Investor Checklist: 4 Things To Consider Before You Start Investing

If you don’t want to live from paycheque to paycheque, you have to start investing your money. In this era of price hikes and economic instability, investments will help you enhance your wealth over time.

You need to research the market, investment options and check if you’re financially fit before making investments. But when you start looking at investment opportunities in Australia or anywhere else, things can get overwhelming.

To make your life simple, here are the things to consider before you invest your hard-earned money.

Determine your investment goals

The first step to take before investing your money is to figure out what you want to do with it. Be it buying a new house, car, or that expensive home renovation you’ve been planning for years – sort it out.

Determining this is important as your investment decisions will depend upon your goals. Check out these pointers –mt4 bridge

  • Annuities offer a stable income after retirement, irrespective of the financial market condition
  • For short-term investments, money market accounts will help you accumulate the required amount
  • For long-term investments, stocks and mutual funds will be ideal
  • If you want a stable and low-risk earning, term deposits and savings accounts will suffice
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You can also opt for risk-free investment options such as bonds that offer you a fixed income after a certain period.

Assess your financial condition

After determining your financial goal, analyze whether you’ll be able to invest your money. But if you’re going through monetary issues, then you need to think hard before investing.

First, you need to check if you have any existing debts. Clear them off as soon as you can to free up cash for investments. Then, you need to develop an investment fund for using any investment option and set it aside.

Lastly, you have to develop an emergency fund, which can cover almost six months of expenses. It will be your lifesaver if some risky investments don’t pay off well or you suddenly face a cash crunch situation.

Find out your risk tolerance

As stocks and mutual funds have some risks involved, you need to understand your risk tolerance first. It will help you determine how much money you can invest and how much you need to save if anything goes wrong.

  • For instance, if you invest in a stock with a three-year plan in mind, things might go wrong in the second year.
  • Due to financial fluctuations, the value of your stock may fall. In such a situation, you might pull out your money or decide to keep it.
  • If you have the financial backup and patience, you can overcome these ups and downs in the market.

Tip: You can either talk to someone experienced in investments like Kailash Concepts, a Quantamental investing company. Check out their fast growing stocks article to help you with your investing journey. You can also use an online investment risk calculator to judge your risk tolerance.

Understand investment options

By the end of 2020, more than $4.0 trillion was invested in Australia by foreign economies! So, you can see that there are a lot of investment options here.

  • Savings accounts, term deposits and bonds – These offer low-risk and predictable amounts after a fixed time.
  • Shares – High-risk, and your profit depend upon the company share’s rise/fall.
  • Exchange-Traded Funds – Lower fees, easy to buy/sell, and its value will go up or down depending upon the index it’s tracking.

You can contact a financial planner to know about other options, including Real estate investment trusts, Listed investment companies and cryptocurrency investments.

Summing up

When looking at investment opportunities in Australia, keep in mind your goals, and risk tolerance. Also, you need to understand these investment options properly and develop an emergency fund accordingly.