Children are often burdened by unrealistic academic expectations throughout their lives. However, parents, teachers and mentors must teach them that there is more life beyond the scorecard. All the work is worthwhile if they grow up and become kind, considerate, and helpful people to those in need. Because life is more than just numbers. What matters is the journey and the quality of the journey.
Similarly, when making an investment, return is not the only thing you need to consider. I hope something big is a good thing, but achieving financial goals based on unrealistic assumptions can make it go downhill.
In the past, many stocks may have performed very well. However, remember that your future performance does not depend on your historical temperament. Consider the following points to fully understand the investment situation with the following:
The trade-off between risk and return. In the past, sometimes you were attracted by investment products provided by account managers and investment agents only by considering the rate of return provided. However, as an investor, you should also evaluate many other factors. One of the most important factors is risk. You will see that everything has a price, including your return on investment. In order to obtain greater profits, you must have sufficient risk tolerance. In other words, the high return on your investment is the premium you get for taking high risks. This is the so-called risk-benefit trade-off. Almost all investment products face various risks, but at different levels. Therefore, before investing your hard-earned money, it is important to understand the risk-return tradeoffs of each asset class and the investment path in it to assess whether it is appropriate for your risk profile. It is not advisable to rely solely on rewards.
Properly allocation of assets. Pay attention to asset allocation. Define your asset allocation based on age, income and expenses, assets and liabilities, risk appetite, investment goals, investment scope and financial goals. Asset allocation refers to the allocation of investable surplus among asset classes (such as stocks, debt, gold, real estate or even holding cash). Therefore, when allocating assets, you are actually adopting an investment strategy that can balance the risks and returns of your portfolio, taking into account your risk profile, financial goals and investment time frame. As mentioned above, every asset has a certain degree of risk and expected return.
Investment time frame. Asset allocation varies with the time frame available before the financial goal occurs. For those who have a short-term investment period of less than 3 years, it is recommended to allocate them to fixed-income securities, and to avoid assigning them to asset classes such as stocks and gold due to their variable rate of return, so the risk is higher. Due to the short investment time. For the medium-term investment period like 5 years, you can allocate a portion of the investable surplus to stocks and gold to take advantage of the higher risk-return ratios provided by these categories, but you will not be enthusiastic.
For longer investment periods like 10 years above, you can allocate a larger proportion of the funds to higher-risk asset classes in order to use the power of compounding over a longer time frame. That is to say, maintain some (if not too high) exposure to bonds and gold so that the risk can be mitigated to some extent. For investors, it is crucial to recognize the risk-return trade-offs of any asset class, and to be realistic in the expected returns, and to wisely evaluate the performance of their investment portfolios.
"Time to market" instead of "timed market". Everyone wants to enter when the market is low and exit when the market reaches its peak. However, regardless of market research and analysis, it is impossible to always accurately predict the direction of market development. Take 2010 as an example Philippine Stock Exchange (PSE). When valuations were really cheap, many investors missed the stock market's reversal and missed buying opportunities. On the other hand, in 2011, when the market was in trouble, many retail investors left the market. I believes that you should focus on long-term financial goals and commit to a fund that continues to invest in order to optimize the level of risk return. Achieving your life goals requires a disciplined investment method and perseverance to ignore market momentum. Trading is meaningless, because it may endanger your wealth and health. Remember, traders are good commodities only before the last transaction. The bottom line to achieve your financial goals, first assesses your risk appetite. Once is determined, stable investment will begin. In addition, diversify your investment in all asset classes and monitor your investment portfolio every six months.
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