An independent investment represents the capital that an individual puts into a company, with the expectation of receiving a bigger profit in return. It often makes for passive income throughout variable periods of time, and it’s recognized as a smart way of earning money. It can be pretty scary if you’re just starting, though. There’s a lot of things to consider, a lot to gain, and a lot to lose.
How can we make that first step without risking danger? Well, it is no easy task, but the incredible amount of sources where we can get detailed information and statistics on the subject, and the advisors who made mistakes before us, are making the process more accessible. Here is some homework to do before jumping into the world of investments.
Analyze your situation
For beginners, it is recommended to set aside at least 10 percent of your salary so you can use it to invest. This may not sound like much for some, but it can be the difference between covering your expenses or not. Are you currently living month to month? If that’s the case, you’ll need to get a positive cash flow first.
There’s 2 ways of doing this: you can try to make more money, or you can live cheaper. The second one is a common solution, as it takes less time and creates strong habits that will still be useful when you’re in a wealthy position. Examine your lifestyle, and see if you can make any sacrifices to better manage your earnings.
Know your limits
You should feel comfortable with the strategy you choose to reach your goals, so that sticking to it doesn’t become a problem. There are plenty of investment options, like stocks; a partial ownership of a company that you can sell or get dividends from, or bonds; a loan of money to a company that returns it with interests in the future. They come with their own rewards and perils, so depending on your risk tolerance, they should take more or less weight in your investing portfolio.
Having a good understanding of your investor profile will help you take the best decisions and make everything less stressful. Fluctuations are very common in the market, so you have to be patient and approach them with the right mindset. Acting by emotions can make you lose capital.
Research
In order to succeed, famous investor Warren Buffett explained that he spends days — even weeks in some cases — reading about the companies he wants to invest in so he truly understands everything about them. At this moment, you probably don’t need to spend as much time on this as he does, but getting some kind of background knowledge for enterprises and interpreting it to see if they’ll grow in value is important to guarantee that you’ll really get something out of them. If you want to feel safer and more professional, make sure you have time to spare in research!
Invest in yourself
Before real estate, stocks, business, or anything that you have in mind, comes preparation. Learn about the basics, grab some books about finances, or pay a course if you need to, because these are the most intelligent moves to make when you’re brand new. You’ll learn a lot from experience, but being knowledgeable will reduce the chance of mistakes significantly. It is normal to be confused, but clearing all of your questions and building a strong foundation will make you a confident and efficient investor.
Mastering the art of investing doesn’t happen overnight, but if you have the dedication and the conditions to shape your skills, you’ll be surprised by how much it’ll benefit you in the long term.
