Process of investing

There are many types of investments at hand, but some could not be the most adequate for you. The process of buying and selling stocks is relatively simple, but knowing when to buy or when to sell is much more difficult.

In essence, the types of investments that you choose will be determined by your own personal goals and objectives. The process of investing begins with an investment plan that lists the goals, including a written strategy plan that will detail the way in which you will achieve your goals before compromising your money. You should have a savings account for contingencies that will provide you money in case of emergencies such as health, loss of job, property damages or loss of personal assets amongst others. Investing your emergency fund in stocks will never be a great idea, and this because the stock markets fluctuate too much and are very volatile. You must remember that that money could be needed when you least expect it; it is unpredictable.  If the stock market  enters a crisis, you could lose all your money, and not have money to cover the emergency. That is why one has to invest those emergency funds in liquid investments; those that can be turned into cash at any moment without losing your capital. Every investment made in the money market and banking accounts are called liquid investments.

After having created an emergency  fund you should keep on developing your investment plan for the short and long future term. Although you may count with only a modest salary, you should at least invest small amounts of your money. This could make a great difference in the future.

Here are some results that you could get by investing small amounts of money.      

Suppose you could save $50 every beginning of the month at a6% annual interest rate. By the time you are 65 years old your savings would be the following:

  • If, you start investing at age 25 by 65 you would have saved $100,072
  • If you start at 35 by 65 you would have saved $50,476
  • If you start at 45 by 65 you would have saved $23,217, and
  • If you start at 55 by 65 you would have saved $8,234      

The result of increasing the time of your investment will speed up your savings due to the power of recycling. You should write a check to your investment account every beginning of the month instead of waiting to the end of the month to decide what you are going to do with the money left. That is how it is because everybody is tempted to spend to the money to the opposite which is saving it; besides by the end of the month you will usually have hardly any money left to invest because you already spent it.

How to know where to invest your funds? An discussion on the following five points may help you implement and keep an investment portfolio:

  • Determine your financial objectives
  • Assign assets
  • Identify your investing strategy
  • Select your investments
  • Assess your portfolio