Business. I can be reached at nikeshmehta@allonmoney.com or LinkedIn profile.