What to know before making your first investment
While individuals can profit from a sound investment, not all investments are created equal. Not to mention, no matter which one a person chooses, there isn’t a perfect one, meaning there’s still risk. Although taking the step to make an investment can be beneficial, it’s important for a person to educate him or herself first.
Determine What’s Most Important
The first step of beginning the investment process is to determine what a person desires as the outcome and how much of a risk he or she is willing to make. For instance, safety is often a top priority for many. They may not possess the funds to risk on a “gamble.” This is especially the case for individuals who don’t have an ample amount of savings. On the other hand, maybe they have a family and every dollar counts. In these cases, safety is a main concern.
For others, the amount of income the investment could generate or the growth potential an investment has could be a top priority. Often, individuals who focus on income are looking to make an investment for their retirement that’s multiple decades away. The same applies to growth. Ultimately, an investment with high income or growth potential will keep up with inflation. This allows the principal to grow.
Keep in mind, if a person is looking for an investment that’s safe, the overall outcome may be slightly lower. However, for those who want an investment that will grow or generate a high amount of income, there isn’t as much safety.
It’s fine to make more than one investment such as in an IRA as well as a trade investment to focus on multiple aspects of the spectrum.
Don’t Monitor Too Carefully
One mistake individuals make who invest in the stock market for the first time is they let anxiety make their decisions for them. As soon as someone sees the stock fall, he or she pulls out because he or she is scared of the risk. However, the stock market changes consistently and just because it’s falling a bit today doesn’t mean this will continue. It’s important for individuals to think rationally before making any hasty moves with their money.
Although some people feel it’s essential to invest early to plan for the future, it’s vital that a person doesn’t risk money he or she can’t afford to lose. Therefore, anybody who doesn’t have a “safety net” should wait to invest or invest in something short-term only. It’s always possible to lose money.
Don’t Hold On Longer Than Needed
It’s important to not get attached to an investment. Thinking rationally is necessary, but it’s okay to sell at some point and reinvest in something else. As one’s financial situation changes, the person may want to start taking risks. At this point, it’s fine to sell and reevaluate both short- and long-term goals. It’s okay to sell when an issue arises that causes a person to need money now, but during this time, it’s necessary to consider the consequences of withdrawing from an investment.
Individuals making an investment should be prepared to go through various emotions.