invest wiselyIf you are reasonably financially secure and have some spare cash to play with investing it wisely could potentially provide you with an income stream sufficient to retire early. Many people are put off investing because they believe that expert knowledge is required, but this is not the case. Everything you need to know can be learned. Here we provide an overview of what you need to know to start planning for the future.

 

Risk

Investing is all about balancing risk. The type of investor you will become depends very much on the type of person you are and will depend on how prepared you are to take a risk to potentially secure a better return.

 

Time

If your ultimate aim is investing for retirement, you need to have a clear idea of when you ideally want to retire and work out how much money you realistically need to make that happen.

 

Type of Investment

Once you have ascertained your attitude to risk you will be in a position to start researching the sort of investment that dovetails with your outlook. It’s worth taking some time to really research the various options, from bonds and shares to more esoteric options such as investing in property or even art. Investing for retirement can be as hands on as you like, with options like SIPPs (Self-Invested Personal Pension) giving you maximum control over what you invest in and how much. If you’re less financially savvy, you may want to speak to a financial adviser before going ahead with any decisions.

 

Spread the Risk

Financially speaking, it is not often advisable to put all your eggs in one basket. Investing in shares in a limited number of companies or bonds will necessitate a great deal of research to ensure that the investment is sound. You could consider investing in a mutual fund, which is basically a pooled investment with other investors and allows you to diversify your stock in a way that’s not possible as an individual. A good fund manager will regularly review the investment made, track the progress and change the investment strategy if required.

 

Research

There are a whole host of widely available financial tools that can help you chose the best investments to make your dream of early retirement a reality. As well as your own personal research, many specialist investment companies and brokers have in-house staff dedicated to talking you through your options.

 

Taxes

Tax is generally payable on the profits and income generated form an investment, but some vigilant financial organisation can reduce the impact of tax on your investment. The simplest path to take for UK investors is to set up an ISA (Individual Savings Account) at a broker like Nutmeg, while those in the US will need to check out IRA options (Individual Retirement Account), wherein you can save tax-free until you make a withdrawal.

 

Housekeeping

Once you have your plan in place you need to keep on top of it and regularly check that your investment portfolio is growing at the required rate to ensure your early retirement. Being proactive is the key to achieving your retirement goal.

What else do you need to do to invest?

About Robert Farrington

Robert Farrington has written 77 articles on this site..

Robert Farrington is the founder and editor of The College Investor, a personal finance site dedicated to young adult and college student finances.

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One Response to Investing Wisely for a Bright Future

  1. Love how you call out people who are assume that expert knowledge is needed in order to be a successful investor. There are so many powerful tools at the disposal of the self managed investor. I got some excellent advice from a financial adviser upfront who metaphorically “taught me to fish.” He equipped me and then sent me on my way. I now feel I have what I need to be successful, and I have a long time to do so. Thanks for the post.

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