The world of trading, shares, stocks, and bonds is a complex one. While most experts will generally recommend considering an investment strategy at some point in your life, the reality is a lot of people struggle with making the decision to begin investing. It’s often much more reassuring to keep money in your bank account, just in case, than it is to take a chance. Of course, if you’ve looked at all your options, and you’re sick of feeling like your money isn’t going anywhere, it could be the perfect time to push yourself into taking a leap. Today, we’re going to help you answer the three questions you need to know before you take that important next step.
What’s Your Current Situation?
The first thing you’ll need to know before you can begin exploring your possible trading options, is where you stand financially right now. For instance, if you’ve still got debts with interest to pay off, such as loans, and credit cards, then you should deal with those before you start spending money on trades. You can’t always guarantee the money you get back from your strategies will be more than you spend on your loan interest.
You’ll also need an emergency savings fund. This means you have around 6 months of the living costs required kept in your bank account at any given time to protect you if something goes wrong. If you’re in a riskier position, like being self-employed, you might need to consider saving more.
Can You Commit to an Education?
This is an important question, but one that’s regularly overlooked by eager investors. There’s more to getting started in this environment than simply deciding how much money you’re willing to spend. You also need to be willing to dedicate a lot of time to learning, long before you spend anything.
For instance, there are various types of trading to get involved with, and the only way you’re going to know which one is right for you is to research. Penny stocks, for instance, seem like an excellent tool for beginners because they’re low cost, but they also come with a lot of risk if you don’t know how to use them correctly. This is why it’s important to read guides on how to trade safely, and find ways to practice your skills before you begin taking on any risk with real investments.
Do you have a Goal?
Finally, before you can decide if this is the right time to get started with your investing portfolio, you need to ask yourself if you have a genuine goal to work towards. Maybe you have a couple in mind or perhaps simply how much you need to retire eventually. Do you want to earn an income with your cash right now or are you hoping to simply make money in the long-term? Usually, your goals will be dependent on things like how much risk you can reasonably afford to take on. If you’re limited in the risk you can deal with, you might need to consider more long-term goals. If your risk level and goals don’t match up, you might need to wait until both aspects align before you look into actually investing.