What is investing? How does it work? How will you benefit from it? These are the basic questions you need to ask yourself if you are contemplating about investing in the stock market.
Investing is defined as expending money with the expectation of achieving a profit or material result by putting it into financial schemes, shares, or property, or by using it to develop a commercial venture.
There are many different ways to make an investment, such as stocks, bonds, mutual funds or real estate, and they don’t always require a large sum of money to start.
1. Before investing, make sure to bring order to your house first.
What do we mean by this? It’s simple. Do not give what you don’t have or give everything you have,
You do not give what you do not have, nor give everything you have. So, make it a point to build your financial stability before considering investing. Jumping into investing without first examining your finances is like jumping into the deep end of the pool without knowing how to swim.
It is advisable to create an emergency fund and a decent savings before you set aside money for investing. Whatever money you decide to put for investment must be an amount you are willing to lose, or if you do in fact lose it, won’t hurt you that much.
Step 2: Learn The Basics
If you want to play the game, you better know how to play. Don’t worry, though. You don’t need to be a financial expert to invest. You just have to learn some basic concepts or terminologies.
Learn the differences between stocks, bonds, mutual funds and certificates of deposit (CDs). You should also learn financial theories such as portfolio optimization, diversification and market efficiency. Read books, follow investing blogs, and find peers who have been in the investing business for quite some time for more practical advice.
Step 3: Set Goals
Once you have established your investing budget and have learned the basics, it’s time to set your investing goal.
Safety of capital, income and capital appreciation are some factors to consider; what is best for you will depend on your age, position in life and personal circumstances. We all have different needs, so factor that in.