In my previous post, I have told my readers about the particular types of investments that they can liquidate in the event of a financial crisis during the disruptive phase of Covid-19. And many of my readers were interested in knowing more about investing. Of course, when people have even a little bit of cash in their hands, they like to cash this opportunity in the form of higher yields which is understandable.

However, not every person is capable of investing in anything riskier than a savings account or anything else and looks for a professional to guide them to less-riskier investment plans meant for beginners. To help my readers invest in the right manner, here in this blog, I am sharing some key points that you need to consider before you start investing, otherwise it can jeopardize your financial goals. Let’s begin:

Things To Keep In Mind Before Start Investing

1. You Need To Set A Budget First - Having a household budget will help you know how much you are left with to invest or whether you should invest or not. To get it started, pen down all your income sources & divide them into your expenses. Once you start following your budget, it will help your financial plans stick with it and in a few months, you will notice a significant improvement in your spendings. It will help you with short-term or long-term financial goals.

2. Be Aware of Your Financial Condition - Unless investors don’t know how much amount they can invest in a plan for the said period, they cannot make an informed decision or expect satisfactory returns. So, the next step is to make a list of all your existing assets, be it liquid or fixed, and know their value. It will help you achieve your financial & investment goals.

3. Make Sure You Pay Off Your All Debts Now -If you have created a budget without paying off all your debts like credit cards etc, it is likely to increase an unnecessary burden to your financial goals. So, start paying off your existing debts you have been hanging around as early as possible. It includes any types of loans such as home loans or personal loans or outstanding credit card bills. It will bring a positive impact on your net worth.

4. Don’t Forget To Arrange A Cash Emergency Fund - Yes, this is extremely necessary in case your financial investment plans don’t go as planned, leading you to run out of cash. Investments don’t always execute as they were planned since they are subject to market risks. So, it is always better to maintain a backup plan ie. a cash emergency fund so that you could have some savings left in your hands for your daily operations and avoid a cash crunch.

5. Get An Idea of Asset Allocation - The market is full of various & attractive investment plans like you can invest in gold, bonds, mutual funds, real estate, or anything else. Clearly, you would want to invest in a plan that is less risky and ensures great returns. Here, effective asset allocation plays a vital role as different asset classes perform well at different times.

6. Find Out Your Risk Tolerance Ability - When you are thinking about investing, it is all about two things. First is rewards and second are risks associated with a particular type of investment. Since every investor has different risk-bearing capabilities, you need to find yours depending on the priorities and goals. Figure out the level of risk you are willing to take and choose an investment plan accordingly.

7. Explore Your Investment Options - Another important step that you need to do is to be aware of all the available investment plans, risks, rewards & features, and find your investment options after getting them matched with your budget & goals. Ask questions like “do I know about the stock market, mutual funds or ETFs” or “how to compare two investment plans” etc. If you don’t have those skills, I would recommend hiring professional investment management services who will help & guide you in the best manner.

These are some of the essential things that you need to keep in mind before making investment decisions. Like most other things in life, it is advised to be prepared for the investment journey to be a successful investor.

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