Wednesday, May 25, 2022

You want to start investing? This is what to consider

Investing for Beginners: When you’re just getting into investing, all the information on what to do when you’re a beginner, and the options available to you can seem overwhelming.

The primary objective of investing depends on an individual investor’s financial goals. Although the ultimate goal of all investments is to earn money, the method you use to invest money can vary dramatically depending on whether you’re a dividend investor or a real estate investor and whether you prefer the stock market or passive income investing. The amount of risk you can bear, along with your investment time horizon, also plays a role.

Chances are you’ve got more than one goal competing for your attention.

While the awareness around the importance of financial planning for a better future is rising, there still prevails confusion around how to go about it. Essentially, there are 2 parts to financial planning. The first one is about safeguarding you and your loved ones against unforeseen circumstances, such as loss of job or a medical emergency. The second aspect is to building capital to meet financial goals. These goals may include buying a house, taking care of your children’s education and acquiring land etc.

The main idea is to prioritize. Each individual will have slightly different priorities, but no matter what those priorities are, retirement and your emergency fund will come first. After that, you can focus on your other goals and building wealth. Once you determine your priorities, you can create a chart or excel sheet that lets you track your progress on your goals. Having a solid plan in front of you will make it easier to stay on course.

How you can buy a plot with your Sh. 30,000 salary

Create an emergency fund, save for retirement or a child’s education, build up a down payment for a home—when you’ve got multiple goals, where do you focus? Many investors struggle with the concept of “who gets paid first.”

Start by making a list of all the things you need to make you feel secure and fulfilled — in the short term and the long term.

Short term goals may be to buy a car, pay for a wedding or vacation, or pay for some home repairs.

Longer term goals may be to get out of debt — like paying off loans or a mortgage, or paying for your child’s education or saving for retirement. Or maybe it’s to buy that second home.

Whatever you hope to accomplish, narrow the list down to approximately five goals.

It is common to receive advice to put money into savings, but many people do not know where to go from there. It is important that the money you are saving has a specific purpose so you can find the best way to make that money grow and begin building wealth. Understanding the purpose of each kind of savings and investment, along with the best timing of each, can help you know how to prioritize as you begin to put money away.

Note, before you become focused on saving money, make sure you first get out of any consumer debt. The interest rates on credit cards and most other loans are much higher than what you can earn on typical savings accounts.

Once you are set on investing, be skeptical. This is because you can find investing advice just about anywhere — books, blogs, that friend of a friend with a “hot tip.” Approach everything with a healthy dose of skepticism, especially when it seems too good to be true.

You shouldn’t expect to get rich quick through investing or find some system that helps you predict when stocks go up and down. Not only can lousy investing advice cost you money, it wastes your time as well.

You should start investing now since the best way to start building wealth is to get some skin in the game. Make low-risk investments and invest at least a little more month after month.

You’d have a hard time finding an investor who wishes they’d started later, but you can find plenty who wish they’d started sooner.

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As you work to build wealth, it is important to have goals in mind for this money, too. It may be retiring early, being able to help your children through college, or purchasing a vacation home. You may want to leave a good inheritance to your children.

You’re going to see investments lose money. The market has its up and downs. What’s important is that you don’t let your emotions get the best of you when your investments take a hit.

New investors make this mistake all the time. They invest when things are going great because they want to hop aboard the money train. Eventually, there’s a slump. Seeing the value of their investments go down, they panic and sell low.

It’s never fun to lose money, but here’s how you can prepare yourself for these downturns:

Only make investments when you believe in their long-term value. Don’t micromanage your account. You don’t need to check it every day.

Remind yourself that the value of your investment now isn’t what matters. It’s what the value is 10, 20, or 30 years down the road. Prioritize low risk, high return products such as land!

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