Decided to start investing in the stock market for the first time? Congratulations! You have just taken a big step towards your goals and achieving financial freedom. However, you need to be equipped with the right knowledge to do so. Here is what you need to know before making your first investment purchase!
1. Figure out your investing goals
I love statistics so I’d like to share some powerful ones with you. A Harvard Business study found that 83% of the population does not have goals, 14% have a basic plan and only 3% have written goals. Did you know that the 14% with a basic plan are 10 times more successful than those without?
Ask yourself what you want from your finances. Do you want a home in 5 years? Do you want to travel internationally, long-term? Or maybe you want to retire early? It sounds cheesy, but get a piece of paper out and write down exactly what you want.
2. Understand your risk tolerance
We all are comfortable with different levels of market risk. Some of us would be terrified if we invested $10,000 and it dropped to $8,000, or it may not bother you at all. Have an honest conversation with yourself of where you stand. If you believe you can overcome your emotions and not be scared during a temporary market drop, you are a higher risk investor and therefore will get higher returns. Or you may be a lower risk investor who is happy with small, yet stable gains.
This is important to figure out as it will determine what assets you invest in. You won’t be investing in risky penny stocks if you have established yourself as a low-risk investor.
3. Create a plan of action
Once you have your strategy and goals, it is time to create a plan. This will determine how much you will invest, how often and for how long. This will allow you to be strategic in your investment approach and ensure you only do things that align with your goals. For example, if you wish to buy a house in 10 years with the investment funds as a deposit, you will need to create a 10 year investment plan.
A plan is also useful to keep yourself in check. It will help you remain calm when the market goes down or when everyone around you is buying a certain investment. It will help you to remind yourself that what you are doing is what works for you and your own goals.
Once you have accomplished the three points as above, you will be able to move into your investment journey with significantly more knowledge and confidence. You will be able to invest in assets that align with your goals.
If you’d like to learn more about investing or the stock market, here are some extra resources to build your knowledge:
Thank you to Frugal Beans for giving me the opportunity to write this guest post! It was so lovely to work with them and I hope I’ll be able to collaborate with them again. If you enjoyed this article, please follow me on Instagram @themoneymarketerblog or follow me on Twitter @moneymarketerau.
This Post was written by Ruby from The Money Marketer blog. a personal finance enthusiast and digital marketer. Ruby’s blog is a great source for all things finance. Take a look here!