Before you decide to save and invest your money, you need to evaluate the risk against the potential return that you will receive. It is best to both invest and saves your money at the same time. The difference is that when you invest, you have a much higher possible return, but also an increased risk.
Every day you are making financial decisions that impact your life. In order to be a thriving investor, you need to make investing and saving a part of your daily routine. Many ask how to save money to use for investing. You will be surprised how little savings it takes to begin your path to riches. You might invest $20 or you might invest $1000. You need to invest an amount that you feel comfortable with after all of the bills are paid.
Before Investing Money
Before you invest money, make sure you have prepared the following important things. Make sure you have paid all your debts or liabilities. Make sure before you invest you have your cash reserve or the emergency funds needed to help you in case there is an emergency so that you will never pull out your investment.
The ideal amount of emergency funds should at least 3 to 6 months of your income. So, if your income is $2,500 per month. You should have $15,000 emergency funds good for 6 months.
You should also have to buy life insurance. Life insurance is for protection. You need a life and/or health insurance just in case something bad happened to you. The insurance can help your family to recover from financial losses in case you died or fall sick.
The ideal life insurance coverage should at least 3 years of your total annual income. If your annual income is $60,000, you should buy life insurance that has a face amount of $18,000 good for 3 years to help your family to recover from financial losses.
After you have paid your debts, have emergency funds and bought insurance, it’s time to know your risk appetite.
Know Your Risk Appetite.
It always depends on your age, of course, if you’re still young, you can take high risk and for the mid-40s to 50’s you have to take a medium risk and for 50s and above, they should only take low-risk investments.
- For low-risk investments, money market funds, time deposits, and bonds are appropriate investments.
- For medium risk investments, a combination of bonds with equities is appropriate investments.
- For high risk, you can choose to invest purely on stock equities.
Make an investment Goal.
After you analyze your risk appetite, you have to make an investment goal. What is an investment goal? It is goal wherein you should know the purpose of your investments, how much should your investment cost you every month or annually. When should you start investing and when is your plan to redeem your investments.
Take the investing Action.
A plan is good if you work for it. You can never see a result of your investments if you didn’t work your plan. You have to take action, just do one thing at a time. From opening your investment account, funding your investment account. And if you choose to invest in the stock market, you should buy your first stocks, you don’t need to be afraid. All is easy especially if you really want to grow your money. Just ask the financial advisor or financial experts, there are advisors in the bank or any financial investments firms.
Achieve financial freedom.
Saving is good because it will teach you the habit of managing your money. If you are a disciplined money saver, you will also be a disciplined investor. Set aside money from your salary or income every month and fund your investments account such as mutual funds, stock brokerage account or fund your savings account intended to use as a business capital.
In conclusion, It is highly recommended to do your math in parallel with your research project. Do not depend on other’s research because they may not be accurate as what you hear. Probably it is not wise t believe everything that gets into your ears. When you assess the risks and rewards of investing your money in a particular area, be sure to be reasonable enough to distinguish the advantages and disadvantages. Do not invest your money in a hurry rather stop for a while, think twice and then take the decision because every decision you take today is going to influence your tomorrow. In short, an investor has to be wise enough in evaluating all the factors involved in investing money. Better his decisions better are his chances of high returns.