Thursday, 16 July 2015
How to invest your money
Some people want to invest but do not know how to go about it. Investing your money to achieve financial growth is a good thing for everyone. You can either invest your money in the capital market (halal), real estate market (halal), commodities like gold (halal), oil etc. I spoke about the risk appetite for businesses in my last post 'managing risks'. Risk appetites should not only be used in making business decisions but also be used in determining how individuals should invest their money. So you need to ask yourself some questions like what will be the impact of losing this amount of money that you are about to invest on your life and that of the people in your life. Will it affect you drastically, if yes then do make low risks investments. In other words, know the amount of money you can afford to lose. The amount you want to make from the investment (investment goals) should also determine how you should invest your money. The time you can tie up this money for should also help determine how you should invest your money. The money market (halal) is a good place to save money for individuals that are risk averse.
For people with medium risk appetites, investing in the shares (capital market (halal)) of companies whose financial statements have been analysed is advisable. However, diversifying your share portfolio helps you to minimize your risks, by diversify, I mean do not put your eggs in one basket, invest in different sectors, different stock exchange market (halal stocks) that way a loss in one market/sector can be compensated by the gain in another. Shares (halal) can be invested for long term purposes or short term purposes, that will be dependent on your investment choice. For long term investors, people who want to tie up their money for more than 1 year, investing in commodities like gold(halal), oil will be advisable cause they will increase over a long period. The real estate market is advisable for people who have a lot of money they are willing to tie for a period longer than one year. Land will always appreciate in value, although buildings will depreciate, the appreciated value of the land will always bypass the depreciated value of the building. The risk involved in buying a land is medium, just make sure you buy the land from the right people like going to a registered agency. The return from owning a land for a period longer than one year is high. Some investments (halal) might cost additional charges. An investment should be well diversified, investment in different investment markets and sectors.
Halal means anything lawful Islamically. Zakat must be paid appropriately. Keep checking out my blog regularly. Cheers!