Are you ready to invest?
The most important factor when beginning an investment stratergy is not which Fund is going to give you the highest return, or the quickest result. These factors are certainly important and there are many funds to choose from, but there is an overiding factor that must be addressed before the new investor can succeed in any investment venture.
Investing within your Limits.
Discipline in being able to comfortably allocate an amount of money specifically for the use of investing and then sticking with that allocation. That is the key to to investing for the long term which results in steady growth and avoids the stress that can happen when things dont go according to plan in the short term.
The difficulty is in the investor seperating investment funds from living expenses and investing more than he should hoping to make a quick ‘killing’ and then pay it back into living expenses.
This approach however more often than not can lead to the very opposite thing that the investor is wanting….more money and a stress free life! At the very least it leads to poor money management skills which will limit the long term returns even if things do go well.
Budget:
Yes it has been said many times before. And yes it can be tiresome. But if you do not sit down and dilligently work out your daily living expense budget you will never know just how much you can afford to put aside for investing purposes. You MUST do this.
If you find that you have nothing left after allowing for all your living expenses then you are living beyond your means. It is imperative that you have at least 10% of your net income left over to invest with. So…
Cut back on dicressionary items that you could do without. There are plenty of resourses on the internet to help you do this. This may be uncomfortable to start with but the long term rewards are well worth the short term discomfort.
Although it takes some work to set up, to live within a budget not only frees up the needed funds to invest with but is somewhat liberating in your everyday life as you know exactly what you can afford and when you can afford it. You are not then taken by surprise and consequently stressed out when an unexpected expense arises.
Borrow:
Not a good idea for the beginner. Even if you think you are onto a good thing. Even if you can borrow at 0% interest. Maybe later on when you are an expert at investing you can weigh the risks and decide to borrow, but when starting out stick to making your budget work.
Records
Two things here.
Keep good records
1. Keep good records.
2. Keep good records.
As with budgeting living expenses, keeping detailed records of your investing is critical.
As we all know, things happen! The longer the time frame the more likely that things will happen. So you you need to know exactly where you stand with your investments so that emergency withdrawals can be made if neccessary.
If you have followed good principles you will have diversified your investments and good records will tell which one or ones you can withdraw from with the least amount of damage to your portfolio. When the crisis is over endevour to to rebuild back to where you were using the now ingrained disipline of budgeting!
To disregard the above advice is to be a gambler not an investor!
