Investing is a nonnegotiable for one who dreams of being financially free at some point. We set aside for retirement, for our kids' education, or even just to grow our savings. Whatever the case may be, we will all have to invest at some point. However, the word “investing” can be intimidating if we don’t know anything about the concept. Now we’re not talking about how to choose investment decisions. Rather, how you can prepare yourself to get into the world of investing.
Understanding the basics of investing comes from preparing yourself before you start to look at options. It is best to consult a professional (financial advisor or planner) for this stage to ensure you get the best advice. Nonetheless, going into this with a plan is important to make sure you get the most out of your investments. You want to make sure you find someone with your best interest in mind so you don’t agree to things that may negatively impact you.
With that being said, let's look at what we know:
Know Your Limits
Before you start investing, decide how much money you’re willing to work with. You want it to be an amount that you can live without for some time (as investments take time). Know your assets and what you owe, factor all this in when coming up with the amount. As well you’ll want to get a debt management plan to know the amount you’ll need for an emergency fund. Taking care of these will alleviate the need to withdraw more money while your investments grow.
Build a Timeline
Planning by reviewing when you’ll need your returns is important (retirement, college tuition, etc). Long-term investing in this case gives investors a bit of leeway to take on market ups and downs. For example, you wouldn’t start investing in a college fund the year before your children go. You start that from the time they are born and continually look for opportunities to move more money into it.
Another component under the umbrella of time is not spending too much time saving before planning and taking action. This applies to anything, the longer the time spent waiting shortens the time for taking action. It’s good to plan, but don’t let it set you back years of investing time.
Evaluate the Risk Involved
Watching your portfolio go up and down can be nerve-racking and cause panic for new investors. It’s important to understand the unpredictability of stock patterns, but even taking significant dips can be part of the stock's growth. As well, stocks usually have more risk involved than bonds. With owning stock, you own a percentage of the company while bonds are a loan you give to an organization.
The reason bonds aren’t as risky is because they give a lower return in a shorter amount of time. Finding what works best for you will involve consulting, however, research what kind of investments you feel most comfortable with.
Invest In What You Believe In
Find investment opportunities you believe can change things in the world for the better. This in itself is a form of research for investing. If you see the potential for growth and impressive initiatives being taken then why wouldn’t other investors? In addition, your overall confidence in what you’re putting your money in will be greater if you know the company.
Conclusion
Investing can be confusing and stressful, especially if we go into it with no prior knowledge of how investments work. You want to set yourself up for success, so take the time to educate yourself on the process as well as find the right advisors. Investing is a tool that can determine your future, make sure every decision around it is made with confidence.
Written By Ben Brown
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