At first, investing may seem like a daunting and stressful task, but once you take a step back, analyze what you want out of investing and gain some basic knowledge, it is rather exhilarating to invest the fruits of your labor.
Here are five things that every novice investor should understand before taking that giant leap towards investing.
When researching different banks and the investing options they offer, it may seem difficult to grasp, which is why it is very important to understand some of the common terms that are espoused, such as APR, cash flow and term deposits.
There are a variety of ways to get around this. One way is to utilize the different websites that can give you clear, easy to understand definitions of financial lingo, including Investopedia.com, Forbes Financial Glossary and InvestorWords.com.
The other option is to speak with the bank’s customer service representative in order for them to explain what certain terms mean.
Which bank is best for you?
Investors have different needs. Banks have alternative selections to suit those needs. This is why it is critically important to research the banks. Speak with a CSR, browse through their website and/or obtain pamphlets.
Sit down, do not be impetuous and make your decision wisely. If you have friends or acquaintances who invest then attempt to get some information relating to their experiences using the bank you’re interested in.
Do you have the money to invest?
If you have a steady job and income then investing is an excellent idea. However, if you work part-time or are unemployed then maybe you should put off investing for the time being. Although investing is very important for your future, a roof over your head, food on the table and your bills paid on time is more imperative right now.
Analyze your budget
It is easy to start putting money into different investments, but can you afford it right now? Similar to researching which bank is best for you, it is also crucial to analyze your income, your bills and priorities.
If you have a budget, re-examine it. If you don’t, create one and see how much you can tuck away each month. An investor must ensure that he or she has the extra money each month to properly invest.
What are the best types of investments for you? What are my goals?
There are numerous types of investments out there, including mutual funds, stocks, Guaranteed Investment Certificates, term deposits and many others. Take the time to see which one is best for you.
What are my goals? Am I going to have one investment for a long-term goal, such as purchasing a house? Or am I going to put my money into a GIC for a short-term goal, such as a high-priced item?
It is good to lay out your short, medium and long-term goals on paper to fully maximize your investments.
In the end, investing is a fun experience and can be very rewarding. Take your time, talk to your loved ones and make sure you follow these five steps towards your financial freedom.