Investment is something a lot of people know they should do, but few execute it properly. This is a large and complex area of finance, and if you don’t approach it in the right way it can easily blow up in your face! Although you should start early, it doesn’t help if you rush into investing. Here are a few ways to check if you’re ready.
First of all, your current financial situation. Countless people neglect to consider this before investment, and the consequences can be disastrous. If you’ve got a lot of debt and very little savings, then it doesn’t make sense to start throwing your money around. Imagine if you put all that you own into property investment right before the niche suffered a crash! Before you even start thinking of investment, make sure you wipe all your debt. Then, save consistently for at least three months. If you’re self-employed or have an unstable career path, then it should be even more. Both of these steps will free up more of your money, and ensure that the world of investment doesn’t chew you up straight away!
The next point to think about is what you’re intending to do with the money you’re looking to gain. If you want to use it as a down payment, you’ll need to invest differently compared to if you were investing for retirement. Obviously, there are any number of things you may want to use your capital for. Fortunately, there are more general rules you can follow. If you want to access and use the money within five years, then I recommend using a more conservative bank account. If you’re not planning to touch the money until much later, then you can afford to be a little more aggressive. This is where more volatile investments like stocks and mutual funds come in. Just be sure to stay away from retirement accounts unless you’re 110% sure you won’t touch it until you reach old age.
The final thing to consider is the need for a financial planner. While it’s possible to have a lot of success in investing without one, most new investors could benefit a lot from a financial planner. All you need to do with these pros is tell them your financial goals. From there, they’ll show you how you can go about achieving them. They’ll outline all the different options available to you, and the benefits and drawbacks of each one. Don’t assume that they’ll be the miracle cure to your problems though. Many financial planners are self-employed. Like any self-employed profession, this one has been polluted by one or two hacks! Do a little research into investing yourself to make sure you’re not being swindled. If your advisor can’t explain your options properly, then drop them and find a new one.
Work through this post, and you’ll be in a much better position to start investing. I know you might be raring to go, but a little bit of preparation goes a long way.