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How to know if you are ready to invest

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Many people are eager to enter the world of investing but are unsure as to whether or not they are ready to do so. Investing can be a major commitment in time, effort and money, so it pays to take the time to determine if you are ready to become an investor. The good news is that there are guidelines that can help you to determine if you are ready to become an investor. Here is what you need to know about how to know, if you are ready to invest-

  • What is your overall financial picture? While no on is saying that you must be debt free before you begin investing, if you are swimming in debt, then this is probably not the right time. Taking the time to pay off your debt and reduce your cash outflow, can go a long way toward helping your investment strategy. If you need to pay off debt (especially consumer debt), take the time to do so and when you are close to paying it off, you can then begin planning your investment strategy.
  • Do you have the money to invest? This is not the same as asking if you have debt. Many people are debt free but don't have the resources, yet, to become an investor. You should never use money to invest that you need to pay for basic necessities. If money is earmarked to pay your rent or mortgage, buy food or pay for basic living necessities, it should never be invested. In addition, you should never use money to invest that you will need to make a large purchase in the next few years. Money that will be needed to fund an education, buy a home or make another significant purchase should not be used to invest with. You should carefully consider your financial picture (and whether or not your debt is paid down) and then look for ways to find extra money to use for investing. Most of all, you should never invest with money that you cannot afford to lose completely.
  • Are you willing to put in the time and effort? Investing is not about making a quick choice about where to put your money. You will need to be able to commit to reading, researching and finding out everything you can about any potential investment opportunity. The reality is that this can take a lot of time and effort. You must be willing to put in the time and effort that are needed, in order to be successful in your investing. If you feel that you are unable to give investing this level of dedication, or simply don't want to, you may want to consider waiting before you begin investing.
  • How much patience do you have? The most successful investors are the ones who can put their money, into an investment, leave it there and walk away, for an extended period of time. Successful investors understand that investing has an inherent time value attached to it. Investing is not meant as a get rich quick scheme. You will need to be able to purchase an investing position and then hold on to it, in order to see the maximum potential, for return. If you are unable or unwilling to do this, you may want to consider putting your money somewhere else.
  • Where is your tolerance for risk? The reality is that every investment opportunity has some degree of risk. Anyone who would state that any particular investment is risk free is simply not being truthful. Investors must understand that even the safest and most conservative investments have some degree of risk and be able to accept that, in order to become a successful investor.

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