Investing is gaining popularity among the general public, and even the younger generation is now actively planning for their financial future. Investments extend beyond personal endeavors and can involve institutions and large corporations. Numerous avenues exist for investment and profit generation. Nevertheless, acquiring the knowledge and skills necessary for prudent and effective investing is crucial before embarking on such ventures.
The presentation commenced with an explanation of the significance of investing. Whether it is a long-term or short-term endeavor, investing offers the advantages of generating additional income, creating savings for unforeseen expenses or urgent needs, and building a financial nest egg for retirement.
The investment consists of various types: bonds, shares, gold, real estate, fixed deposits, mutual funds, exchange-traded funds, national pension schemes, and public savings funds. Of the various types of investment, it is necessary to differentiate between what is called optimal investment and what is just speculation.
When someone spends money or assets to buy shares and other things, there will be many changes in market value that affect the value of our investment. If someone only speculates, of course, whatever form of investment will only last for a short period.
Most of the attitudes held by speculative investors tend to be aggressive. Decisions are based on personal opinions or emotions and only look at market psychology. Changes affecting the value of an investment to a loss are enough to encourage investors to immediately sell their shares without looking at the long term. One investment that many people only speculate on is cryptocurrencies.
Serious investors typically operate with a longer time horizon, focusing on future goals. Additionally, their approach is characterized by a composed and cautious attitude when confronting market fluctuations. Decision-making is rooted in fundamentals and essential factors rather than reacting to short-term market volatility. These investors engage in extensive calculations spanning several years, even in the face of losses. Bonds, mutual funds, and the stock market represent tangible and substantial investment forms.
“One thing that is certain in investing is that the greater the risk, the greater the profit. There can be no such thing as big profits but no risk,” said Falahariq regarding the facts about gold in the investment world.
Falahariq explained that various people often make several mistakes, which will cause losses to their financial condition. Actions to avoid could be emotional decision-making, lack of diversification, ignoring costs and legalities, chasing past performance, poor research, or following a herd mentality, using debt and hot money.
One prevalent issue involves influencers promoting fraudulent investment schemes that promise quick profits, resulting in many influencers facing legal consequences due to their involvement in such scams. Therefore, as investors, we must exercise greater caution when selecting investment opportunities. In light of this, Falahariq advocates five critical steps for prudent investing.
Firstly, we must establish clear and well-defined goals and objectives. What do we aim to achieve through this investment? Secondly, it’s crucial to assess our risk tolerance thoroughly. We should avoid hasty decisions, whether buying or selling our investments. Thirdly, diversifying our assets is essential for risk management. Fourthly, we should regularly review and rebalance our assets and expenses to ensure our financial strategy remains on track. Lastly, continuous research and in-depth analysis of the market or companies we intend to invest in are essential. These methods can be applied using various passive and active approaches, such as growth, indexing, dividend growth, contrarian, and value investing.