Do you want to start investing? Do! By doing so, you won’t let your money gather dust in your savings account AND you’ll be working on your financial independence. But starting to invest does not happen overnight. Therefore, for the following reasons, it is better not to start investing (yet).
1 You don’t have enough savings
Ho, stop! Before investing your money, take a look at your savings account. How much is on there? After all, money that you have invested is something you would prefer to keep for as long as possible. If there are necessary expenses – a broken washing machine, I’ll mention something – you’d rather not touch your investment money. So that’s what your savings account is for. But then again, if there’s almost nothing on there…. You get it! The rule of thumb is that you should be able to get ahead with your savings account for about three months.
Want to know more about how and how much to save? You can read it HERE.
2 You have debts
Feels like an open door, yet it’s good to point out: don’t invest with money you’ve borrowed. So don’t put money in stocks that comes from uncle DUO, nor use the excess value of your home to invest. That’s all borrowed money that you have to pay back someday. When the time comes, again, you don’t want to touch your investment portfolio (because a long run is key in investing, remember?).
3 You need the money fast
This reason could not be missing: don’t go investing if you will need the money again in five years. Suppose you get out of the market at a bad time, in fact, you can lose a lot of money just like that. It is also a waste, because the longer you invest your money, the higher the return (this is due in part to the interest-on-interest effect, which we explain HERE ). So do you have a dream trip planned in three years? Then it is better to save anyway.
4 You only want active investing
Of course, following the market and buying and selling shares at the right time is exciting, but delivers in the end not the most profitable. If you invest the same way every month (for example, through more stable ETFs) and don’t touch your investment portfolio otherwise, you will keep more money in the long run than trend-sensitive investors. Still want to keep an eye on the market and join the investment game? Then literally give yourself play money: an amount you can spare anyway and experiment with.
Psst: if you are an ELFIN member, you get access to the Beginning to Invest e-course. Here you will learn all the basics of investing and after taking the e-course you will be able to make your first investment independently, even with a small amount!
