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Managing Personal Investments: Roles & Importance

Instructor: Yuanxin (Amy) Yang Alcocer

Amy has a master's degree in secondary education and has taught math at a public charter high school.

After reading this lesson, you will know why you need to evaluate and monitor your investment choices. You will learn why keeping an accurate record is essential for your financial success.

Investments

As you continue to work from year to year and you watch your savings grow, you will want to think about a way to invest that money. We define your investment as the act of putting your money somewhere for it to possibly grow and make even more money. Many people invest in the stock market or mutual funds. A mutual fund is a collection of stocks from different industries. Others invest in real estate. Others invest in businesses. Anything that can potentially make you money is an investment. If you plan and choose your investments well, then you will watch your savings grow from year to year. Let's talk about how you can manage your personal investments so you make the right decisions that will earn you more money.

Evaluating Potential Investments

The most important step before making any investment is that of evaluating it to see if it is a good fit for you or not. Also, you need to evaluate it to see if the investment is a good one or not. Some investments are risky and you could potentially stand to lose your money by investing in it.

How then do you evaluate your potential investments?

With any investment, you will want to look at its history. Has this particular investment grown in the past few years? You want to pick an investment with a history of growth. If you see that a particular investment loses money year after year, then that is probably not a good investment to choose. You'll also want to consider the market. Will the market continue to support your potential investment?

For example, say you are interested in investing in a business that makes puzzles for cats. You'll want to look at how the company has performed for the past several years. Does the business continue to grow year after the year? Is it profitable? Then you'll want to consider whether the market will continue to support this potential investment. Consider if the market will still be interested in the business a year from now. If the answer is no, then you won't want to invest in the business because once the business fails, then you'll lose your money. If the business has shown consistent growth over the years and the market seems highly interested in the business, then this investment may be a good one.

Monitoring Investments

After you've evaluated and chosen your investment, you still need to keep an eye on your investment. Yes, you'll want to monitor it. Why? Because things can always change. The market can change and no longer be interested in your investment. For example, the market may decide that puzzles for cats are a silly idea. If that happens, then your investment in the puzzles for cats business will no longer be a good gone. If this happens, then you'll want to get out of your investment as soon as possible before you begin to lose money.

You monitor your investment by checking on its growth on a regular basis. With stocks, this regular monitoring is usually performed on a daily basis. Real estate investments are usually long term and so you'll be checking on the value of your real estate on an annual basis. When you monitor your investment, you look at its value to see if it is increasing or decreasing. If you notice that your investment is decreasing in value, then this is a signal that you may need to quit your investment. You quit your investment by selling it in some way.

Why Is It Important?

Your evaluating and monitoring of your investments is a very important part of your financial success. With good evaluations and monitoring, you will be able to pick and keep the good investments that will earn you money. You will be able to catch the investments that begin to lose money so you can sell them before you lose more money.

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