How do I invest? Getting the basics right

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Investing is something that you should go into with your eyes wide open. If you want to get it right, you can’t just jump in and hope for the best. It’s your money you’re investing, so you should make sure you do everything possible to protect that investment and encourage it to grow. To help you out, we’ve put together this guide to get you started in investing, covering all the basics from getting rid of debt to how to buy shares.

Why invest?

Most people invest to get some kind of return. While there are other reasons to invest, getting a good return on your investment would probably be the biggest attraction to the investment game. In order to maximise that return, you will need to learn how to invest and what to invest in.

Before you start investing

If you have any high interest debt, such as credit card debt, it’s usually recommended that you pay off that debt before you start saving or investing. There’s no point getting a certain return on your investment if that return is being negated by the interest you are paying out to your credit card provider.

Knowing how much to invest

There are different views as to how much a person should save or invest. A common recommendation is to save/invest about 10% of your total income, however you may be able to save more, or you may only manage less. Create a budget, see where you can cut back, and get an idea of how much you can put into your investment.

If you put away that chunk of money when you get your paycheck, you may find that you don’t miss the money during the month. If you aren’t able to put away that much, try to work on putting away more each month and working up to it over time.

Setting investment goals

The best investments are planned and researched thoroughly. If you want to get the most out of your investments, set yourself goals to achieve. These can include what you want to get out of your investment, when you want to see a return, what kind of investments you want to make, how much you will need to put in to achieve your goals, and a back-up plan if things don’t go as expected. Using an investments calculator can help to set achievable goals.

Knowing what to invest in

The sixty-four million dollar question. What do you invest in? Knowing what to invest in takes time and quite a lot of legwork. You will need to research the market, as well as the kinds of investments you can make, and the companies you are looking to invest in. Be wary of get-rich-quick investment options, and always make informed decisions. After time, you will get a feel for how investing works and what kind of investments work for you, making these choices much easier.

Knowing how to invest

As always, working out how to invest will take some background research. Perhaps you want to use a broker, perhaps you want to do your own trading via an online trading platform, or maybe you want to invest in something like a starter ‘share-pack’ or a managed fund. Work out what works for you, compare your options and see which one works out best in the long-run.

Do you have anything to add about the basics of investing?

Photo Credit: LievenVM