Value Your Opinion The Most While Making An Investment Decision

When it comes to financial decisions it is very important that you consult an expert but it even more important to evaluate the advices of various expert and ultimately make your own decision. Following are some of the steps that may help you in making a wise decision.

i. Evaluate your current financial roadmap:
Before you make any investing decision, sit down and take a fresh look at your entire financial situation. An important step to successful investing is knowing your current goals and risk tolerance. These factors may have changed with the current economy.

ii. Evaluate your comfort zone in taking on risk:
Traditionally, if you have a financial goal with a long time horizon, you are likely to make more money by carefully investing in asset categories with greater risk, like stocks or bonds, rather than restricting your investments to assets with less risk, like cash equivalents. On the other hand, investing solely in cash investments may be appropriate for short-term financial goals. The principal concern for individuals investing in cash equivalents is inflation risk, which is the risk that inflation will outpace and erode returns over time. With today’s market volatility, investors must evaluate their acceptance and comfort zone for risk.

iii. Consider an appropriate mix of investments:
Market conditions that cause one asset category to do well often cause another asset category to have average or poor returns. By investing in more than one asset category, you'll reduce the risk that you'll lose money and your portfolio's overall investment returns will have a smoother ride. If one asset category's investment return falls, you'll be in a position to counteract your losses in that asset category with better investment returns in another asset category.

iv. Create and maintain an emergency fund:
Most smart investors put enough money in a savings product to cover an emergency, like sudden unemployment. Some make sure they have up to six months of their income in savings so that they know it will absolutely be there for them when they need it. During a downturn of the economy, this is particularly important.

v. Consider rebalancing portfolio occasionally:
Rebalancing is bringing your portfolio back to your original asset allocation mix. By rebalancing, you'll ensure that your portfolio does not overemphasize one or more asset categories, and you'll return your portfolio to a comfortable level of risk.
You can rebalance your portfolio based either on the calendar or on your investments. Many financial experts recommend that investors rebalance their portfolios on a regular time interval, such as every six or twelve months.