Starting Your Financial Life? 6 Tips on How to Start Investing

Just when is the right time to start investing?

Is it after graduating from college? As soon as you get your first paycheck? The moment you turn 18?

In truth, there’s no standard timeline for becoming an investor. The Oracle of Omaha bought his first stock at the tender age of 11 — three shares of Cities Service Preferred for $38 per share. So if you think you’re too young or too broke, think again.

And if you’re ready to take the plunge, it’s crucial to arm yourself with the right information. Continue reading for tips on how to start investing.

Develop a Passion for Investing

Look around. The most successful investors are those who’re passionate about investing. When you’re passionate about investing, it’s easy to wake up every morning and keep looking for opportunities without burning out or giving up.

As such, the first step to being an investor is to nurture your passion for the practice. Read books about investing, watch movies such as The Big Short, follow your favorite investors on social media, and attend investment conferences.

Whatever activity stirs up your passion, just don’t start investing if you don’t feel excited about it.

Build Capital

Yes, Warren Buffett only needed $38 to make an investment, but that doesn’t mean you can start investing with a few bucks. Times have changed. Investment dynamics are shifting. Markets are more volatile.

You need to build a decent stash of capital before you can start investing. This means saving more.

If you’re employed, develop a habit of putting away a certain percentage of your monthly income. Call this your investment fund.

Also, consider reducing your expenses.

If you’ve multiple cable and streaming subscriptions, for instance, you can get by with one. If you eat out often or spend money on movie tickets every weekend, there’s no harm cutting the frequency. With fewer expenses, you’ll have more disposable income, which you can channel into your investment fund.

Take Care of Your Debt

Debt isn’t a bad thing. In fact, you need debt to build your credit.

However, it’s not a smart idea to start investing when you have lots of debt – especially high-interest debt – to your name. If you go in while in heavy debt, you could make reckless financial decisions that can affect your investments.

As an example, let’s say you owe $5,000. On the upside, you also have a similar amount in your investment fund. You decide to invest the entire amount in a promising stock, hoping for quick returns so you can keep repaying the debt.

Unfortunately, the stock doesn’t perform as expected, so you have to be patient. But you’re already behind on your debt payments, and lenders are on your trail.

What do you do? The most convenient thing is to cash your stocks (even at a loss) and pay up the debt! This isn’t how investing works.

Therefore, take care of your debt before starting your investment journey. You don’t have to pay it off at once – ensuring you have a sound repayment plan suffices. If most of the debt is high-interest, consider taking a consolidation loan.

Find Your Ideal Investment Markets

From stocks to real estate, mutual funds, bonds, and exchange-traded funds, there’s a wide range of investment options.

The question is: where should you invest your money?

A common mistake most newbie investors make is going for the investments with the highest return potential. However, in most cases, such investments are also extremely high-risk. Without adequate experience, you can blow your money.

Your strategy should be guided by your passion, investment goals, and the size of your investment fund. If you’re passionate about the stock market, this is where you should put your money. Focus on finding low-priced stocks with high growth potential.

If you’re passionate about real estate, focus on this market – at least for now. You’ve got a host of options, from investing in rental properties, real estate investments trusts, or even commercial units. On that note, this company can help you determine the value of a property before you buy or sell it.

Leverage the Power of Technology

We’re in the Information Age, which means investing is no longer as difficult as it was a couple of decades ago.

Today, there’s a range of tech tools that can help you forecast the future and make smart investment decisions. Some, such as Robo Advisors, have completely automated the investment experience. They have algorithms that can analyze investment information, make complex calculations, and take investment positions.

As a newbie, you’re free to leverage technology but don’t overly on it. You want to get some skin in the game, and the best way to do so is to make manual investment decisions.

Have an Exit Strategy

Investing is more like making a bet. You’re counting on the market to play out in your favor. However, sometimes even good bets fail.

This is why you need an exit strategy for every investment you make. If things aren’t going your way, you should know how long to wait before you say: “OK, this is a bad apple. Let’s throw it away before it messes up the rest.”

When you have a clear exit strategy, you will be able to get out of a bad investment before it’s too late.

How to Start Investing: Don’t Rush

Investing your money is an effective way to build wealth, achieve financial freedom, and secure your future. But it can be a rocky path, especially if you get started without a good understanding of how investing works.

Luckily for you, this how to start investing guide has the information you need to make sound and profitable decisions. One important thing: patience is key.

And in the spirit of learning, keep tabs on our blog for more investing tips and insights.

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