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3 Things You Need To Consider Before Making Investment Decisions

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For many people that have never invested a significant amount of money before they often feel that it’s relatively easy to get a return on an investment. But, in reality, it takes more than just the basic knowledge when it comes to investing. A real successful investor understands where his/her money is going, and takes certain calculated risks to get the expected results. Today, investors are becoming younger, where we are seeing Millennials now maximizing their potential while creating and expanding their investment portfolios.

In this post, we want to highlight three of the most important factors every new investor needs to consider before making any investment decisions.

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Know the factors that affect your investment

Apart from the rise and fall of a particular company you invested in, you must understand the various factors that affect the value of your investment. For example, those who are investing in oil and gas companies at the moment may experience challenges in their investment value due to the fall in the price of crude oil worldwide. Amongst the many factors that affect this turmoil are the economic changes in the primary countries, such as the China and the United States. FXCM said there are various economic indicators that affect the US economy. This includes the gross domestic product (GDP), current employment statistics, consumer confidence surveys, personal income and outlays report, new presidential construction, and non-farm payrolls. If your investment relies heavily on the US economy or its market, then the items discussed will greatly affect the value of your investment.

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Photo Credit: photosteve101 via Compfight cc

Review the potential of the investment

Aside from understanding the key elements that could affect your investment, one must also have extensive knowledge about the potential of the investment opportunity you are about to take. There are many scam artists currently operating, searching for the perfect victim who’s careless when reviewing their company and their products. Often, they’ll use highly publicized news items to lure you in and make them sound legitimate. The US Securities and Exchange Commission (SEC) said that it’s best to ask questions and check with unbiased sources before you invest. Take your time and talk to trusted sources, such as family and friends, before investing in a company.

Have an emergency fund

When making investment decisions, you must always have a backup plan. As mentioned previously, investments require calculated risks. Thus, before making any big decisions, make sure that you have enough emergency funds in case things don’t go according to plan. The smartest way is to put enough money in your savings account to cover any emergency scenarios, such as sudden loss of investment value due to a drastic change in the industry or economy. Some consider putting at least six months of their income into their savings, so they can still rely on them if things turn bad.

These three items will get you a long way in the investment game, but make sure you know your portfolio very well. Investors always need more than the basic knowledge to get the most out of their investment opportunities. If you have more tips you want to share, feel free to leave a comment below.

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