Home Investment Education Investment Guide Before You Start Investing
Before You Start Investing
Written by Kenny Foo   
Thursday, 12 February 2009 22:04

A lot of young investors will have this question in mind - ' How do I start investing?' as if they were born instinctively with investment knowledge.Some young investors even feels that investing is similar to gambling or playing the lottery, which is definitely a wrong mindset for investing. In fact, there is a question that those young investors should ask themselves before they start investing - ' Are you ready to start investing?' . There are some steps that those young investors should take before they start investing.

Do you have your mindset ready to start investing?

The first step a successful investor should take is to learn what it means to invest.As stated previously, investing is not gambling or playing a lottery. Although it is true that some investors may gain or lose huge amounts of money in a short period of time, but the majority of successful investors realize that investing consistently over the long-term is the best way to ensure yourself financial security.It also means that the longer period the investor invests consistently on a investment product, the safer the investment will be.When it comes to investing, time is the most powerful asset. The investors have to accept that investing is a long term and on going process. As long as the investor accept it, the investors are ready to start investing in his mindset.

Do you financially ready to start investing?

Nowadays, more and more young teenagers are in debts especially on credit card debts. Start investing shouldn't in the investor's mind if the investors are in debts as it is always better idea to pay off debts before the investors start investing . By paying off debts like credit card debts, the investor actually guarantee a great return by stop paying the interest of the debts from his pocket.For examples, if the investors pay off the credit card debts, he can guarantee a return of 15-22 % by stop pa,ying the interest.Other forms of debt include financial aid, car payments,  and bank loans.Although the interest of these debts might not as high as credit card's interest, but it is something that investors need to take note and cannot be neglect. In fact in reality, there are some loan like car loan and house loan that you might spend 10 to 20 years to get rid of it. Is it mean that you need to wait 20 year later after you get rid of your house loan and car loan and then only start investing? The answer is NO. My advice is to clear all the high interest loan before you start investing while the bench mark for high interest loan is house loan interest. It means that all the loans that have higher interest than house loan interest are consider as high interest loan and it should be clear before the investors start investing. The best is to learn the skill to calculate and weight the investment return of every option to find the best options.

Do you ready for emergency before you start investing?

When the investors start investing their hard-earned money in any investment products, the money should be already allocated for a long period for investment purpose. In case of emergency, the investor might need to pull out the money and spoil the whole investment plan. Hence, most financial planners suggest all the investors to have approximately 6 month's salary saved up in a liquid account like saving account or fix deposit as emergency fund for any emergency case. This will prevent the investors to pull out the money in case of emergency and spoil the original investment plan. Besides, as an effective investor, the investor should not just put the money in normal saving account, but should find the best option of liquid account to put the emergency fund as long as the investor can take out the emergency fund anytime without impacting the value of the emergency fund.

These are three questions that all the young investors should ask themselves before they start investing. All the investors must ready these steps before they start investing.


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Last Updated ( Monday, 02 March 2009 10:03 )
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