Four Most Practical Guidelines to Investing Securely

Last year was challenging and significantly changed people’s financial predicament. Russia’s war in Ukraine affected the whole world, increasing energy and food prices and pushing Europe to yet another refugee crisis.

In the US, the cryptocurrency exchange FTX collapse left one million users without investments, with many calling it the second-worst collapse after Lehman Brothers. The overall feeling of distrust creates the need for financial stability, and secure investing is one way to achieve that.

Investing relies on several factors, as much as market knowledge – it’s a combination of both. This article will stick to the most practical guidelines for a secure investment so newcomers don’t burn through their savings within a year. Maybe even long-time investors will refresh valuable lessons.

Investment is an excellent way to secure long-term funds; for example, many use it to secure retirement funds. However, investment is susceptible to market volatility, and even the best of us can lose money due to unforeseen circumstances.

It’s commonly accepted to have three-to-six months of savings before putting your finances into investing. According to Forbes statistics, “63% of Americans don’t have enough savings to cover a $500 emergency.” It would be best to calculate how much you need to be fully prepared for unexpected circumstances.

If you secure these finances first, you can set aside funds for long-term investment, and you won’t have to withdraw anything from them in case something happens. Remember, if you withdraw from long-term investment early, you may suffer unplanned losses and taxes.

Risk evaluation is mandatory to maintain a successful investment history. Moreover, if you decide to invest in specific company stocks, you must prepare for continuous scrutiny of their industry and unique business practices.

You will need to rely on your knowledge and be critical of outside advice. Take Theranos as an example. At its peak, the company was endorsed by Bill Clinton and gathered the most famous high-profile investors like Rupert Murdoch and Betsy Davos.

However, some medical professionals were skeptical of Elizabeth Holmes’s promises and found them unrealizable. If more people had listened to expert opinions than relied on third-party hype and mass behavior, the whole scandal would not have blown so much out of proportion.

Theranos happened more than eight years ago, yet a contemporary example illustrates risk evaluation perfectly. The collapsed cryptocurrency exchange FTX gathered support from dozens of celebrities, including Shaquille O’Neal, Tom Brady, Naomi Osaka, Gisele Bündchen, and others.

Many blindly trust their idols, but that is a terrible investment practice. You should research the technology behind the business you are investing in; if anything sounds too good to be true, it probably is. FTX was one of those crypto-scams that promised short-term, low-risk tenfold returns, which simply does not happen in the current economy.

People choose to invest for different reasons, and their strategies hugely depend on how soon they need their money.

If you are saving money for your retirement and it’s far away, you can choose more risky investment opportunities that will yield better returns. There are excellent options like the employer’s 401K plan.

However, if you are looking for a mortgage down payment, a short-term increase in income, or pay for your child’s college a few years ahead, you must minimize the risks, or you can jeopardize your plans. Keep in mind that the Covid-19 crisis and the war after the pandemic increased market volatility. However, here are some of the best short-term investment opportunities in 2023:

• High-yield savings accounts. The bank pays interest in such accounts regularly, and they are insured by the National Credit Union Administration (NCUA) at credit unions and Federal Deposit Insurance Corporation (FDIC) at banks. These accounts are highly liquid, so you can immediately transfer your money to other accounts.
• US government bond funds. This is an excellent choice for a safe investment without researching each bond individually. The US government’s IOU promise is generally considered very safe because it’s the leading world economy, which is not expected to change any time soon.
• Short-term corporate bond funds. You can expect higher returns than from government bonds; however, they are slightly riskier. Still, these bonds are considered safe because renowned corporations are the backbone of the global economy and very rarely fail. Furthermore, the rising or falling rates do not affect these bonds much, yet they are not insured by the government and can lose money.
• Series I savings bonds. This is your inflation protection. When inflation goes up, the payout increases. And vice versa, you will get lower return rates if inflation goes down. Ever since Covid-19, inflation is still climbing up, amplified by further geo-political crises, making this a secure investment option. Furthermore, if you save your money without investing it, it will most likely, lose money to inflation in the long run.

On the other hand, if you’re looking for long-term investment opportunities, below you will find four options viable in 2023:

• Growth stocks. A good old friend of a market analysis enthusiast and an excellent choice if you can combine knowledge with intuition. Putting your money in an individual company is a high-risk strategy that can have enormous returns. Yet it is extremely susceptible to market volatility, and you can say goodbye to your money if you invest in a scam. Right now, tech companies are among the best Growth Stock investments. Artificial Intelligence, e-commerce, and Cybersecurity companies are expected to grow in the upcoming several years, but you have to research each individually.
• Value stocks. Value stocks are often put against growth stocks because they grow slower and have lower returns. But we’re talking about long-time, low-risk, right? Value stocks have more resistance to market volatility and recessions, and if the market moves in a favorable direction, they will have sufficient returns to justify long-term investment.
• Stock funds. A theme-unified collection of stocks can be a game-changer if you pick the correct investment branch. You don’t have to spend countless hours analyzing individual stock performance, but industry knowledge is mandatory overall. You will be rewarded by an average of all the companies in the fund, which brings down volatility risks. However, if a specific economic branch fails that supports the whole industry, you can experience significant losses.

As you might’ve noticed, short-term investment often prioritizes bonds and long-term – stocks. That’s because bonds are more secure, especially when discussing government-issued bonds. Corporate bonds are nearby, providing significant risks only if a major corporation goes bankrupt.

Simultaneously, stocks are way riskier but have much better results. You will find lucrative options over a long period of time and with sufficient effort. But it is highly advisable to diversify your stock investments because unforeseen circumstances can affect a whole industry, rendering your investment worthless. In other words, don’t go investing in tulips.

That’s something older-generation investors didn’t have to deal with but is becoming absolutely crucial.

According to Big Four accounting firm PricewaterhouseCoopers, investors consider cyber attacks the biggest threat to businesses. The cybercrime industry is booming, and things worsened after the Covid-19 lockdowns. Hackers target corporate computer networks and unsecured WFH routers to infect the device with malware and ransomware.

Ransomware spreads like wildfire, bringing down public healthcare institutions and private oil companies alike.

It’s best to invest in businesses that take cybersecurity seriously. However, it is just as important to protect your own online valuables. For example, many investors now use online apps like Robinhood, Invstr, Acorns, etc. All of them are password-protected, but how much do you know about password security?

Investors have a lot on their minds following their stock prices and market situation, and taking care of the most basic online hygiene might slip their attention. However, cyber-attacks are on the rise right now, and you can lose all your investment to a cyber attack more likely than to a market recession.

Using a password manager to protect each online app and bank account with a strong, complex, and unique password is highly advisable. A Virtual Private Network will protect your devices on public Wi-Fi, which are often targeted by spyware. A VPN will do so by encrypting your data so that no one will be able to see it.

Lastly, cloud storage solutions and identity theft protection apps are becoming more popular since cybercriminals have developed effective methods to steal one’s identity. This is directly relevant to investors because identity theft targets one’s financial records and can reroute investments or issue new fraudulent ones.

As Charles Dickens famously wrote, “we live in the best of times; we live in the worst of times.” We cannot argue that the current geo-political and economic situation is the best investment time. However, due to inflation, saving your money in a sock will most likely reduce its value over time.

Currently, investing requires careful consideration and effort, but the opportunities are endless. The market is changing faster than ever, and if you can keep up with the dynamics, you will find lucrative short-term or long-term opportunities. We hope this article will help you pick the correct path, and you can read it here if you want to learn all there is about stock investment for beginners.