When should I consider investing?
‘I’m too young…’ ‘It’s too late…’ ‘I don’t have enough money…’ ‘The stock market’s going to crash and I’ll lose all my money…’
Do any of these cross your mind when you think about investing? If so, you’re not alone. Most people wonder about all of this and more before they start their investing journey.
The idea of investing freaks me out…
If you think about it, when you contribute towards a workplace pension, you actually already ARE an investor. Your pension money is invested into funds by your workplace pension provider. That’s how it grows over the course of your career, ready for you to access once you reach retirement age!
Starting to actively invest your money should feel a little less scary now…
How do I know if I’m ready to invest?
So, how do you know if investing is the right step towards securing your financial future?
There are a few things you need to do to prepare for this next stage:
- Pay off your high-interest debt first – paying off things like credit card debt before investing is really important, because your debt will keep increasing at the same rate each month until you pay it off.
- Have a fully funded Emergency Fund – this is typically 3 to 6 months’ worth of salary to cover any emergencies and unplanned expenses that might crop up unexpectedly. Having this means you won’t need to sell your investments to pay for them, so you can have peace of mind.
- Make sure you’re only investing money you won’t need for at least the next 5 years – because the stock market goes up and down on daily basis (this is totally normal), but generally goes up over time, the longer you can leave your money invested, the better.
- Know your risk profile – this will help you choose the right type of investment for you. Some people are really comfortable with seeing the value of their investments go up and down quite sharply and prefer a high risk, high return investment. Others are less comfortable with that and can then choose investments that will be more stable, but might offer lower returns.
- Be prepared to weather the ups and downs of the market – it’s not easy seeing your portfolio go into the red, but stay the course. You’ll only lose money if you sell at that moment. If you don’t sell, you haven’t actually lost any money. And then you always have the chance of seeing those investments grow in value and go up again. As long as you’ve diversified your investments, you’ll be ok!
If you’ve checked off all 5 of these things, you’re ready to invest!
You don’t have to invest hundreds or thousands of pounds to start anymore. Investing has become really accessible, and it can be done from as little as £1 these days.
It’s always better to start investing earlier rather than later. But it’s never too late to start, as long as you won’t be needing that money in the next 5 years. Investing is something you do for the long term, to future-proof your money for future you.