What do you need to know before you invest in the market?

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“Setting goals is the first step in turning the invisible into the visible” Tony Robbins 

Before you start investing in the financial markets you need to establish what your financial goals and expectations are. In order to do this as successfully as possible you need to ask yourself the following questions:

Why do you wish to start investing?

It is important that you identify the reasons behind why you want to start investing. These reasons can very from, wanting to build wealth, to wanting to create money for a house deposit. Having a clear reason to why, will help you stay motivated and disciplined  throughout your investing journey.

How much do you expect to make through investing?

This is critical in order to be successful when investing, you need to have a strong idea of how much money (return) you wish to receive from your investments. You can articulate this as a percentage, such as “I wish to achieve a 7% annual return on my investments” or you can articulate this as a sum amount  and state for example” I wish to receivedR500 000 from my investments”. Identifying your expectations from the market will help you as you are building an investment portfolio. This will also guide you when it comes to measuring which boundaries of risk you should preferably stick to.

How long do you plan to be investing ?

You need to be able to decide if you are interested in long-term or short term investing. You can choose to have a portfolio that is a hybrid of both short term and long term investments. However you need to identify where you lean predominately, are you looking for a short term of long term investment option?This is because strategically a short term and long term investors have different approaches to their portfolios, such as how they are managed and built.

How much can you invest ?

All the mentions in this article are very important, but perhaps a failure to establish can lead to detrimental results. The fundamental rule is that you never invest what you cannot afford. In other words , under no circumstances do you invest the rent money! There is much debate on whether or not if it is acceptable to take out loans to invest in the financial markets. There are different views , but I strongly believe that you should never take out a loan to invest in the financial markets, for me this is not the same as taking out a loan to start a business. If you wish to learn more about good verse bad debt follow the link below ().

At what frequency or rate can you invest in your portfolio?

Ideally you should be investing every month, Warren Buffet famously said that you need to by stocks the way you buy groceries and not the way you buy perfume. The best way to achieve this goal is to automate you investing , if you wish to learn more about this have a look at this article that you can access with the link (). You need to establish based on you financial circumstances if you will be investing , monthly , bi-monthly, annually etcโ€ฆ The more you invest the better your return is as it allows you to optimise from the benefit of compound interest. To learn more about compound interest follow the link ()

What level of risk are you comfortable with?

This usually is a personality thing , and it is important that you build a portfolio that matches your personality. Some people are comfortable with taking high risk “bets”, while some people are more conservative in their approach and others lie in between. What you should not do is invest in products that you are not comfortable with. For example you are naturally a risk adverse person, you should avoid instruments on the market that are considered high risk. This will lead you to make hasty and impulsive decisions.

Do you wish to invest for yourself or invest with another broker?

There are several financial services companies that invest money for you on your behalf. The benefit of this is that you will not have to become a professional of the financial markets in order to successfully manage your money. However, it is important to factor in that these services do not come for free. Usually when other people or financial institutions invest on your behalf they charge a management fee. Therefore it will be in your best interest to compare the offers with the different brokers. Alternatively , you may opt to invest in the financial market yourself , and if you wish to do this you will need to familiarise yourself with the different instruments on the market and how they work. A good place to learn about the market is this website , and our financial management chatbot that you can access through a messenger of your choice using this link ()

To learn more about how to use the chatbot follow the link here()

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