These days, everywhere you look on social media or online, you’ll find ads or posts created around investing and trading. Even social media influencers are trying to make money by getting their followers to join a platform and start trading. Most of these ads will promise you that you can make a lot of money from investing but there are risks that you need to be aware of and things you need to consider first.
Below, we thought we would discuss some of the things that you should consider before investing. This will cover everything from the types of investments that you can choose from to the importance of seeking professional advice when you need it. This way, you’ll know what you’re doing, and you can only invest if it is right for you. Read on to find out more about this.
Check Your Finances
First things first, you need to make sure that you are checking your finances thoroughly before you start investing. This is something that you would want to do before you make any kind of large purchase and if you are going to be investing a lot of money, you cannot skip this step. When looking at your finances, think about things like your incoming funds and your outgoings. Do you have a mortgage and car payments to keep up with? How much do you usually spend from month to month?
If you are living pay check to pay check then investing is probably not for you. Yes, that extra cash that you get from trading can come in handy but if you can’t afford to cover any losses then you could be putting yourself in a poor financial position. If you aren’t very familiar with your finances, then it might be useful to get in touch with an expert who can help. Financial advisors can look at your funds and decide if investing would be the right move for you or not. Spend some time analysing your current financial position and once you have done the audit, you can decide if you are in a good position to invest or not.
Do You Understand Investing?
One of the great things about investing in today’s society is that there are some great tools out there that can help you to make the right moves and trade the right stocks at the right time. However, not all of these platforms do what they promise to do and so you might find that they are best avoided.
If you are unfamiliar with investing and stock trading in general, you should be reading up on how it works carefully before you get stuck in. Just because you have heard of a company that you see on a stock listing doesn’t mean that they are a safe investment.
Tons of new traders and investors make the mistake of diving in headfirst because of what they have seen online. You are responsible for learning more about investing and how everything works before you take the plunge.
The great news is that there are some great resources online that you can use to understand the basics of how everything works. You can watch webinars, YouTube tutorials and even read books that can tell you everything you need to know about investing. If you want to go a bit further, you can even take classes that are designed for new investors. As long as you are educating yourself in a way that makes sense, you can make the right decisions. Don’t skip this step as it can prove extremely useful.
What Kind of Investment Is Right For You?
When it comes to investing, there are so many options for you to choose from. Not only can you invest in stocks and property, depending on your interests but there are tons of options within each of these kinds of investments. You may hear some of the experts talking about how you should diversify your portfolio to really maximise your investments but if you are just starting out, then you should probably stick to just one kind of investment to get to grips with it.
Usually, trading platforms that are targeting new investors will be offering stocks. This is a good place to start if you aren’t familiar with the process but trading and investing in individual stocks isn’t for everyone.
You can also look into ETFs which stands for Exchange-Traded Fund. So, what is an ETF? Well, this is a collection of stocks that you can invest in at once. When you invest in an ETF, you can sell it again on the same day – making it different from a mutual fund.
Before you get stuck in, you must decide on what kind of investment will be right for you. Look at all of the research that you have gathered and make some pros and cons lists for each type of investment. Remember that there are sub-categories within each of these that you must also consider before getting started. If you aren’t sure, you should hold off and do more research to avoid making any big mistakes along the way.
What Is Your Motive?
One of the things that you absolutely must consider when you are getting into investing and trading is the motive that you have behind it. If you simply want to make some more money and get yourself set up for the future, then you have a good motive to get stuck in. However, if you are hoping to pay off some debts with the money that you make in your investments, you are putting yourself at further risk.
The truth is there is no such thing as a risk-free investment, and it is often compared to gambling. While some investment kinds such as ETFs are low-risk, you are still putting your finances at risk when you make that purchase.
So, think about what your motive is and consider the risks that you are facing when you invest. This way, you can decide if this is the right decision for you to make. Don’t let your debts allow you to make rash decisions that could put you in further debt!
You’ll Need Emergency Funds
Before you start investing, you must also consider what you would do if you were to need some emergency funds. The truth is that many of us struggle to put money aside and when the time comes, it can be difficult to find the cash to pay for whatever needs to be replaced or addressed.
Every adult should have savings and emergency funds that they can rely on when things get tough. For many new investors, these emergency funds end up going into unsafe investments and this can be a big mistake. There is a difference between putting your savings into a property that you can sell in the future for a similar price and buying stocks that can fluctuate every single day.
When looking at your finances, look at your emergency funds. If there is any money left over, you can consider using this to invest in the future. If not, investing might not be the right choice for you right now.
There Are Fees
Finally, we thought we would mention the fees that you might come across when you get into investing. This is something that not many people know about, but you must be familiar with the fees before you decide on an investment. Some types of investments have larger fees than others and so you need to look into this a bit further.
While you may have a plan in place of how much you can afford to invest and on what kind of investment, the fees could affect the overall return that you get. One of the most affordable investment options that typically have low fees is ETFs. So, look into this and see if it is right for you or not.
Don’t Rush Into It
You may be tempted to start investing your money or getting stuck into a trading platform, but you need to make sure that you are happy with your decision first. This is your finances that you are dealing with so if you just rush into things, you could end up losing more money than you can afford to in the long run.
We have covered just a few of the things that you need to consider before you make that first investment but one of the most important things you should do is seek advice from a financial advisor. They are typically experienced enough to look into your finances and help you to make the right choices for your own portfolio.
Don’t fall into the trap of joining a platform just because you saw an ad for it on social media. Be sensible with your funds and you’ll soon be on track to getting started on your investing and trading career.
