5 Steps When Introducing Investment Products to Family

We save money for specific reasons. Maybe you want a new car, you want to remodel, or you are planning a vacation. Saving is the perfect way to build up your finances. However, it has low returns, and at the end of the day, you are only entitled to your savings amount and the interest. But, what do you do to your money after saving for some time? For most people saving is a bridge to investment since you need a substantial amount of cash to invest. However, being successful in investing takes time, and you need to familiarise yourself with many things. Here is a guide to help introduce your family to investment products.

1. Defining the Current Financial Situation

Successful investment requires proper planning. Therefore, one has to have a clear destination in mind before beginning the journey. Guide your family members in assessing their financial situation and figure out the amount they are willing to invest. They also need to determine how liquid they want their investments to be.

2. Setting Investment Goals

Defining investment goals makes it easy to come up with a sustainable investment plan. Are they looking for financial growth, a financial buffer, or regular income? Knowing their goals is critical to a successful investment journey. Goals are not just about returns. It also involves the definition of a timeline. Are the objectives short-term or long-term? Do they want a rapid financial growth or a gradual growth?

3. Help Them Determine Their Risk Tolerance

Having goals is not enough; they need to decide how much risk they are willing to take to achieve the goal. Risk tolerance depends on several factors; with the main one being age. People nearing retirement have an aversion to risk because they do not have time to recover in case of a loss. However, a young person can put their money in riskier investments.

4. Coming up with an Investment Strategy

Deciding on what to invest in can be a daunting task for a beginner. A little guidance on choosing the right investment will come in handy. So how do you guide someone in picking the right investment? It is a simple thing to do if a person has a budget, clear objectives, and knows their risk appetite. There are several types of investment for both short-term and long-term investments which can be lucrative or risk averse. You need to offer guidance on portfolio diversification to spread risk and reduce losses in case the stock market crashes.

5. Investment Monitoring

After putting your eggs in one basket, or several baskets, you need to keep an eye on the basket. In other words, follow carefully how your investment is performing. When guiding your family on investment products ensure you teach them how to read and interpret the market changes. Sometimes they may need to rebalance their portfolios if some investments are making losses. Offer advice on how to deal with losses and predict the stock market.

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