What You Must Know Before You Start Investing

Look before you leap. That’s an admonishment many a mother has given to her children. That’s a solid bit of advice that we should all apply to our life’s endeavors, especially those involving our money.

Before you start investing your money or giving it over to others to invest for you, make certain you’ve looked into the realm in which you’re about to leap. You need a strong foundation of knowledge in investing so you can make informed decisions rather than leaping into something you know nothing about.

Read, and then read some more

Most of us are woefully uninformed about the workings of economics. But you can’t set realistic, profitable goals for your investments if you don’t know anything about investing. Take the time to read up on the subject.

Start with investment articles that are easily found on the internet. Basic economic concepts such as supply and demand don’t have to be abstract theorems that mean nothing. With a bit of effort, these terms can become part of a base of knowledge that you use to grow your money through your investments.

You should advance your self-education to include investment books. When you’ve armed yourself with a solid foundation in the basics of economics, money management and investing, then you’ll be ready to leap into the markets without a fear of the unknown.

Play the game

One of the best ways to learn is through doing. Before you put your money at risk, play around with the stock market on paper only. Pick a company or two that you want to follow for a bit. Follow the price of their stocks on a daily basis and check financial publications for company news. Research the company’s history through their quarterly earnings announcements. If you see the price of the stock go up or down by more than 5 percent, find out what influenced the growth or loss in the company.

Once you’ve gotten a feel for how the buying and selling of stocks works, then expand your imaginary investments to other companies. You’ll want to work your way up to building a portfolio in your make-believe investing. This will give you practice in keeping track of multiple investments individually while watching them all for an overall gain or loss over a set period of time. It is much better to lose a large sum of make-believe money than it is to actually lose your hard-earned cash.

The end game is fiscal responsibility

With the volatility in the world today, practicing fiscal responsibility should be high on everyone’s list of priorities. When you’re managing your money in ways that see it growing, which adds security to your future, then you are being fiscally responsible. As you learn more about the world of economics, you’ll come to appreciate the difference between what you need and what you want.

If you want to attend university to obtain a degree in economics, you can certainly do that. But you can learn a lot about how money works through your own independent reading and researching.

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