Financial freedom is when someone is financially free. This means that we are free to do anything we like in the financial context. Working is just something we do out of passion because basic needs have been met.
Technically, financial freedom is a state in which passive income and investment income can cover expenses. If you want to be even safer, passive income and investment income should be equal to twice the expenditure.
That's why we need the right strategies to generate those numbers with passive income and investment. Check out these steps to build an effective investment strategy.
1. Determine financial goals
The first step in investing is to determine financial goals. Then, only design an investment that is suitable to achieve that goal.
For example, if you want to go somewhere, first determine your destination and then determine what vehicle is suitable to reach that destination. Make sure we know what we want to achieve, and set targets for each financial goal. In this case, our goal is to achieve financial freedom.
But, everyone has a different number to declare their financial freedom. So we need to know how much money we need to achieve the financial freedom stage.
2. Create an investment portfolio
An investment portfolio is a combination of various investments with a certain proportion. Building an investment portfolio is a crucial step in investing. Why? To minimize investment risk and get a good return.
If you make a wrong investment portfolio, the risk may be too high. When facing the market in less favorable conditions, investments can also collapse.
This is where the effectiveness of investment lies. The most important strategy in building an effective investment is to create a good investment portfolio. Cash flow and capital gain must be considered.
Capital gain is used to achieve long-term financial goals. But if you are just starting to invest, it is better to focus on getting cash flow income first. After having enough cash flow income, focus on the capital gain.
The result of capital gain can then be used to buy assets that will generate passive income. This makes it easier to achieve financial freedom.
If you have never had experience in creating an investment portfolio, it is better to consult with a financial planner. Make sure to consult with a competent financial planner so that the created portfolio is effective.
3. Implement investment
The next step after creating a portfolio investment is to implement it. Don't ever delay investing, because you can miss out on a great opportunity. Follow the investment portfolio that has been made.
If you want to add capital to one investment product, add capital to the other products in proportion. This way, the proportion of each investment instrument in our portfolio will not change. Don't keep changing your investment portfolio because the investment results may not be optimal.
Sometimes an investor is influenced by the latest news or certain issues regarding investment. As a result, the investor feels that he must change his investment portfolio according to the issue without considering the risk that will arise. However, issues related to the world of investment are not always true.
4. Regular review
Investment implementation is not a "one-time" step. In the process, we will get a lot of learning, especially if we are new to the world of investment. That is why the regular review is very important.
Review everything about investment, from the portfolio, and investment practice, to investment results. Make sure everything is going according to plan, if there is something less effective, make a new plan.
Remember, don't be rash in making changes, review the new plan until you are sure that the change is the right decision.
Through the regular review, we can find mistakes or things that can be developed better in investment.
Investment is the only way to achieve financial freedom. There are many investment strategies that can be used, but the best strategy is the result of a long process.
Investment is not a "one-time" activity. There are many learning processes that need to be gone through to achieve the most effective investment strategy for each of us. It is important to keep adapting to the market so that our investment becomes more optimal. Happy investing!