How To Start Investing

Establish a personal spending plan. Before investing, individuals should consider their ability to put money away.
This includes ensuring they have enough capital to pay monthly expenses and have already built up an emergency fund. As enticing as investing can be, individuals should be mindful to meet their daily life obligations first.

Understand liquidity restrictions.

Some investors may be less liquid than others, meaning it may be more difficult to sell. In some cases, an investment may be locked for a certain period and cannot be liquidated.
Though not necessary fine print, it’s important to understand whether certain investments can be bought or sold at any time.

How To Start Investing

Research tax implications. On a similar note, though an investment can be bought or sold at any time, it may be tax-adverse to do so. With unfavorable short-term capital gains tax rates, investors should be mindful of strategies that extend beyond what product they hold but what tax vehicle they put that investment in.

Gauge your risk preference.

As mentioned earlier, investing incurs risk. This means you may end up with less money than what you started with. Investors uncomfortable with this idea can (1) reduce the amount they invest to only what they are comfortable losing or (2) explore ways to mitigate risk.

Consult an adviser. Many financial professionals would be happy to provide their guidance, let you know what they think about markets, and give you access to online platforms where you can invest money.

Return on Investment

The primary way to gauge the success of an investment is to calculate the return on investment (ROI). ROI is measured as:

ROI = (Current Value of Investment – Original Value of Investment) / Original Value of Investment

many would claim that the stock investment has outperformed the real estate investment. This is because every dollar invested in the stock gained more money than every dollar invested in real estate.