Investing is the cornerstone of any wealth-building plan. In fact, I would say that it’s nearly impossible to build true wealth without an investment strategy. However, there are some things to consider before you start investing.
As you know, entering into the stock market can be a bit scary. After all, we’ve all heard so-called stories of people “losing everything” in the stock market.
So, what can you do to keep yourself from becoming a stock market victim?
The best thing you can do is to arm yourself with knowledge. Hopefully, I can impart some easily digestible knowledge to you today! Here are three things you need to consider before you begin investing.
3 Things to Consider Before You Start Investing
Before we dive right in, I wanted to offer a free resource to you! I wrote a short, 23-page eBook to help those of you struggling with debt. To get it, just enter your email below and I’ll send it right to you!
Now, let’s look at three things to consider before you start investing!
1. Never invest in anything you don’t understand
Have you ever tried looking into investing? The terminology alone is enough to make your head spin. Unfortunately, some investing professionals aren’t much help, either.
They look at you and say things like, “Well, I recommend this JP Morgan Global Growth fund that keeps a low expense ratio and has a load of 5%.”
If your advisor ever says anything like that just slap him. Just kidding, don’t do that or you’ll go to jail.
Instead, just ask them to explain. If they can’t explain, then find a new advisor.
Here’s my point: Be weary of investing in anything you don’t understand.
Don’t know what a mutual fund is? Look it up on Investopedia. Confused about ETFs? Nerd Wallet has some helpful information. Or you can always send me a message and I would be happy to help!
However you decide to go about it, do some research on different kinds of investments before pouring money into anything.
And no, you don’t have to be an expert in everything. But a basic understanding of different kinds of investments goes a long way.
2. If it sounds too good to be true, it probably is
“If you give me your money, you’ll never have to worry about money again! In fact, you’ll get a 100% return in just TWO WEEKS!!”
“We have a daily guaranteed return of 8% EVERY DAY!!!”
“You’ll be a millionaire in just three years if you just do this!”
What do all of these statements have in common? If you said they sound too good to be true, then you are correct.
Whether you realize it or not, we live in the wild west of the internet and social media. And that means there are plenty of snake oil salespeople out there.
I’m gonna shoot you straight on this one. If anyone ever promises you outrageous returns for minimal effort, they’re hoaxing you.
Truthfully, the safest and least-risky way to build wealth is to do so slowly.
Don’t allow some slick video to tap into your greed complex. Indeed, getting easy money sounds very appealing! But remember, as followers of Christ we don’t just build wealth for ourselves.
Therefore, be alert and weary of anyone who promises anything too good to be true. Because it is.
3. Remember that investing is a long-term commitment rather than short-term gains
Finally, I want you to keep in mind that investing is something for the long-haul. Why is that? Good question! Let me introduce you to my good friend, Mr. Compound Interest.
So, what is compound interest? To put it plainly, compounding interest means interest that continues to build upon itself. In other words, it’s growth upon growth.
For example, let’s say you put $10,000 in an investment account. After choosing your investments, you learn that you can expect around 10% growth per year. For the sake of simplicity, we’ll just say that you leave it alone and just let it grow.
After one year, your investment grows to $11,000. Hey, another thousand a year isn’t too bad! But for the next year, your investment doesn’t get 10% on $10,000. Instead, it gets 10% on $11,000. after 10 years of just sitting there, your investment could eventually grow to nearly $26,000. And that’s if you never add anything to it!
So you can only imagine what it could do if you continue adding to your investments. Plus, as time goes on, you can even add more to them!
For many people, the investment process seems slow and boring. And you know what? They’re right. Taking time to build wealth is truly boring for the majority of people.
However, I want to send a warning from Scripture your way:
A faithful man will abound with blessings, but whoever hastens to be rich will not go unpunished.Proverbs 28:20
Be careful if you have a desire to get rich quick. Besides, few are able to do so. For the majority of us, we’ll need to build wealth the slow and methodical way.
Inform Yourself About Investing
Ultimately, I want you to keep yourself informed. My hope is you will keep these things to consider before you start investing in mind!
Just remember to stay away from anything that feels sleazy. If it feels weird, then it probably is.
If you’re at all confused, make sure you work with a professional who will educate you. In the financial world, there are many so-called “advisors” who are really salespeople in disguise.
That’s why I recommend you find a fee-only advisor in your area. Those who are registered with the National Association of Personal Financial Advisors are duty-bound to act in your best interest. Or you can also check out one of Dave Ramsey’s Smartvestor Pros.
Either way, make sure you know what you invest in. And be weary of over-the-top promises.