Every good investor has a strategy. You wouldn’t apply for a job without a resume or plan an arctic expedition without a plan. These things need to be carefully thought out, with potential risks identified and opportunities targeted. This way, we can invest with the most efficient methods to yield maximum returns.
Know Your Aims
The biggest problem many have when starting to invest is not having adequate planning. What this means is first knowing why you are seeking to invest? One aim could be to invest in your retirement savings. With this aim in mind, there is no pressure to make quick or huge gains, as the funds are not to be utilized until much later. If you have ambitions of trading as a career then it would be more appropriate to look at a short turnaround and significantly better returns.
Identify Acceptable Losses
We never plan to make a loss, but only a fool would discount the possibility altogether. If we plan well, we can evaluate what level of loss is acceptable. Acceptable losses will vary dependent on your situation. For pension investments, we would look for a relatively low risk of loss. But if we are trading in other investments, the strategy could look quite different.
Take cryptocurrency trading, as this is a new form of currency investment that gives the possibility of positive returns over short periods. Crypto coins are unregulated digital currencies means no central bank regulates to keep them stable. For this reason, cap your acceptable loss before you begin and identify a point where you will cut your losses if the value drops to this level.
Remember losses can be set against your tax bill in your accounts. Having properly prepared accounts prevents you from missing out on this relief. Make sure you know if you can carry forward any losses into a subsequent tax year, where possible.
When, & How, to Cash Out
You should know when to cash out, but also how to do this. The easiest access investment methods are usually bank accounts; however, these are not the best for interest rates. If we take the example of cryptocurrency trading, we mentioned earlier, we can easily and quickly convert LTC to BTC or any other cryptocurrency or national currency.
Access to Funds
One question you should ask yourself before investing is will you need access to these funds quickly at any time? If the answer is yes, this should influence your choice of investment. Avoid fixed-term savings schemes and pensions for this.
It is usually possible to access funds from a long-term such as a pension, however, there are often punitive fees attached to such a service. It’s not to say that accessing pension funds is always a bad idea. It might be beneficial for the long-term to combine several old pensions into one place.