Before you can start investing the first thing you should do is
make an assessment of your personal financial position. Before
you can invest in anything you need to have the necessary
capital available. Perhaps the best way to tackle things would
be to list all your assets i.e. real estate, savings, cash,
mutual funds etc set against this your liabilities mortgages,
loans and` credit card debt, this will give you an indication of
the amount of capital you have available for investment.
Before you consider any form of investment it is much better to
clear high charging debts particularly if you are not using them
to acquire an appreciating asset, such as the mortgage on your
home. Credit cards, particularly store cards and personal loans
with higher monthly payments should be paid off before you
consider investing capital in the stock market.
Once you are certain that you have capital available for
investment in the next thing is to decide on your risk level, or
to put it another way the amount of volatility in the stock
price that you can live with, and still be able to sleep at
night! The general guideline is that the higher the risk the
greater the potential gain, that is why you should only invest
in the stock market with capital that you do not need for
immediate daily requirements. If you are only prepared to take a
low risk and are happy to accept a correspondingly low return
Money Market Funds would probably be most appropriate for you,
the stock market however offers the potential for a much greater
gain with a correspondingly higher risk.
Once you decide to start investing take it slowly at the
beginning, only invest part of your capital preferably no more
than 20% in one or two stocks, this will allow you to get the
feel of things without risking everything, you may also wish to
diversify your holdings and have a mixture of stocks and bonds
and mutual funds this will have the effect of reducing your risk
and of course will also reduce your potential reward.
The actual mechanics of investing in stocks or mutual funds is
very easy to do, online there are many investment services that
offer up to date information about stocks and once you are ready
to invest it is very easy to find and no-frills online
stockbroker who will work to one very low commission rates. If
you require more information and a high level of service you can
always use of full-service stockbroker but of course this will
involve significantly higher charges.
Providing you take the time to thoroughly researched the subject
before you commit your hard earned capital, stock market
investing can be very rewarding even for beginners.
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