When we invest, one of the factor we are looking for is the return on our investment. Usually the higher the better. But we all know that as the return goes high, so ask the risk that investment have. Profitability of the investment is still one of the criteria we are considering.
Return varies from one investment to the other. While it is a good thing to take note of the return, we have to take note that all investment have risks. It will be foolish to say that your investment has zero risk at all. Even if it’s less risk, it’s still a risk which we need to take note. Who would have thought a big company like NOKIA will be obsolete today. If you invest in an equity fund and all the companies invested by that fund collapse, you’ll find your investment at the bottom. I know it will be almost impossible to happen, at least it’s a risk scenario that could happen and you should anticipate.
When you invest, it’s a good thing to count your profits. Being optimistic about it is a good thing, it helps us motivate and excites us. However, counting chicks while the eggs are still unhatched have it’s consequences.
Anticipate that all investment comes with a risk. As such, losing money is a scenario you should prepare yourself. That’s why it’s important to follow the best practice before you invest your hard earned money:
1. Have a good cashflow
2. Pay off all your high interest debt
3. Have emergency fund, at least 6 months of your monthly expenses
4. Get complete insurance coverage
5. Invest your extra money