Investing

How To Know When You’re Ready To Invest

Stock Market

When I was about 20, I decided to take a trip into the world of investing. I knew a little about it after researching investing tips and such on the internet. I ended up opening a Sharebuilder account and purchasing some stock with my tax return. After a few months I became low on cash and wasn’t financially prepared with a budget or emergency fund. I ended up selling the stock and put up my investing shoes. During that trip the stock actually lost money and I also had to pay a fee to sell it. As you can tell I wasn’t prepared to invest at all.

Do you have a budget?

I went the wrong way on the financial railroad. I should have first set up a budget to get my spending straight. I was definitely not spending my money on what I should have been and didn’t have any money to save at the end of the month. Now that I have a budget set up to follow and I’m not spending frivolously, I’m one step closer to be ready to invest again.

Do you have an emergency fund?

When I became low on money I had no place I could pull money from other than my investment account. What I should have had was an emergency fund. If I had just $1000 in a savings account I would not have had to sell my stocks.  Having a cushion to keep you from selling stock to survive is important. Now that I have that available to me I’m about ready to invest again.

Do you have any consumer debt?

At the time I didn’t have any credit card debt so I didn’t have to worry about this. But if you have any consumer debt it’s much more important to pay down than to invest.

Now it’s time

Once all of that is taken care of you can start learning to invest. Research on the internet the different types of stocks and once you feel comfortable that you know what you’re doing then open up an invest account and start investing.

The fees to invest can get high so if you don’t have much money to set aside like me, you can put a little bit of money into a savings account every month and in a couple of months make a stock purchase. That way the fees don’t take as much out of your investment as if you were to purchase stock every month.

If you’re interested in learning the stock market, check out my eBook Your Guide To Investing

Have you had any investment mistakes you’ve learned from?

Comments (8)

  • Hey guys! Bumped across your blog on Twitter! Great info and insight…and I love your blog’s theme and message! This post actually motivated me to write another post…I’ll let you know when I put it up on http://www.moneysmartradio.com . I’d love for you guys to drop by and even consider being a guest blogger for us! Talk soon!
    .-= Matthew´s last blog ..Money Smart Week 2010 Begins Today! =-.

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  • Good info. I love hearing other people’s stories about how they began investing. I started at age 21 signing up for an automatic investment plan with a mutual fund company where I made $50 deposits a month into a Roth IRA. I felt it was important to find a balance of saving emergency cash while also investing a small amount regularly to develop the discipline. Time is on your side while you’re young when it comes to investing. Never underestimate the power of compounding. I’m glad I stumbled upon your blog. Keep up the good work.
    .-= Chad Smith´s last blog ..Health Care Reform Scams =-.

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    • Thanks for the comment. I wish I had the discipline you did. I agree, compound interest is very powerful. I think more young people should take advantage of it.

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  • Great title-important key points. Thanks for sharing your experience, hope it helps others!

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    • Thanks, me too. My mistakes are other peoples lessons.

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  • Your first trip into investing sounds a lot like mine. It is funny that you ended up with a sharebuilder account because I started there and moved to first trade, but the result was the same. I ended up losing money, then had to pay to sell the worthless stocks that i purchased.

    It was a learning experience. And I definitely didn’t have any of the three things that you mention here. Currently, my goal is go get rid of my consumer debt. That is a weight that is pointless and I need to dump….ASAP!

    Thanks for the reminders because after I dump the consumer debt, i am off to build an emergency fund. Then once I am ready to invest, I will probably build another emergency fund again. LOL

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    • Yea, it’s sometimes good to experience those failures so you learn from them next time you try.

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  • The first investments should be low-risk instruments that you’re not very likely to lose money on bonds or mutual funds, for example you probably will earn a relatively low rate of return on the investments, but giving up the potential of higher returns for more security is worth it at this stage.

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