You have a little money saved up. You have always been interested in investing and now you are finally prepared to take the plunge. You are going to be an investor. But you are a little hesitant, a little scared, what are the first things you need to do before placing your first order?
A Volatile Market
If you have finally decided that you want to be an investor, you are probably aware of the current state of the market. Things are currently in limbo. Europe is facing an economic crisis on a grand scale that is sure to shake things up worldwide. The decisions of the leaders of many European countries will have a huge impact on the direction of the markets, and many of them are still waiting to deliver their actions.
You might want to take a few weeks to watch the markets and news very closely before making your first transaction. The news from Europe is probably going to be bad and the first rule of investing is that you want to buy low and sell high, not buy when things are looking to take a severe plunge.
You may have your eye on something that should see little impact from the European Union’s actions, but with an impact that could be far-reaching, it is better to play it safe right now.
Do Your Reading
Blogs and online publications are a great place to read up on the latest investment strategies and market news. But there are a handful of important books that you should have read to make sure you have a solid foundation for your new hobby.
The following are some key books that every new investor should carefully read. You can also ask your investing friends for recommendations or read the reviews of other investing books on Amazon.
- Jason Kelly’s The Neatest Little Guide to Stock Market Investing
- Benjamin Graham’s The Intelligent Investor
- Kathy Kristof’s Investing 101
Fantasy Investing
If you are ready to get your feet wet with investing but have never actually added any money to a portfolio, Fantasy Investing is the best way to get experience without having to risk any of your real money.
Investopedia runs the most popular Fantasy Investing program on the Internet. The program allows you to use a system almost identical to their real online trading program, but with a fake starting balance of $100,000.
With Fantasy Investing you can be a little more creative with your spending. You can try out a handful of different strategies you’ve developed or heard about. You can even try that super risky strategy that you might never try with your real money but would like to have a little more Vegas-style fun.
Be Ready to Lose it All
The simple answer to the question of how much money you should start with when deciding to invest is as much as you are willing to lose. With investing, depending on how aggressive or short-term your strategies are, you should be prepared to lose all of the money in your portfolio. You probably won’t, of course, but if you are investing with more money than you are comfortable losing your strategy could be affected and if the worst does happen you could be in a tight spot.
For long-term investing, much of your money is focused on the far-reaching future as well, so your funds will be tied up for quite some time. With this type of investing you are continually adding money to your portfolio, so it is expected that you won’t be making any withdrawals any time soon.
Online Trading Fees
However, you should be aware of the margin your trading fees will be taken from your portfolio. A smart investor doesn’t plan on making too much percent on their investments, so if your bankroll is small enough that you are taking a significant hit from fees, you should probably wait a bit before you start investing. Keep your horse on the fantasy lanes for a while until you have enough seed money to not worry about fees.
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