How can I invest my savings?
Individuals generally want to make the most of their savings. When we look at investment habits from past periods, we see that financial investments have also come to the fore, apart from investments such as land, house and shop, which generally provide income. Recently, savers tend to turn to different financial assets other than deposits or participation accounts. This search for diversity not only supports the development of capital and money markets, but also contributes to increasing financial literacy. However, many people who invest in money and capital market instruments unconsciously and based on hearsay may also suffer. That’s why one of the most curious topics lately is which financial instrument to invest in.
Which financial instruments are most suitable for me?
Before answering this question, it is useful to mention some factors. It is generally accepted that investors exhibit three different behavioral patterns towards risk. The first group is the risk averse group. The second group is defined as the risk-insensitive group, and the third group is defined as the risk-loving group.
First of all, we need to point out that every financial investment has a risk factor. In an environment where there is no uncertainty, it is accepted that there is a directly proportional relationship between the return and risk of a financial instrument. What we are trying to explain here is that as you turn to risky assets, your return increases. But where the risk is high, the loss may also be high. That’s why we first need to decide what our risk perception is in financial investments. Sometimes risk perception may also be related to the amount of savings. Some people may not care about the amount of money that won’t hurt them if they lose it. This may increase the perception of risk. But as the amount increases, the perception of risk generally begins to decrease. For example; Risking ten TL money and risking a thousand TL or one million TL money may reveal different types of behavior. For some people, the situation may be different. The risk may be more sensitive for people who cannot tolerate the loss of a small amount of money. That’s why risk perception is so important. If you are a risk-averse person, it would be the best decision to turn to financial investments that we call low-risk or risk-free.
As we mentioned above, risk perception is very important for making the right financial investment. A second important issue is the maturity of investments. Will your financial investment be short, medium or long term? For example, we often hear about people investing in company shares based on hearsay without any knowledge or research. When these people cannot get the return they expect, they may incur losses due to buying and selling in very short terms. Stock markets are financial instruments whose returns will be higher in the medium and long term rather than the short term. Of course, stock selection is also very important here.
Another factor is whether the investment you make in a financial asset is your savings or money you will pay. For example; You have a debt and you have postponed its payment or it is not due yet. Are you planning to invest this amount with a financial asset? If it is money that does not belong to you or that you keep to meet any needs, it would be the best option to focus on financial investments with direct return guarantees without taking risks.
These questions can be expanded further. But basically, to summarize the factors that should be taken into consideration when investing in a financial asset: First of all, it is necessary to know well what the risks of financial instruments are. For example, when you invest your money with a term deposit, the profit you will receive when the maturity comes is certain. You do not risk losing principal (except in extreme cases). But if you invest in a stock, you actually become a partner in that company. In this case, the company may make a profit or make a loss. With this logic, your principal money is at risk. We will talk more about financial instruments and how risks are calculated in another article, but the main issue we want to emphasize here is whether you can take the risk of losing principal. Another issue is maturity. Although focusing on short-term investments can sometimes bring profit, it can often result in losses. Being patient and extending the maturity of the investment to a reasonable level whenever possible is an important element in terms of return.
Finally, another important issue is diversity. This is where portfolio management comes into play. A classic phrase you hear all the time is “don’t put all your eggs in one basket”. The most important point to consider when managing a portfolio is not to fill your basket with financial instruments that move in the same direction. What do we mean by this statement? To explain a little: If you keep financial products that are positively correlated with each other in the same basket, as the price of one falls, the other will also fall. But if you create a portfolio of products that are inversely correlated with each other, at least as the price of one instrument decreases, the other increases and the loss you will experience in the portfolio will be minimized. Creating a portfolio is a subject that requires knowledge, market monitoring and, in fact, expertise. That’s why our advice to all savers is; Leave this job to the experts. Investment and retirement funds, which you can choose according to your risk perception, are managed by people who are experts in their fields, have received training in these subjects, are familiar with all financial instruments, and constantly keep their finger on the pulse of the markets. Funds managed by these experts may be a good option for you to make the most of your savings.
To get detailed information about the funds, you can find it in the funds section of the website https://www.kap.org.tr/. You can also review the website www.tefas.gov.tr to compare fund returns.
You can contact investment companies to get detailed information about financial instruments. Reports created by the research units of investment companies will also contribute significantly to increasing your financial literacy.
