Learning how to start investing begins by figuring how much money you can safely invest!
So you want to start an investment career, but you're not quite sure how. There's one simple rule you'll want to remember: Only invest money you can afford to lose. Here's why.
If you are ever forced to sell at a time when the market is volatile, you may sell at a loss. Now if you do not have enough cash reserves and this happens this may not be a very good way of learning to invest.
To determine how your financial ability you need to take a look at your liquid assets by finding out how much cash you have available to you. You can do this by estimating the value of your assets you can easily convert to cash.
Never invest your rent or mortgage funds, food money or any money that will affect your daily activities. You've worked for your money. It should work for you not take life out of you!
The key to success in investing is to stay in the market long enough to start making profits. Here is Warren Buffet's rule for investing:
1. Don't lose money
2. If you do refer to the first rule!
Investment is like gardening: It takes time, and some of the crops you plant are going to fail along the way. Your goal, especially in the early stages of investing, is to make sure that a single failure doesn't put you back to ground zero and require you to build up your seed capital again and delay your investing career even further.
So first, figure out how much money you can spare for your initial investments. There are 3 useful indicators you can use to assess how much you can invest: Personal financial statement, Personal balance sheet, risk tolerance and investment goals worksheet.
Investing a few hundred pounds can give you a decent rate of return. Say you invest £200 in a company. Your investment pays off; you get back £250. That might not sound like much, but that's £50 that you didn't have before, £50 that you can apply toward other investments. And if the investment doesn't pay off, you're out £200. It won't take much to get that £200 back ... and chances are good that your next investment will be better.
That's how to start investing the smart way. Know how much money you can stand to lose, and don't put up any more money than that. Of course, there are other tools you'll need in order to learn how to start investing. But if you follow this one rule, no matter what else you know, you'll never wind up worse off than you started - and there's a good chance that you'll end up a whole lot better!
