When You Actually Start To Do Investing? What’s the Right Time ?

Most people will fall into the old cliche: do investing as early as you can. While as broad statement there is nothing wrong with it. Actually to start investing there are certain crucial element as prerequisite that you need to be aware of. Without fulfilling this requirement, not only you can jeopardize your success in investing but it could possibly ruin your financial life. Make sure this not happen to you !

Prerequisite of Investing

1. Clear Up Your Bad Debt first.
   When you start investing, although depending of the strategy you use, expect a good year to be the one with 10%-15% of return. Maybe more when you become experienced. But those credit card , store card or personal loan can easily charge interest rate at around 20% level. So, if you have this kind of debt, doing investing to produce 10%-15% will not make sense as by just paying off these debts, you can consider yourself achieving result of 20% return as you don’t have to pay that interest money.
2. Achieve Your Level of Financial Protection second.
   After clear up your bad debt, before doing investing, you need to get yourself to Financial Protection stage. Financial Protection is a situation where you can have emergency money in the bank to cover 6 months of your living cost without doing any work.  Emergency funds has more priority than investing as it will provide you with peace of mind and more importantly to make sure every investment decision decided not in rush or desperate condition.
   Having enough emergency fund for you and your direct family will give you solid foundation of making good financial decision. So, before aiming to do any investing, a step before is to concentrate to accumulate enough emergency fund for a rainy day by achieving financial protection stage.
3. Have sufficient capital. Don’t start investing with too small capital.
   While investing doesn’t really need too much money to give you handsome return, there is certain threshold that you need to pass before even considering it. Depending on the strategy, generally you will need at least maybe around $10,000 to start simple investing of buying stock/share for example. Any amount less than that, the profit that you will get will be significantly less to cover the cost of investing. This will send a wrong message to your subconscious: that investing is not doing that much and the risk is then you decide not to do any investing at all.
4. You need to know what you are doing.
   Investing although sounds easy can be very tricky. You can ask those victims of scam investment scheme. Most of them didn’t really have a clue what they were investing on. This is really the problem. People fall by the good sales pitch of marketing people of some scheme of managed investment without really knowing the gist of the investment itself, in particular the real risk and potential reward. I don’t say managed investment is bad, but my point is you need to know exactly what it is. Ask a friend who knows and can be trusted (who doesn’t have any financial interest on the investment – neutral view) or just learn it yourself. Internet should provide you with adequate material. Do check the discussion forum and scam-fighting website to double check the intended managed investment scheme. But the best kind of investment, in my opinion,  is if you can do it yourself independently and you know what you are doing. Not only save you the fee, you can outperform the return and have the invaluable gift: the expertise of investing.

The risk without them

Why you do need those 4 prerequisites fulfilled first? The short answer will be : to make sure your investment experience is a good investing.

Imagine if you invest your mortgage money to buy some investment, say buying stock. You will put unrealistic expectation to your “investing’ activity” to give you profit before the end of the month, otherwise you cannot pay your mortgage next month. Well, this is not investing..this is called “Gambling“.

The psychology effect is even more devastating by doing that, you will be telling friend that you have done “investing” and “it doesn’t work” and “it cost me money”, etc… And deep down there on your sub-conscious,  you think what you said above is the way ot should be. And the long result, you will never achive a successful investing because of this false premises. So, DON’t DO IT !

So, make sure do 4 items above before starting your investing. Or at least catch up to have it fulfilled while you still do the investing.