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Discover the five most important things you need to know before you start investing

by , 11 June 2013

If you're new to investing, prepare yourself for your journey into the stock market with this five point checklist. It'll help you become a more successful investor. Read on to uncover what you need to know before you buy your first share…

A long journey requires careful planning and preparation to succeed. Stock market investing is no different.

Here’s a five point checklist you can use to create your own plan to achieving investment success, explains Gareth Stokes in Fear, Greed and the Stock Market

Your five point checklist for investment success

#1: Analyse your current financial situation to determine how much money you have available to start your share portfolio
Before you start investing, you need to do a proper analysis of your current financial situation. You can complete this analysis yourself or make use of a professional financial advisor to assist you. Without this crucial step, you won’t know how much you can commit to investing.

#2: Set realistic financial objectives you’d like to achieve in five or ten years’ time
If you don’t know this, you’ll never make any progress so set a system for measurement right at the outset. You might include long-term goals like:
  • R1 million in ‘blue-chip’ shares in five years’ time
  • Dividend income of R30,000 per annum in five years’ time
And remember to be realistic when setting your investment goals!

#3: Break up these financial objectives into short-term goals you can achieve in one year intervals
Spend some time creating route markers along your path to the ultimate goal. If you want to double your money in five years, then you’ll find the task less daunting if you set out with goals at the end of every year.

#4: Choose the mix of financial instruments that suits your risk profile
This depends on the type of investor you are and your attitude to risk. If you’re looking for consistent income, you’ll probably invest a larger portion of your funds in bonds or fixed deposits. If you’re investing for capital growth, either to boost your existing retirement funding or to create your first fortune, you’ll want to concentrate your activities on JSE listed shares.
#5: Create your own roadmap to investing
Write your investment plan down. Refer back to it if you feel you’re straying from the intended path and get yourself back on track! It’s a good idea to set it aside for a few days then go through it again to make sure you’re 100% happy with it. Before embarking on your investment journey, it’s worthwhile discussing your investment plan with your financial advisor.

There you have it. Make sure you tick all the boxes before you embark on your stock market journey to ensure your investment success.

Discover the five most important things you need to know before you start investing
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