If financial independence is one of your goals in life, you will almost certainly have to invest your money to achieve it. Investing allows your money to work for you, rather than sitting in a checking account and waiting to spent while inflation eats into its purchasing power. Before you can invest, though, there are some things you should take into account. Here are the
Define Your Goals
Before you put a single dollar into your investment portfolio, you need to know exactly what your goals as an investor are. A portfolio constructed for long-term, low-risk growth that will serve as a retirement fund will look very different from one built to optimize your short-term cash flow. For this reason, it’s a good idea to know precisely what you want to get out of your investing activity before you start.
Take Stock of Your Resources
You can only invest the money you don’t spend elsewhere, which is why it’s a good idea to create a monthly budget that allocates a certain amount of money to your investments. This money should be invested after your essential expenses have been covered, but still leave you some extra discretionary cash to spend as you please. Many people adhere to the idea of investing 10 percent of what they earn, while others try for more ambitious targets. The amount of money you can invest will depend on the current balance of your income and expenses.
Find the Right Assets
The assets you choose will vary depending on your financial goals. For long-term growth, consider blue chip stocks with a long history of strong performance. If you are too risk-averse for the stock market, a high-interest savings or money market account may be a more comfortable place to get started. For cash flow, assets such as dividend-paying stocks or rental properties will likely be the best options.
Remain Consistent and Look for New Opportunities
Unsurprisingly, investing is a numbers game. If you want to achieve financial success, you’ll need to consistently allocate money into your investment portfolio to allow it to grow as quickly as possible. While you increase your holdings, it’s also important to remain open to new opportunities. If the assets you choose initially don’t perform well enough to remain in your portfolio for the long haul, you’ll need to be able to find better alternatives before transitioning out of them.
Reaching success with investing is a long and often difficult process. If you start out with a good understanding of your personal goals, a budget that will allow you to invest regularly and the motivation to remain consistent, you should be able to see robust portfolio growth over a long enough period of time. Remember to always research assets thoroughly before investing in them, as investing in an asset you don’t fully understand is one of the most dangerous traps you’ll face in your investing career.