When we read any article about financial planning, we often meet investment. Investment is an important element of financial planning because it can help us to materialize our planning. Some money that we have invested at the investment will grow. Here are the fundamental investment in financial planning.
1. Match to goal
The investment should match with goal. We can invest fro short, middle, and long term. If you want invest for 20 years next or for your kid education, you may invest your money at blue chip stock or Dvividend Reinvestment Plan. Your money will multiply over many times.
2. High risk, High return
Most investment is risky. You dare to take the risk for the higher return investment. On the other hand, the risk adverser will not get higher return. For example, we will not receive much money by investing our money on certified deposit or saving account. The interest rate is less than a percent while the inflation is high. On the other hand, the stock investor who dare invest at China can get double digit return. Some Chinese stock has hit double digit return.
Share or diversify your asset to various investment. Do not invest at low risk investment or high risk investment only. Put the money in one basket is too risky and it will not make so much money. Example: Your money in saving account or certified deposit will not give you much return whereas your money decrease. The rate may be lower than inflation rate and you still pay the administrasion fee, atm fee, and other fee.
When one of investment decrease, others investment may increase. You will still get benefit even the market is worst.
4. Low cost and Low tax
Find the cheap investment. Notice the transaction fee and other cost when you invest your money. Try to minimize the cost so you will get so much return. For example: the no load mutual fund is free charge.
Consider the tax when you invest too. The investor should minimize the investment tax. You can consult to your financial adviser for it.
5. Pay yourself first
Having received money from boss, you invest the money directly. Then, you pay the debt. The investment will pay you at the future or when you need much money.