When preparing the money for investment in the medium to long term, it is essential to devise ways to reduce risk.
As the most typical risk, financial products such as stocks and investment trusts have the risk of loss of principal, unlike deposits and savings. Since the price fluctuates, you can make a profit if you manage it well, but there is also the possibility that the price will fall and you will lose money.
Stock prices and standard prices (investment trust prices) fluctuate because of various factors, such as economic trends, political situations, and exchange rates, so it is difficult to predict future prices. However, by devising an investment method, it is possible to increase assets while reducing risk.
Focus on a diversified investment
Diversification refers to investing in multiple assets rather than investing in one asset.
For example, if you invest only in stocks, your assets will decrease when stock prices fall. However, if you invest 50% in equities and 50% in bonds, you may offset some of the loss from a stock price decline with higher bond prices.
It is said that stocks and bonds often move differently (for example, when stock prices rise, bond prices fall). Combining assets with different characteristics, such as stocks and bonds, can be expected to have the effect of moderating the price movements of all assets.
Keep investing long term
When preparing medium- and long-term money for investment, continuing to invest in reserves for a long time also leads to risk reduction.
The method of purchasing a fixed amount of financial products every month with reserve investment is called “dollar cost averaging”. With the dollar-cost averaging method, less quantity is purchased when the price is high, and more quantity is purchased when the price is low, so it can be expected to have the effect of leveling out the unit purchase price.
In addition, according to the materials of the Financial Services Agency, there is a tendency to reduce the possibility of a loss of principal because of continuing long-term installment investment that diversifies investment target assets and regions.
When working on asset building through investment, it is important to continue to accumulate and diversify investments for a long time without being overwhelmed by short-term price fluctuations.
Better money management means better time management and savings
“Money Management” introduced the need for two types of money management: household budget management and savings management.
In managing your money, it is most important to keep track of your overall living expenses and savings. By grasping the whole, you will know where you need to save money, so you will not have to endure painful savings such as cutting food expenses more than necessary, and you will save without difficulty. Increase.
In the beginning, money is a lifelong relationship.
Thinking about how to use money, how to save, and how to save, you can also be conscious of time management.
For example, “I plan to buy a house three years from now, so I can’t afford to loosen my wallet now.” I want to increase my household income by doing so.”
Think of a management method that matches the money you manage and improve it to something that is easy to continue.
Once your household finances have improved, try investment trusts that allow you to invest even a small amount to prepare the money you need in the medium to long term.
