Before You Invest

Before You Invest

Before You Invest - If you are seriously considering investments as a financial option for yourself then it is suggested by experts you have to check your finances first. Before you start any investing, you have to see where you money goes as you spend it on a daily basis. Does all your money go for basics such as food and rent with no extras? You have to sit down and assess your funds to see if you have any extra money that is not needed to keep your home budget balanced.  If upon going over your financial situation you find you have extra money monthly; then that extra money can be used as seed money to get you started. You don't want any seed money to affect your life style or deprive you of your essentials.

The next thing you want to do is set goals for yourself. Most people have specific things in mind that they want to achieve for themselves when they begin the investment game. Knowing why (for Ex. Retirement) you want to invest helps guide  you as to what are the best type of investments to suit your goals. 

It is always advisable to start with safe instruments first. An instrument is any financial dealing where there is a chance of creating a return on the amount of money used in the deal. Examples of safe investments are things like bank CD's and even a savings account. Both accrue interest. The savings account won't give you a good return but it's something. Even United States Savings Bonds are safe instruments to begin with. They are relatively safe and are a good way to build small stable sources of returns. 

Once you get your feet wet, you may want to then branch out to riskier ventures. This is when it's good to talk to a broker. An investment broker is an intermediary who brings together buyers (you) and sellers of investments. Brokers must be licensed to operate. They act on behalf of you the buyer and the sellers of stocks. Investment brokers do charge a fee for their services as a commission. The commission is a result of trades they conduct via the instructions of buyers and sellers. You can look into mutual bonds at this point. The interest return is greater than bank deals. Mutual bonds are a more stable as far as investments go with a much less risk factor than other types of investments. 

Make sure you discuss all the low risk options available for you with a stock broker first. You want to focus on low risk stocks and securities. You will need to have a few thousand in order to start up with your initial stock strategy. When you get to this point however you still do not want to buy on the margin no matter how solid your credit rating is. Buying on the margin is borrowing money from a stock broker to invest with. It is like a loan from a brokerage. 

Margin trading does however allow you to buy more stocks this way. Beware that some  brokerages  require more than a 50% deposit of the purchase price when you go margin investing. You want to stay away from this kind of investments; especially with no experience under your belt. When you become a seasoned well savvy investor then you may want to do that as well. But it is not recommended for beginners. 

Even with a broker you want to research your potential investments first. You have to keep in mind that even though a reputable broker will make recommendations if you ask; the ultimate responsibility for agreeing for a transaction is you. They do everything by signature. Try and learn all you can about the company that is issuing the stock or security that you are interested in. 

You also want to look at how that company has performed for the past year. It is also recommended to look closely at the recent analyst predictions about the company you are leaning towards. Listen to what they  foresee for that company before you buy shares in  that same company yourself. These people are experienced and know how a company can be up one minute and crash the next. This will help you reduce the risk of losing money.

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