Everyone knows that it is important
to invest your money in order to make it grow. Hiding it under the mattress doesn’t work. Before you invest, you need to learn some basic concepts in
order to get started.
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Be sure you have three to six month’s expenses in a savings account or
money market fund. This money is for emergencies only. (E.g. If your monthly
bills are $2,000 per month, you need to have from $6,000 to $12,00 in cash
before you invest anything.
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Carry adequate life insurance on the breadwinner. If you cannot afford
the insurance you need, you cannot afford to invest.
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Establish a reason for investing. Make investing correspond to a purpose
or goal. If your goal is investing for retirement, paying off a mortgage
early, for travel or income, it will be easier to invest with that in mind.
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Do not invest for any goal that you want to meet in less than three years.
Investments are long-term, not short-term. Three years is not long for any
investment.
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Become educated. Read as much as possible about investing. Understand
the concepts. Read financial pages and the business section of the newspaper,
even if you do not understand all that you read. Eventually it will make
sense. Attend seminars and classes to gather information, but resist the
temptation to invest as a result of any seminar you attend.
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Establish a relationship with a professional investment adviser. A Certified
Financial Planner (CFP) will be your best resource because this person is
trained and educated to teach you as well as advise you. Be prepared to
pay the CFP for their time -$50 to $150 per hour.
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Make up your mind that you will invest every month. Decide on a set amount
and invest it faithfully. As your budget allows, or your income increases,
increase your investing.
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Stick with your investments. Resist the temptation to sell when the market
gets bad, or when they have a bad year. All investments will have ups and
downs.
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Diversify. Don’t put all your investments in the same area: all real estate,
or all CD. Mix it up. Diversification cuts losses and increases returns.
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Reinvest all of your earnings. Don’t spend dividends. Let them be added
to your account so they can grow.
