Before you start investing, stop and think about what you want to get out of this. Why are you putting money aside in the first place? Are you saving to buy a new car, or to make a down payment on a home? Maybe you are planning for your child’s education, or saving for your own retirement.
Money represents something different for all of us – personal freedom, security or the ability to afford the things we want in life. Having a plan can help you get where you want to be.
Ask yourself these questions before you get started:
What do I want to accomplish?
Look at the big picture and set goals. Attach some dates and monetary amounts to your goals so you have a realistic idea of what it will take and how long it will be until you to achieve them.
What type of investment is right for me?
Each investment has its own characteristics, level of risk and potential return. Knowing your situation will make it easier for you to make the choices that are right for you.
How much risk am I willing to take?
There is no such thing as a low risk, high return investment. Understanding your own ability for risk-taking is very important and may depend on a number of factors such as your tolerance for market ups and downs, when you need access to money, and if you have any other sources of income to fall back on.
Am I comfortable enough to do this on my own?
It’s important to always invest in knowing more. How much time are you willing to spend sorting through investment choices and keeping up with the markets? How confident are you in your investment knowledge and ability to carry out your decisions? If you need some guidance, you may want to seek the services of a financial adviser.
Take the time to develop a personal investment strategy. Your personal investment goals are an important part of this process, maybe the most important part. Your goals will determine how long you need to invest, which can affect your risk tolerance.
This can be a complicated process, and many people will want to do this with the help of one or more qualified professional advisers. Choosing your advisers is a very important step for most investors.