Can Investing Go Wrong?
Investing can be a powerful tool -right at your fingertips! With the right research and careful consideration, people have used investing as a way to grow their money. This growth can allow households to save for big expenses or to keep a solid emergency fund on hand. Whether this is for a down payment on a new house, a child’s ever-growing college tuition bill, or in the case of a rainy day, there are many reasons why investing can help people achieve their own personal financial goals. However, what happens when this goes wrong? While investing provides the opportunity to multiply funds, it also has the capacity to decimate funds and leave you stranded.
Even just one poor investment has the potential to lead to a devastating financial loss. This has the power to pump the breaks on your entire investment venture! If your investment accounts have been depleted or tied up, you no longer have the capacity to make other investments – regardless of how well you have researched.
While this can be a powerful learning experience, it is a learning experience that everyone would be better off avoiding! However, this cautionary tale should not keep you from investing! Rather, this should encourage you to plan ahead and make smart investment choices. Keep reading for tips and tricks on how to make smart investments – even as a beginner!
Research
School is a tool! Take the time to really understand the different aspects of investing. Your public library is a great place to start. Consider reading a few books on the basics of investing. The “Intelligent Investor,” “The Little Book of Common Sense Investing,” and “A Beginner’s Guide to the Stock Market” are all great titles to consider! If you are not an avid reader, consider exploring a few investment podcasts. “Invest Like the Best,” “BiggerPockets,” and “Planet Money” are all popular podcast options. These podcasts do a great job of explaining some of the complicated inner workings of investing in layman’s terms while also educating and providing advice for current or future investors.
Goal-Setting
Take some time to reflect on your investment goals, and consider how aggressively you want to invest. What do you want to gain through this process? Are you looking for a small way to supplement your existing income? A new hobby? Or are you perhaps willing to invest aggressively regardless of any potential loss?
Once you know what your goals are, this will help you map out an investment approach strategy that you can feel both happy and comfortable with.
Risk Tolerance
This is a very important term with which to familiarize yourself. Carefully think about how much you are willing to risk in this process. In addition, make sure you consider what the actual repercussions are of any potential loss.
Budget Wisely
To piggyback on the above point, make sure that you have money to cover your life expenses, even if you were to suffer a loss from investing. Any money that you invest should be money you are willing to lose. A smart tip is to make sure you have at least 3 months’ worth of living expenses in a separate savings account. Sit down and calculate your monthly expenses. Determine how much money you need for rent, utilities, food, and travel expenses to and from work for the entire month. With this safety net in place, you have an emergency fund that you can dip into if you were to suffer a large investment loss.
You should also have a handle on any existing debt before you begin to commit capital to investments. Have any credit cards, personal loans, student loans, title loans, and equity loans either paid off or with a plan in place to have them paid off?
Play the Long Game
Typically, with investing, a long-term perspective is most helpful. The market can shift and change at a moment’s notice. Market trends come and go. If you are in the investing game long enough, you may even see trends re-emerge. This is also why it is important to keep a well-diversified portfolio or a portfolio that is composed of different types of assets. Simply stated, make sure you don’t put all of your eggs in the same basket!
Stay in the Know!
Along with initially educating yourself on the foundational concepts of investing, it is important to keep yourself abreast of new developments in the investment field. Keeping yourself informed does not need to be time-consuming!
Following popular Instagram influencers on Instagram can be a great way to stay informed on your daily scroll. Steve Chen (@calltoleap), Karan Lohiaa Finance (@karanlohiaafinance), and James Coupland (@jamesproperty) are all popular investors worth a follow! If you are looking for additional resources, @financialtimes, @bloombergbusiness, and @worldeconomicforum are also popular investing accounts!
While the idea of investing can seem intimidating, do not be deterred! Investing can be a way to financially empower yourself and pave your own path to financial freedom!
