Investing can be one of the best options to make your money grow. It may not guarantee that you’ll accumulate wealth quickly, but it’ll keep you secure financially. If you’re planning to jump into investing, here’s some valuable financial advice you need to know and consider to help you become a wise investor and get your money management correctly.
1. Invest in Yourself First
Some people forget the fact that investing money isn’t just having your money work for you. Investing is also related to educating yourself on money management or skills that can make you a successful investor, or an individual with highly paid skills.
Skills like project management, mobile app developing, investment calculators and cloud computing are some that you can begin with. You may also start looking at this list of high income skills, then evaluate which among them is most doable for you. Remember that you are an investment, and you are your most valuable asset, that’s why you need to keep your money safe.
2. Identify What Type of Investor you are
You have the power to choose any type of investment you want for yourself. You can go to real estate, be a businessman, or get into the stock market. If the stock market is where you want to invest in, you might want to consider assessing what type of investor you are first. By doing so, you’ll be able to choose which stocks to buy and what you need to avoid.
For example, if you’re an impatient investor, buying stocks that barely move won’t be the best option for you. It will only trigger your impatience to the point where you’ll just sell what you bought even if it hasn’t reached your target sell price yet. Also, keep in mind that a good inversion implies having your money safe in spite of the risks of investing.
3. Set Your Short-Term and Long-Term Goals
Before starting with any kind of investment, always think about the reason why you want to invest, first and foremost. Also, think about the things that you want to achieve, and when you’re planning to accomplish those, to get this done an investment calculator is always a good idea.
Once done, you can group your answers into those that can be done in less than a year or those that might need a longer period for commitment, that’s the most basic concept of money management.
Short-term goals are the things that you would like to achieve or accomplish in a year or so. These can be your dream vacation, a car, or additional investments, among others. Meanwhile, long-term goals are the things that you want to achieve over time, such as the life you want after retirement or anything that you may need many years to accomplish.
Identifying your short-term and long-term goals is crucial as these are going to be your motivation as an investor.
Related: 8 Easy Ways to Start Investing with Little Money
4. Start as Early as you Can
There’s no right time in investing. You don’t have to wait until you save tons of funds before you start your investing journey. You can even find ways to start investing with small capital. You can invest little by little and gradually grow your capital. As an investor, you shouldn’t underestimate the power of compounding.
5. Don’t Ignore Investment Fees
This is the most neglected area by some investors, not realizing how much they affect their investment returns. Small fees can be huge when you add everything up.
If you have a broker, they may charge different fees on your account over time. They may also charge transaction fees for every trade you make or subscription fees for premium accounts. An investment calculator is a useful tool that can help you determine these numbers and prepare for them ahead of time.
6. Diversify Your Investments
There are many types of investments that are available to everyone. The Internet allows investors to conveniently invest in different industries. You can now invest not only in the stock market, but also in real estate and cryptocurrency, among many others.
Diversifying your investments is highly recommended as it’ll save you from losing everything you put in a single basket. In case one of your investments fails, you still have other investments left that may cover your losses.
Related: The Right Mindset for How to Invest
7. Make Sure That you Have an Emergency Fund Before Investing
It’s important to establish an emergency fund before you go on investing money as unplanned expenses can ruin your investments. This emergency fund will keep some of your money safe.
For example, if you invested in the stock market without an emergency fund and then something happens, you might be forced to liquidate your investment immediately. This will negatively affect your stock investment, especially if the current price of your stocks is lower than the price when you bought them. Having an emergency fund prevents this from happening.
8. Avoid Deals That are Too Good to Be True
There are bad people on the Internet who want to take advantage of new and aspiring investors. They come with several schemes to lure innocent investors who are simply eager to grow their money.
Most of these schemes are related to cryptocurrency investing because of its popularity. In the cryptocurrency scheme, for example, scammers will say that they’ll use the money they’ll take from you in trading. As a return, you, as an investor, will get half of the profit. But, if you know how risky day trading in cryptocurrency is, then you’ll know that the offer is too good to be true. You should immediately reject the offer.
Therefore, you should keep in my mind that you must understand how your prospective type of investment works before jumping into it.
9. Identify Your Investment Budget
Only invest what you can afford to lose. This way, you won’t go broke in case your investment failed.
Also, it’s a good financial advice to never let your emotion affect your investment strategy. There are stock investors who’ll try to invest more if they see that the stock value keeps on going up. They’re so excited about the increase until they realize that all their money is into the stocks already. Once the price goes down, they’d lose everything.
This is why you, as an investor, should set a limit on your investment budget and only invest what you can afford losing.
Related: Investment Lessons Learned From Warren Buffet
Remember the List And Invest Wisely
At this point, you should now be ready to invest. The ones enumerated above aren’t hard rules in investing as you’ll discover different strategies along the way. But, as a starter, feel free to go back to the list above and be reminded of the wise tips before you jump into investing money.