In the complicated world of trading and investments, there are all kinds of things that you need to consider before diving in head first. Just like with entrepreneurship, choosing a niche is essential – and getting it wrong can have long-term consequences on the value and performance of your investment. Some investments are just as time-intensive as a side hustle or a new business venture can be. Managing a property, say, can take up unexpected hours every single week. Others, such as contracts for difference (CFDs), are known for being particularly high risk. This article will point out three of these key considerations – and explain which investments are ideal to choose or avoid.
Time and energy
First off, you’ll need to decide how active you want to be in your investment choices. Some retail investors simply want to make a small but healthy return on their cash, and aren’t particularly interested in being hands-on. If this applies to you, then it may be worth opting for a managed fund, which means that a designated fund manager will make most of the decisions on your behalf. If you want to get involved, though, then the world is your oyster. Often, people who want to be active in this regard choose to become property developers, or design their own bespoke stock funds – these both require time and effort, though, so be careful before committing.
Another important aspect to consider is your attitude to risk. As you’ll have discovered in business, it’s often the riskier investments that have high potential payoffs – but they’re also the ones that hold the most potential to wipe out your portfolio. One way to access some high-risk investments while also reducing your overall exposure to risk is to diversify a little. For example, it may be worth devoting a small portion of your portfolio to CFDs while also investing some of it in a fixed rate bond or other more predictable asset class.
Mode of access
For other investors, the key consideration is not time or risk but simply how easy it is to break into a particular asset class. Buying an apartment block in the centre of a growing city full of economic potential may be a relatively low-risk investment with tasks that you can mostly outsource, but the huge upfront costs mean that there are big barriers to entry for a humble retail investor.
Other investment vehicles, such as CFDs, don’t have that problem. Once you’ve found Australian CFD brokers that are legitimate and suit your needs, it’s often possible to get started in just a day or two – and as they’re derivative products, they’re not scarce in the way that, say, company stocks might be.
With so many considerations to take into account when identifying the right investment vehicle for your needs, you’ve got a lot of decisions to make. However, just like in your business career, it’s possible to whittle down the list of criteria and find an investment that works for you. Whether it’s a low-time cost investment such as a managed fund or a more easily accessed alternative such as a CFD, there are plenty of ways to ensure that you choose an investment vehicle that is right for you.