The feeling of uncertainty and anxiety is familiar to everyone who started doing something that he had never done before. Such feelings are especially acute for novice investors. How should I invest? Which asset is better to buy or sell? What are the investment options I should pursue? Where should I even start? It is simply impossible to tell about everything in one article, so let’s focus on what any novice investor needs to know.
There are two types of investments: short-term and long-term.
Short-term investments are highly liquid and are usually held and sold within one year. As a rule, they offer lower rates of return.
Long-term investments are investments that are held for more than 1 year, they are difficult to liquidate and, as a rule, they offer higher rates of return.
What should be considered when investing for a short and long time.
1) Goals and objectives
Ask yourself: why and why are you investing? Always make sure that you have a clear goal. Then ask yourself, what is your goal? Do you want to earn a steady income? Do you want to achieve long-term capital growth? A combination of both? Visualize this clearly and formulate a plan for creating your portfolio.
It is very important to know and remember why you are investing. For example: considering buying your first home, what goals do you want to achieve? Perhaps you want to own a semi-detached house in the city in the next 10 years, in which case it would be wise to set goals appropriate to your circumstances, such as personal debt, total income, cost of living, etc., in order to consistently accumulate money to repay your investments in the future. the expected schedule. It will depend on which assets will be in your portfolio.
There are many different instruments or asset classes. Be sure to study and understand the differences, such as the stated percentage of profitability, the minimum term affecting liquidity, the required level of obligations, and so on. Novice investors are advised to invest in something with a low level of risk and with a low level of commitment.
Do the investments you are looking at comply with the norms of Islam and Shariah? Muslim investors should look for Shariah-compliant products because investments should be free from activities prohibited by Islam, including usury (riba), gambling (maisir) and ambiguity (gharar). Investments also cannot be involved in non-compliant activities, such as gambling and non-halal drinks and food.
4) Decide on risk
All types of investments involve their own risk. Therefore, it is important to understand how to protect yourself. When choosing an asset to invest in, it is important to understand and evaluate your own risk tolerance.
In other words, you must clearly understand and imagine how much money you are willing to lose? Do you have other sources of income that can help reduce such risks?
5) Decide on time
How much time do you have left to work on your investments? Some investments require a more active role from their investors, while others do not. This is due to volatility and frequent changes in asset prices.
6) Compare and learn
Before plunging headlong into the abyss of financial affairs, it is worth conducting a study and comparing the various types and forms of investments available to you, since short-term and long-term investments have their pros and cons.
It is best to start ranking your priorities already at the selection stage. Perhaps you want to get high returns in a short period of time with a reasonable amount of risk, so it will help to make a list of different types of investments that can help you achieve your goal, and then narrow down your options even further.
What asset to choose for investment?
When choosing where to invest your funds, it is important to make sure that you do it intelligently and, if necessary, use the services of trusted companies and brokers. It is important that the asset you are interested in meets the requirements and rules of Shariah. Remember that there is no ideal formula for successful investments that would suit everyone without exception, therefore it depends only on you what the future will bring.
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