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11 Top Tips To Identify A Promising Investment

There are a lot of investment opportunities and types in the modern era. As well as stocks and bonds, which have always been accessible to individual investors, there are new and emerging opportunities like cryptocurrency. Some investment types, such as precious metals, foreign exchange, and even fine art, have become more accessible, too.


Whether you have a few dollars a month or a much larger amount to invest, there are some excellent opportunities. But, before you throw your cash at a potential investment, you should do your own research to determine risk and potential returns, as well as check that the opportunity is suitable for you.


11 Top Tips To Identify A Promising Investment

1. Determine Your Risk Level

We all have different risk tolerance levels when it comes to investing, and the level of risk you take with an investment does have a direct impact on potential returns.


For example, bonds offer relatively low returns but they also carry minimal risks. They can be a good investment choice for a pension or long-term investment and for those with a low-risk tolerance. On the other hand, cryptocurrency is a high-risk investment. But, with many coins said to explode in 2024, there is also the possibility of a high reward. Technology expert Michael Graw further confirms that the crypto market is known to be unpredictable, with some coins succeeding while others fail. This shows how investing in something like crypto can be high risk and high reward. 


Before you research any investments, determine how much risk you can handle. Will a high-risk investment leave you sweating over your investment pot? Do you have some money spare to take a chance on a high-risk investment in the hope of pulling in a big payday?


2. Set Goals

Your reason for investing will help determine the types of investment you’re looking for, and will also be significant in determining your risk tolerance. If you’re investing for retirement in a few years' time, you will generally look for a low-risk investment. If you’re just entering the workforce and want a long-term investment, you might be better with long-term bonds, or a stock that you believe will grow over the next decades.


Set goals and use them to help identify potential opportunities that will work towards meeting those goals.


3. Diversify

Whether you’re looking for a short-term play or a long-term investment, diversification is important. Hold different types of investments, including cryptocurrencies, traditional stocks, foreign currencies, and bonds.


Diversifying an investment portfolio means that if one investment loses money, your other investments can help make up the shortfall. It essentially smooths out the spikes. Even within each type of investment, you should look to diversify so choose stocks in different companies within different industries and that operate in different markets. Alternatively, you can use funds that do this for you.


4. Do Your Research

Once you’ve determined your risk tolerance and set goals, research any potential investment. Even if you follow investment professionals or managers, you should still do your own research. No investor gets it right every time, and you might notice something that others have missed.  


By doing your own research, you can invest with more confidence. And if you’re new to investing, it can also help identify pointers for future investments. Doing research means investigating whitepapers and checking company reports. Read news stories, look for interviews, and check historical performance. Also check fees, penalties, and any requirements and terms associated with the investment.


5. Check Fees

Every form of investment has fees somewhere. Some fees are transparent and charged immediately when you invest. Others are less transparent. They might be soaked up into exchange rates or may only trigger when you sell your investment. Some fees can render small investments unprofitable, no matter the performance of the stock or other products.


Finally, some fees might come in the shape of penalties. For example, if you withdraw from a high-interest savings account within a certain amount of time, you might get charged. Identify all the fees and use them to determine the cost of your proposed investment.


6. Play To Your Strengths

If you have a deep understanding of a particular industry or a specific type of investment, use that knowledge to your advantage. If you understand blockchain and know the industries it is starting to be used in, choose a cryptocurrency that plays to that particular use and invest in it.


Or, if you closely watch the renewable energy sector and know of an emerging technology that you believe will take the market by storm, find a relevant company and invest in its stock. Similarly, if you’re a statistician, you can lean into technical trading. If you’re a researcher, look into share fundamentals.


7. Listen To The Experts

Technology writer, Michael Graw, points to the continuation of Solana-based meme coins as potential cryptocurrency investments. Whereas, other experts highlight a likely resurgence in bonds, and especially short-term corporate bonds.


No expert gets everything right, all of the time, and most specialize in certain areas of investment. But, you can use the information they provide to give you a starting point and potentially offer a view you hadn’t considered.


8. Ignore The Experts

There are a lot of investment and topical experts, and while many do know what they’re talking about, the Internet gives virtually anybody a voice, so check the credentials and experience of any experts you intend to follow.


And, even some so-called experts get things wrong or even completely overlook certain opportunities. There’s no doubting Warren Buffett’s credentials as an investor, but he regularly decries the investment value of Bitcoin and other cryptocurrencies even despite the availability of Bitcoin ETFs and considerable investment from some major financial institutions.


9. Follow The News

Knowledge is power, and this is as true in investing as it is in any other area. Read news stories regarding the industries you invest in and even the types of investments you make.


News not only includes news articles in popular publications but also press releases and interviews coming from those within the industries. These pieces of news can shed light on new investment opportunities or help guide you when a portfolio update is needed. 


10. But Don’t Buy The News

There’s an old investment adage that you should buy the rumor, and sell the news. This means that by the time some information becomes public knowledge, it’s too late to take action. 


For example, when Dogecoin became a popular crypto coin for depositing at anonymous casino websites, its value rocketed. Some investors enjoyed considerable returns if they invested before the news broke.


11. Ensure Clarity

Whatever you choose to invest in, whether it is the latest meme coin or one of the big seven stocks, ensure that the investment offers clarity. You should have definitive knowledge of the fees and costs associated with the investment and the business itself needs to offer clear investment reports and news, otherwise, you are investing blind.


To invest you will usually need to use a broker, exchange, or some other platform to conduct your deals. And you need to understand how these work, what their fees are, and information regarding their background, too.


Conclusion

There are more investment opportunities today than ever before. But, with this greater availability of opportunities also comes greater risk. Determine your goals, do your research, and ensure that you have a good diverse portfolio of investments, to help minimize your risk and increase your potential for returns.


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