If you know next to nothing, how are you going to invest? The first thing you need to know about investing is, how much do you really know? If it’s not a lot, you will need to read a lot to educate yourself.
To become knowledgeable, you need to read the basics. Find out what a stock, bond, or mutual fund is and what the differences are between these three financial products and its variables. Read books on finance and investing.
Talk to savvy investors, watch videos and live presentations. Once you understand the differences and the risks involved in investing in each particular vehicle, you can move forward with confidence.
You can now move on to the second phase of learning about investing. Gain experience by investing in small stocks and learn from both your mistakes and your successes. However, first find out what type of investor you are. Here are some tips to help you find the answers.
As part of your investing activities, establish a game plan and set specific goals for yourself. The answers to these questions will be invaluable benchmarks for you in your business of investing your funds.
o What is your investment schedule?
o In which industry sectors do you want to invest?
o How much funds can you safely use to invest to achieve your goals?
o Have you considered your short-term financial needs or goals?
o Do you plan to live on these investments during your retirement years?
Determine your investing style. Are you a risk taker? Or do you like regular earnings? Consider this thought, will you be able to sleep soundly at night, knowing that your investment is going down and that it will take a long time before it goes up? Or would you prefer to entrust your funds to a fund manager? Do you like minimal risks when investing your funds? Consider what type of risk taker you are, as this will help you choose which financial vehicles to invest in.
How long do you want to spend on your equity investments? Is it only 15 minutes a day? Or consider yourself the ultimate in entertainment spending 7-14 hours a week reviewing financial statements and debating the merits of those actions.
Take a close look at the answers to these questions. If you know what type of investor you are, you can leverage your strengths and minimize the risk on the funds you invest with.