For the first time, investing money can feel like jumping into the deep end of the pool. It can be a stressful situation.
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This is especially relevant given the current worldwide epidemic and volatile financial markets. Make sure you've taken care of your basic needs, such as monthly bills and childcare, before taking any action. After that, you may securely decide whether or not to start investing.
If you decide to participate amid a market slump, here are five ideas to help new investors get started:
1. Has emergency money been set aside?
Simply because you desire to invest does not mean you should put all of your money into the stock market.
Set aside three to six months' worth of expenses and regular payments in an emergency fund. This is a sum of money that you can access immediately if needed and is held in either a high-yield cash account or a relatively low-risk investment.
You'll be able to invest the remainder of your money more aggressively if you have an emergency fund.
Also read: What Are The Main Objectives of Investment?
2. Invest when it's convenient for you.
It can be scary to invest a considerable sum of money all at once. Even while statistics show that a lump-sum investment outperforms two-thirds of the time, you may be hesitant to do so, which is fine.
Another approach is to make small investments over time. Setting up an auto-deposit, where you specify the amount and frequency, is one of the most acceptable ways to do this (i.e., monthly). You can set your own pace this way.
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3. Concentrate on your time frame.
Your investments do not all have to be at the same risk level.
You're probably saving for multiple financial goals at the same time, such as a down payment on a home, future college expenditures, or retirement. Each of these financial objectives is likely to have a different time horizon and, as a result, should be invested accordingly.
Generally speaking:
Short-term goals should be invested more cautiously, whereas long-term goals should be aggressively invested.
Breaking down your investments into goals allows you to manage risk better and create a customized investment strategy.
Also read: Evaluation of Investment Products
4. Keep in mind the historical background.
As a rookie investor, you may not have much context or know what to expect in terms of performance. All of this is to imply that we have seen numerous market downturns in the past and will undoubtedly experience many more in the future. They are an unavoidable aspect of an investment, and all investors, young and old, should learn to deal with them.
Even if you're tempted to cash out all of your investments or even stop making auto-deposits, now is the time to stick it out. As history has demonstrated, the market will recover, and consequently, your portfolio.
5. Concentrate on what you have control over.
The stock market is beyond your control. Furthermore, you have no control over the news, inflation, GDP growth, or unemployment rates.
You can, however, influence how much you save, how much risk you accept, how well you diversify your portfolio, and how you react when markets become frightening.
Focusing on what you can control and doing your best to ignore what you can't manage will undoubtedly increase your chances of investing in success in the long run.
Finally, no matter how long the downturn lasts, staying on top of your finances and overall risk in your portfolio can help you weather the storm.
(Check out 'Learn & Grow with Wizely' to learn more about financial planning and investments.)
