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Five Tips To Making Important Investment Decisions

Guest Author: Megan Seymour

Investing is one of the best ways to build wealth. However, a successful investment strategy can be very complex and risky, especially in volatile bear markets. An article on investing in 2023 by Fortune reported that 2022 was a bear market as it “was the worst year for the stock market since the Great Recession.” This was due to rising unemployment and decreased gross domestic product (GDP), with declining corporate profits observed nationwide.

That being said, the report also indicates that 2023 looks promising for those looking to create an investment portfolio. If you hope to start investing, the market analysis and your personal capacity are only two of the primary factors you will have to consider. To help out, we’ve come up with five tips for making important investment decisions.

Here's what you need to know.

Top Five Investment Tips for 2023

There is no guarantee that your investments will pay off. This makes it important to first figure out your risk tolerance or how much money you can afford to lose. Investopedia suggests creating a comprehensive financial plan by calculating your net worth and determining your cash flow. Afterwards, you can define your goals, such as buying a larger home or starting a business.

While no one can tell you how to prioritize these goals, a professional financial planner can help you finalize a detailed savings plan. Investopedia explains that this can help ensure that your plan covers all the essentials.

Besides a financial planner, other financial experts can help you decide whether an investment will generate income. The job description of a financial analyst makes them well-positioned to help organizations make investment decisions by analyzing their past and present financial data, as well as forecasting trends within the industry. This can be especially beneficial for entrepreneurs of small-to-medium enterprises who need to create a comprehensive market analysis in order to grow their business.

Busier individuals may opt to hire the services of an investment broker, who buys and sells investment products on your behalf. This is ideal for people who are new to investing and hope to build a robust investment strategy. However, this may not be recommended for those who have a smaller investor portfolio or hope to build financial literacy on their own.

Dollar-cost averaging is a helpful strategy when making investment decisions, as regular investments are made with the same amount of money each time. This allows you to buy more of an investment when its price is low and less when its price is high — protecting yourself from the risk of investing all of your money at the wrong time. Lump-sum contributions to individual retirement accounts can especially benefit from this strategy in a volatile market.

“Timing” and market analysis are important. However, they are secondary factors to personal capacity, savings plans, and risk tolerance — especially in extremely volatile markets such as cryptocurrency. For example, if you are interested in cryptocurrency you should reassess your reason for investing in it, what value you see in it, and how long you would keep it if it becomes volatile in order to minimize any risk. If you get the timing wrong, you could make a loss that would have a knock-on effect on any other investments. Remember that the high growth potential of any investment comes with very high risk, so stay true to your “why” for investing at all times.

Paying off all high-interest debt under any market condition is an effective investment strategy. This decreases your debt faster because your debt is directly related to your interest fees — and thereby increases your personal capacity and risk tolerance.

In the case that you fail to pay off your debts efficiently, a low credit score can have a serious impact on your ability to invest. As we’ve illustrated in a previous article, home ownership and mortgage approval is challenging with bad credit. However, it isn’t impossible. You will have to first repair your credit, an investment decision in itself, before you can make more investment decisions.

“Investing puts money to work. The only reason to save money is to invest it.”
Grant Cardone

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To get started on the path to financial independence, contact us at DebtBlue. Our finance specialists can discuss ways that you can reduce your debt load, improve your credit history, and increase your credit score — making your investment decisions easier, and personal debt relief only a call or click away.