How to make a wise investment in the current financial climate

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To spend or to save, that is the question. In the uncertainties of today’s financial climate, making a wise investment choice can seem like navigating your way through a maze. With market fluctuations testing the nerve of even the savviest investors, it’s no wonder that many are seeking guidance on how to secure their financial future. In this blog post, we’ll discuss three golden rules to keep in mind when deciding what to do with your money.

Education is key

Regardless of the nature of your investment, availing yourself of all the facts is the best way to ensure you’re making a smart decision. For example, venturing into the stock market can yield positive results for everyday investors, but to get the most out of your money, it’s crucial to understand all the nuances and intricacies involved with trading stock. At the very least, regularly keeping up to date with the latest financial news is a great way to build a foundational understanding of the current climate and predictions for the future.

On top of that, podcasts, books and websites created by industry experts are all great sources of information and can go a long way to helping you make smarter investment decisions. Of course, there is also the option to discuss your financial situation with a professional advisor. They will work with you to develop a more secure financial strategy depending on your personal circumstances, but their hourly fees can be high, and it’s important to research their qualifications and background before committing to entrusting them with your finances.

Consider lower-risk investments

If you’re looking to make small, positive changes to improve your finances through investing, you’re likely to start by considering low-risk options. These will offer more stability and better access to your money, but there are lower gains to be had. Some examples of popular, low-risk options include annuities (typically for people of retirement age), government bonds and high-interest savings accounts.

Again, even though your money will generally be ‘safer’ when investing in this way compared to more risky options, it’s still important to understand the differences between each to ensure you can maximise your return. Especially when it comes to a savings account, researching different options will mean you can make a more informed decision. Remember, a savings account with the highest interest rate isn’t necessarily always the best option. Lots of accounts will limit your withdrawals and penalise you for going over this limit, so make sure you base your decision on your own circumstances.

Diversify your portfolio

If you have some extra disposable income and are looking to make some more long-term investments, there are plenty of options out there – so don’t put all your eggs in one basket. Regardless of the economic climate, it’s always best practice to diversify your portfolio as a means of protecting your assets. This is a technique employed by amateur and professional investors alike and will reduce the risk of significant losses. Diversification means investing in different industries, products, markets and maturity lengths.

In practice, diversification might look like investing in both physical products/commodities and a range of stocks. For example, gold has been deemed a valuable asset for thousands of years, with countries even building up their own reserves of the precious metal, primarily as a way to safeguard against economic downturn. For individuals, it’s generally considered a safe investment, especially during times of economic uncertainty, but there are lots of other factors that can affect its price. That’s why as well as investing in gold, you might look to the stock market to invest money in different types of businesses.

However you choose to diversify your portfolio, ensure you always make considered investments, rather than spreading your money thinly for the sake of diversification.

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