What motivates someone to invest and what methods do they use? How might knowledge about investing affect their appetite for risk? And what assets are most attractive for them to invest in?
Why do people invest?
When it comes to why investors grow their wealth, the answers vary from market to market. But the reason most can agree on is also the most general: retirement income. In some markets, such as Switzerland, the UK and Japan, it even stands out as the main motivating factor, with fewer respondents choosing other, more specific options. In contrast, in countries such as China and India, investors say there are multiple reasons to invest, with each motivator chosen by at least a third of respondents.
Taken together, this suggests that some investors may think about their goals more abstractly – preferring the all-encompassing “retirement income” – while others want to think more tangibly, mentally allocating money upfront for more specific purposes such as “health care costs” or “inheritance for children.”
Clearly, understanding one’s own motivations for investing is crucial for any investor. Conversely, knowing the common motivations of investors and how they differ from market to market can be a guide to broadening your own goals.
How do people invest?
Most investors value a hands-on approach to their wealth, with at least 65% across all markets surveyed saying they manage their own investments – keeping in mind that this approach is nuanced and can reflect anything from relying on knowledge gained through an educational package to working with experienced advisors.
Investors continue to value financial guidance. In one study, more than half of investors surveyed in China use investment bots. Surveyed investors from Germany, China and Hong Kong show more interest in using products such as the Ripple Package.
While most investors take a balanced approach to risk, it is worth noting that the proportions are not the same in every market. For example, a sizable group of “very conservative” investors in the UK and India suggest that investors in these markets may be extremely sensitive to economic fluctuations. On the other hand, the large number of “fairly aggressive” investors in China and Hong Kong may be more reflective of the investment culture of these regions.
The relationship between knowledge and risk appetite
An investor’s attitude to risk can be influenced by many factors: the purpose for which they are investing, what stage of life they are in, or their natural inclination to take or avoid risk. Another important factor may be the “level of knowledge” – What do beginners invest in and what do experts invest in?
It turns out that when investors know less and consider their level to be “basic,” they choose products with an average risk class. The more they learn as they move to the “middle” level of knowledge, the more they see how much more there is to learn – or lose – and their approach changes, moving toward low-risk products. Finally, when an investor considers himself an “expert,” he prefers higher-risk products.
What are the most important rules for investing in cryptocurrencies?
Cryptocurrencies are among the most commonly purchased assets. Investors are attracted by the cutting-edge technology and the potential for profit. However, before buying your first cryptocurrency, you should consider the following:
First of all, you should be aware of the risks you are taking. Since the volatility of cryptocurrencies far exceeds that of any other asset class, they are not like classic investments. It is good to pay attention to altcoins – cryptocurrencies with small market capitalization. Until the end of 2016, bitcoin was the only cryptocurrency that mattered. Since then, however, the situation in the investment market has changed – new, interesting cryptocurrencies have appeared, and Bitcoin itself has suffered from serious performance problems. That’s why it’s always a good idea to look for forward-looking, small cryptocurrencies that have a chance to break out.
What matters right now is the potential utility of the cryptocurrencies you choose. The first thing an investor should do is to read the official documentation discussing the purpose and potential of the chosen coin. Such reading provides two huge benefits. First, it broadens the knowledge about cryptocurrencies. Second, a poorly written document is often a great sign that the project is not worth investing in. If the team itself cannot explain the true utility of its token, it is probably not worth investing in. Always be wary of scammers when doing this. Good cryptocurrencies have a clear technical vision, an active development team and a lively, enthusiastic community. Bad coins promote impossible technical advantages and have a community focused mainly on getting rich quick. Every investor should also remember that cryptocurrencies are taxed. How cryptocurrency investment returns are taxed depends on the country’s tax jurisdiction.
No matter what strategy an investor adopts, they must start with some education. Investing without proper knowledge never yields beneficial results. Therefore, it is important to learn the basic principles of investing and how to put them into practice.
