A simple way to start investing the healthy way. Here is a checklist of items that you should do before starting your investment journey.
Often times, beginner investors just start investing from day 1. While that might yield some good returns, never start investing with a high-flying stock. There are things you need to be prepared, planned and taught before getting into investing. Here we go,
1. Clear bad debts
Bad debts are unnecessary expenses that are not ‘needs’ but ‘wants’ that pose financial struggle like buying a new flat screen TV when you already have a perfectly working one. Or it could be an unhealthy loan that charges more than you would typically make by investing.
It doesn’t make sense to invest in 10% return vehicles if you have a loan of 12%, you are literally leaving money on the table. Pay them off the earliest, particularly credit cards as they charge the highest interest in the shortest amount of time.
2. Setup a rainy-day fund
Anything can happen – good and bad. You can’t completely control what happens, but you can be prepared for the worst. Be it, layoffs, natural disaster or another pandemic like the COVID-19, be financially ready with a rainy-day fund.
The rainy-day fund needs to last at least 3 months and should accommodate for all your family members’ basic needs. Store the fund in a risk free medium, say a savings account.
3. Learn Investing Basics
You are all set to step into investing, but you are not ready to invest yet. You must know investing from every direction first. Start from the basics of investing, asset classes and skill yourself up to do fundamental analysis, technical analysis and risk management on most if not all of the asset classes.
I would advise to go above and beyond on one or two investment niches of your liking/understanding to establish it as the active part of your portfolio.
4. Analyze your financial situation
Sit down and work with the numbers. Take into account your regular expenses, maintenance, cash inflow, projected expenses and arrive at a monthly number on expenses and savings. This will help find your investment capability and risk capabilities which are essential to finding an investment strategy.
5. Identify your investment needs
Most beginner investors do the mistake of going with the trend and fail at reaping the best benefits of investing. While going with the trend can make good returns sometimes, you might not get the expected yield at the right time.
So, identify the needs of investment like university tuition fee in 5 years, retirement in 30 years. This will help you find the right investment medium and strategy.
6. Find an investment strategy
Now with all our findings of investment capacity, risk capability, area of knowledge, investment needs and timeline, come up with an investment strategy that fits you the best.
You don’t have to choose a predetermined investment strategy. No one size fits all, come with a mix of investment strategies that work best for you. Risk factor can be balanced across the portfolio by diversifying the investment across the asset classes.
7. Choose your investment
Find the best investment types, asset classes, and medium of investing for your investment to go. Then start with the analysis on the asset and evaluate all the possibilities. This could be an exhaustive and tedious work, find help from the experts.
8. Build a watchlist
When you have chosen your investments and ready with the money, it is time to invest. But not right away. Long term investments like real estate and pension funds can be started immediately. But fluctuating assets like stocks can wait if you are expecting a dip in the coming months.
Keep track of the latest events, news and be ready to drop in the money whenever favorable.
Finally! It’s time to invest. Start investing in assets of your choice and keep a track of their performance periodically. Stay on the wiser side about the fees/commissions you pay on your investments. Find the least expensive exchange/vendor to invest in as a fee difference of 1% can make a huge difference in long term investments.
10. Invest regularly
We are not done yet! Investing can be interesting before you start. But will look dull and underwhelming as a beginner as you don’t see much returns right away. The best investment are the longest ones managed efficiently.
Commit yourself to a regular investing for the best results. For example, regularly investing on 10% Interest scheme for 30 years will 7x the principle.
Invest in real estate the easy way!
Investing time along with the money is not everyone’s jam. Some don’t have the time, interest or both to spend. They can invest in actively managed funds like mutual funds, and real estate investment funds.
We at GCG real estate have an interesting offer on real estate investing where we make up to 100% ROI by doing price arbitrage within 24 hours.
Book a free call to discuss the specifics of investing in real estate with GCG Structuring.