Making the move from saving to investing
If you want to become financially independent, you need a good plan. That plan needs to include both saving and investing money. After all, how do you plan to become financially independent if there’s no money to work with at the beginning? Saving money is tough but it’s a topic that has been covered so many times. In fact, in case you got educated in saving, chances are you’ve already managed to set some money aside. That means now’s the right time to put that money into something and start increasing your wealth. But how exactly do you transition from saving to investing? And what should you invest in? Read on to find out.
Assess your financial situation before investing
Before you begin your investment journey, it’s important to take a better look at your financial situation. That’s the only way to figure out how much money you can begin with. Moreover, it’s your financial situation that dictates what invests you should be after and how much risk you should work with. To get a clear picture of your financial situation, think about both your income and expenditure. Also, assess the amount of money you have set aside and find investments you can afford. Once you do that, you’ll have a much better idea of how to invest and grow your wealth. Just don’t forget to set some money aside just in case. You never know when something unexpected can happen and hit you financially.
Get financial advice
We already talked about assessing your financial situation. Depending on how that goes, you might want to think about getting financial advice. It’s just that there are so many financial experts out there and turning to one of them can make your journey much easier. They can take a better look at your financial situation and help you build a portfolio that suits your needs. The best part of it is that you can find any financial expert you want to work with. Most of them now do online meetings, meaning that you can build your portfolio from the comfort of your own home. If you have any investor friends or family members, asking them for advice can also be a good idea.
Practice investing using virtual money
There’s so much about investing you can learn yourself. There’s so much information available online and you can follow guides step-by-step. The problem is, nothing replaces experience when it comes to investing. If you’re new in the world of investing, dipping your toes without any previous experience can seem scary. Luckily, you can use a virtual simulator to get the idea of how investing really works. Of course, online simulators use virtual money and you don’t have to worry about losing all of your savings. Over 700,000 people use Investopedia Stock Simulator where you get to invest your virtual $100,000. Turn to one of these simulators and once it’s time to invest your money, you’ll already be a seasoned investor.
Diversify your portfolio
If you want to graduate from a saver to an investor, you have to become familiar with portfolio diversification. Putting all your money into one asset is extremely risky. The last thing you want to do is end up losing all your savings because you’ve made a bad investment. To make sure that doesn’t happen, all you need to do is to diversify your portfolio. That way, even if something goes wrong with your main investment, you still have other investments that make you money. Just make sure you don’t fall into the trap of going too far. As a new investor, you should limit yourself to about 20 to 30 different investments at all times. Some of the best portfolio diversification options right now include gold and silver, as well as digital currencies.
Learn the terminology
Saving money is pretty straightforward and you won’t encounter unfamiliar terms when setting money aside. However, entering the world of investing is something completely different. There will be so many new terms that it’s impossible to learn them all at once. Still, becoming familiar with trading terminology on time can mean the difference between success and failure. For example, you can’t start investing without knowing what a price-to-earnings ration is. There, you’re looking at a company’s stock price in relation to that company’s earnings. That way, you can figure out if an investment is overvalued or undervalued, and decide on your next move. There are many investment terms you simply have to be aware of before you start investing. Start with the most important ones and expand your word fond on the go.
Stick to your investment plan
The stock market is quite volatile, something new investors haven’t had a chance to experience before. Therefore, it’s quite common for rookie investors to start changing their investment plans as soon as they see prices move in a different direction. There’s no doubt wild swings in the market can trigger a real rollercoaster of emotions but staying calm in such situations is what investing is all about. Understand that volatility is a normal part of investing. For your long-term investments, what happens short-term doesn’t matter at all. Construct a portfolio you can live with and stick to it no matter what’s going on. Of course, if your situation changes and your investing strategy no longer works for you, then a change is warranted.
The bottom line
Saving money can be extremely difficult but in relation to investing, that’s the easy part. So, if you’ve managed to set aside enough, prepare for a lot of hard work. It’s time to start investing and accumulating more wealth. Just remember that there’s no point in rushing into anything. Do your research and practice with simulators until you feel comfortable enough to trade with actual money. Once you get there, it’s time to find your investment strategy and stick to it no matter what. With a lot of hard work and a little bit of luck, you might just be able to turn your savings into even more money and achieve financial independence.
