While individuals looking to grow their wealth over time have numerous options to choose from, investing in stocks has emerged as a powerful avenue. For those who do it with a plan and stay the course for the long term, they have been able to transform their finances. As Moize Goulamhoussen – a Senior Portfolio Manager and Wealth Advisor with over 20 years of experience – knows, good planning and compound returns are some of the key factors that contribute to success.
Investors looking to start investing in stocks should consider the following aspects.
What’s the Goal?
Failing to plan is planning to fail, as the old adage goes. For someone new to stocks, it is vital to begin by specifying their financial objectives. Whether it’s to save for a home, build wealth for retirement or fund a child’s education, it helps to set clear investment goals. Younger investors tend to consider aspects such as accumulating wealth over the long term, while much older ones might prefer preserving capital or generating stable income for their retirement years. The more concise the goal, the better.
Establishing goals is a personal process and can be approached in many ways. However, the SMART (Specific, Measurable, Achievable, Realistic, Time) method is one of the more common ones to consider.
Determine How to Invest
Determining how much to put into stocks requires a clear assessment of an individual’s assessment, which can be done through various means. At the top of the list is to review income sources and ensure there’s an emergency fund. Such a fund ensures the investor has a few months’ worth of major expenses. If there are any high-interest debts such as credit cards, financial planners would usually recommend paying these down, as the cost of high interest can outweigh potential returns from investments.
Once there’s a clear picture of the investor’s finances, it’s time to create a budget. Doing so enables the individual to decide how much they can comfortably invest without putting themselves in a financially vulnerable position.
Hand in hand with this assessment is identifying an investing style. Some people prefer a passive strategy, while others will want to be more hands-on and active in the process. The choice of style might evolve, but there has to be a starting point.
Open An Account
With much of the preparation done, it’s time to get into the actual investing. Dealing with stocks and shares requires a brokerage account, and there are likely multiple brokerage options available. With these, an investor will want to choose one with the features and fees they prefer.
