The world of investment has been hit very recently by the disclosure of the “Panama Papers”, and it could be easy to jump on the bandwagon and state that investing, especially in certain ways, is not a particularly good way of doing business.
This may be the case in certain circumstances, and there is little doubt that some people and organizations seek to benefit from secretive arrangements. However, for the vast majority of people and those involved in the industry, it is a crucial factor in helping to drive the economy, with investments in new business ideas, putting money into successful companies that are looking for support to expand, and also putting money into pension funds to look towards providing a secure financial future for the family.
Who can invest?
Anyone can invest, and they often don’t necessarily know they are doing it. Take pension funds, for example. They are investments for the long-term future, can be private or have contributions made by the employer (effectively free investment money), and are managed to get the best possible return in many years’ time. Every time a payment is made into a pension fund, it is being invested by professionals whose job is to get the best possible returns.
Warren Buffet, for example, is frequently referred to as one of the most successful investors in the world. Based in the US, he has developed strategies to help him work out the best ways to invest well and make money. He has two rules for investing: never lose money, and never forget the first rule.
Investors need to think ahead, and they also need to be aware not only of traditional markets, which can prove safe havens for money, but also emerging markets, especially in the world of technology.
Another successful investor, Ken Fisher, developed an investment business that manages many billions of dollars for clients. His advice for investors is that taking a long view is key for successful personal investing. It doesn’t matter whether one buys equities or mutual funds, when making decisions about investments, they should be done carefully and then be stuck to.
Too many investors want to make a fast buck, and that’s not how good investment works. It’s certainly possible to make some money quickly, but it’s also as possible to lose everything quickly.
How to invest
There are two major aspects to answer this question:
- Research the subject, read books, go on the internet and get information.
- Get professional advice.
The second point is crucial, though getting a good understanding of what investing is all about is also very important. Not understanding the terminology and the jargon, what things mean, puts a potential investor at a disadvantage.
So, armed with a least a modicum of understanding, it’s time to turn to a professional. The point about professionals in the investment business is that they have a wealth of experience in managing money. One should research an investment company in the same detail as researching the subject initially. Skills are learned over time, and that’s why professionals in any industry can make major contributions. Builders build, lawyers litigate – that’s their job – and so financial advisors can make a real difference to investment choices and managing portfolios.
Any financial advisor will want to understand a client’s risk appetite so that investments can be made to suit their preferences. No investment is without risk, though some are much safer than others. Putting money into government bonds, for example, won’t give great returns, but they are pretty much guaranteed. Putting money into a start-up business relies on the business plan and execution of it to work. It can have high returns but can also mean a loss of investment. It’s why risk appetite needs to be understood by the investor and diligent research done into potentially risky investment opportunities.
Wisdom does not necessarily mean that investments will pay off, and that’s why long-term investments can be considerably more lucrative than short-term ones. Once again, it’s important to look at the markets for investment and ensure that the research is done and advice taken for investment management.
Industry sectors can be volatile when it comes to investing. Markets such as steel can crash if there is oversupply and dumping of cheap products, but steel will always be needed. Examining past trading and indications for the future should give an indication as to whether investment looking forward is potentially viable in terms of a good return.
Energy companies will always be needed, but changes in the way that energy is produced and regulated may offer options for investing in renewable energy companies. This is long term, but many companies are working to deliver greener solutions, especially as governments globally are looking to mitigate the effects of climate change. Wind and solar power give the potential for good investments, and nuclear power is still on the energy mix menu, though it should perhaps be treated with caution before investment.
The big tech companies have usually been good for investment, but their shares can be expensive and fluctuate depending on how successful the next model is going to be. However, it’s unlikely that any will go into meltdown as tech is the future, so it’s worth considering, again over a long-term basis.
Getting involved in a start-up can be an ideal way to begin with a small investment. It could grow and lead to further successful investments in the sector. It could be a retail business, a repair garage for autos, or a florist shop that has ambitions to branch out state or nationwide.
Taking the leap
There is a leap of faith in investing. There are so many opportunities and options that it can be hard to sort the wheat from the chaff. Building on knowledge gained, being comfortable with specific areas of investment, and getting the advice that suits the investor’s priorities should lead to a good and profitable relationship for all involved.