5 Things to Consider First Before You Start Investing
Written By Lloyd Brian Laurilla
Published on Jul 13, 2021
Reading time 3 mins
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We can all agree that investing is important. Saving is only the first step to reaching a financially worry-free future. The next step is to INVEST. To guide you in making your first investment, we are sharing five key things you need to consider. These five factors will have a significant impact on your investment decisions.
Can your current income accommodate the monthly investment you will be making? The rule of thumb from financial advisers is to invest 10-20% of your income every month. Now decide whether you can fit the said investable amount with your current income without hindering your daily living or you becoming in debt.
The younger you are the more risk-tolerant you become. Thus, you are able to allocate more of your money on assets that have higher risk for a possibility of higher return. Another way age plays a difference is the power of compounding. The earlier you start investing, the more your money can earn interest over interest and grow overtime.
Make sure you have built your savings first before you invest. Having a prepared emergency fund will help you invest worry-free. As we are all aware of, every investment comes with some degree of risk so better get everything set than sorry.
Your risk factor
Again different investments, different degrees of risk factor. Thus, you’ll need to assess which category you fall into. Assessing your risk factor is important so you’ll know which type of investor you belong to. Are you more of a Conservative Investor - low risk tolerance, leaning more on a portfolio with steady growth?Are you an Aggressive investor - higher risk tolerance, want higher return through long term investing.Or are you a mixture of the two also known as Moderate Investor with a risk tolerance on a medium level.