People who want to start investing usually start with looking for a broker. But there are three crucial steps you must go through before engaging with one.
1. Set Financial Goals
There are certain considerations you must make in setting your financial goal. You should think of your reasons for investing, your timescale, and the amount of money you need to achieve your goals.
2. Know Your Risk Appetite
Knowing your tolerance to risk will help you decide on what type of investing you will do.
If you are highly concerned about losses, you can opt for low-risk investments like bonds and investment funds. If you think you can take a bit more risk, you can go for UK equity income or investment trusts. If you think you can take on high risks, you can go for Venture Capital Trusts (VCTs) or land banking.
Keeping abreast of current events will help you deal with risks. Stock Market London advises that investors must access trustworthy finance news to be able to take calculated risks.
3. Get Your Ducks in a Row
You can start investing with as low as £50 per month, but you should be financially stable first. Start by paying off all your debts and try not getting into new ones. Financial experts agree that even if your investments go well, the accumulated interest you need to pay for your debts will be higher than the money you make in investing.
Next is to set up:
- Funds for emergencies and foreseeable expenditures
2. Fund for investing
The first fund should be at least 3-6 months’ worth of your income or more depending on your needs. The second fund should be an amount you are comfortable not using for at least five years. Setting up funds like these will help you not pull out your assets from the stock market before they reach their full potential.
There you have it. Just follow these steps to have a good start to investing.