What steps do you take when you want to start investing into the stock market? With so much information available and so many investment options to choose from, what do you do first?
Step 1:
You need to evaluate your current income and expenses to determine the available discretionary income you have at the end of the month. Discretionary income is income that is not allocated towards household expenditures or to any other scheduled payment. (i.e. loans, credit cards)
Step 2:
Now that you have decided what amount you can invest on a monthly basis, you need to consider what goals you are going to invest towards. Most people don't just invest for the sake of investing; they have a list of targeted goals that they are trying to achieve. Do you want to build up a cash reserve? Do you want a new car? Do you want to buy a home? Do you want to buy a 2nd home or a piece of investment real estate? Do you want to save for your children's education? Do you want to save towards becoming financially independent? When working towards achieving a goal, the goal needs to be defined as with a time frame and an amount.
For example: Buying a new car is not a goal. Buying an $27,000 new car by June 2009, is a goal as it includes a time frame and an amount.
Step 3:
The time frames for each of your goals will determine the type of investment choices that you should consider. Short term goals should be invested in more conservative investments, while those with 10+ years can afford to be invested into more aggressive investments. Choose your desired investment allocation based on these targets and time frames.
Step 4:
Set up an automated payment plan from your paycheck or directly from your bank account on a monthly basis. This system will allow you to pay yourself first and to begin moving in the right direction for your overall goal of wealth building. Talk to your present employer, an investment institution and your current bank about available investment options and automatic savings plans that you can enroll in. You often can start an automated payment plan for as little as $100 per month. While this will not be enough to secure your retirement, it is an affordable option to start building your wealth.
Step 5:
Begin investing and set up regular monitoring points every 3 months so that you can check the progress of your investments, and to make any necessary portfolio changes. Add more to your monthly payment plan whenever possible and if you receive any bonuses, consider directing all, or a portion of those dollars towards building your personal wealth.
To start investing in the stock market is a simple process. Make the decision to start, evaluate your goals and options, and take action.
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