Invest. It’s one of those thing you know you ought to start doing sooner rather than later, but probably haven’t gotten around to yet. Perhaps you’re a little bit fearful, or maybe you actually are ready but aren’t too sure where or how to begin. If you’re ready and aren’t sure where to begin, you’re in the right place. (If fear is your issue, read this post for some practical guidance).
While everyone’s investment goals and journey will differ in many ways, some things will remain constant. Some of those, particularly, are the basic requirements for investing that are crucial for new investors to identifying and follow. They are:
1. No Consumer Debt
If you’ve heard this phrase before, that’s because it is true: debt is parasitic to wealth. Carrying debt obligates your money to be directed elsewhere other than towards building your own wealth. Additionally, though it isn’t always the case, interest rates charged on debt is typically higher than the interest rate paid on returns from your investments. Investing while carrying consumer will literally leave you earning -% returns from your investments.
Before you invest, especially in the financial markets, eliminate any and all consumer debt balance that you are carrying and also avoid taking on any new debt. Consumer debt instruments include: credit card balances, car loans, and personal loans.Debt obligates your money to be directed elsewhere other than towards your own wealth building. Click To Tweet
2. An Emergency Fund
Investing naturally carries an element of risk regardless of the what you choose to invest in. This means that building and having an emergency fund is important in order to create a buffer between yourself and any possible market fluctuations. This is also it is always recommended that you avoid using money that you might need in the short term for investing money, since not all of your investments may be easy liquidated if you need them to be.
Additionally, should you lose your primary source of income, liquidating your investments prematurely in order to cover your living expenses will put you at a disadvantage in realizing the full return from your investments.
What are you investing towards? Is it for your own retirement, to purchase a home, or do you want to start your business? Identifying exactly what is it that you are investing towards will help you to determine what level of risk you should assume, where and what to invest your money in, and helps you to create a better investment strategy overall. Setting clear, specific goals will also serve as a benchmark for you to measure your progress against and will clearly highlight if your current strategy is working or needs adjusting.Setting clear, specific goals serve as a benchmark for you to measure your progress against. Click To Tweet
Finally, you need knowledge. Some knowledge can be gained only from getting practical, first-hand experience, but there are still a few things that you should know before you get throw your money in the ring. Take some to learn about the different investment instruments that are available to you are and the level of risk that each one carries. You should also seek to identify your risk profile and familiarize yourself with basic financial market jargons and and investment strategies. Simply put, become as verse on matters of the market as you possibly can before you enter it.