Mississippi Money: Are You Really Ready to Invest?
Are you ready to invest in the stock market? Have you heard that stock are up 15% this year, or have doubled in the past six years and you want some of that action for your money? Did you watch a YouTube video on day trading penny stocks and get inspired to quit your job? I hope you didn’t do the latter, but the stock market is an excellent place to invest for large, long-term financial goals.
But are you ready?
Your income and expense will underpin any financial plan that you have. Find your free cash flow by getting your spending under control and generate savings every month. Remember, saving is a habit! If you’re not living well within your means, you are not ready to invest.
Now that you’ve found some free cash every month, build some stability for the times that things don’t go right. Take care of short-term cash needs with emergency savings. An emergency savings account should have enough money to cover your essential expenses for a few months, plus any emergency expenses like insurance deductibles. With this stable foundation, you can embark on the rest of your financial journey.
Before you invest in the stock market, you must understand why you are doing so, and what the risks are.
The stock market is one of the best places to invest money for long-term return. In the short term, over days, weeks or even a few years, returns can be volatile and declines can be steep. Historically, it is longer periods of time that the stock market has overwhelmingly positive returns. Do not invest in stocks expecting assured or short-term gains. Invest for the long-term returns for your long-term goals.
So you’ve found extra money every month and you are comfortable with your emergency fund. You understand the risk and the purpose of investing. How do you take the plunge? First, take advantage of employer retirement plans. You may have a 401(k) or IRA type account that offers tax advantages and automatic savings to get started. Beyond that, you can open a taxable account at a brokerage firm that offers minimal tax perks but is a great place to invest for those long-term goals that you have!
Investing in the stock market is an important part of many people’s long-term financial plan. Once you have your feet on solid ground, and a decent view of what your investing goals are, you can take the plunge. If you have questions, talk to a professional who can help you understand what you are getting into.