The single most important part of investing is getting started. Life is all about habits, and if you never get into the habit of investing, you could be financially impaired for a lifetime. One of the primary reasons people don’t start investing is because they feel they don’t have enough money to do so. But even if you start investing with little money, it may be all that’s needed to kick start your way to greater investing later.
Most people tend to think that the only people who can invest are those with huge chunks of cash in their bank accounts, which is not true. You don’t need thousands of shillings in order to start investing. You can start investing for as little as Sh.500 per month. You can start small, then increase investment contributions as your income grows, and as you gain more confidence in how investing works.
If you don’t feel that you have enough money to invest, consider some of the options. If they seem to be decidedly on the conservative side, that’s not an accident. If you have very little money to invest, then you don’t want to take wild risks.
Before starting to invest, ne needs to have saved first. Saving money and investing it are closely connected. But that will take a lot less than you think, and you can do it in very small steps. The idea is to get yourself into the habit of living on a little bit less than you earn, and stashing the savings away in a safe place. You can start with small amounts of money, and then increase as you get more comfortable with the process.
It is important to come up with a well outlined written plan that will help you get organized. This plan will also help you put down your goals and be in a position to determine the criteria of your investments. These may be paying for a child’s college education, funding your retirement or just growing your wealth.
This information will dictate the amount of return you need on your investment and how soon you’ll need it. This in turn will determine the amount of risk you may need to take in order to achieve a reasonable return. Also, how and where are you going to invest it? There are many low-cost online brokerages where you can open an account with a small amount of money by transferring funds from your bank account very easily.
Read all you can on retail investment products and educate yourself on their differences. You cannot just wake up and decide that you want to start investing. Research is of great importance as it will guide you on the best investment methods to take. Seek advice from successful investors in the market.
Since all investments come with varying degrees of risk you need to assess your risk–tolerance. Being in your investing “comfort zone” means owning a portfolio that contains suitable, well-researched holdings that are in perfect alignment with your various goals, time horizon, and risk tolerance. Determining one’s risk tolerance is a very deep and complicated subject and a wealth of information is available online about it.
In order to reduce the risk, you need to mix a variety of investments in a portfolio. The rationale behind this is that a portfolio of different kinds of investments will, on average, yield higher returns and pose a lower risk than any individual investment. The benefits of diversification will work only if your holdings in the portfolio are not perfectly correlated.
Investing comes with certain expenses. Coming up with a budget will be the best thing to do before you start your investment program. A budget will help in controlling your expenses so that you do not spend cash on things that are of no great impact to your investment. It has been shown that controlling expenses is a big determinant of future long-term returns.
Rebalancing your portfolio on a regular basis is the process of realigning the mix of your portfolio. Rebalance at least once a year and this involves periodically buying or selling investments in your portfolio to maintain your original desired level of asset allocation. Note that all investing involves risk, including the risk of loss. Diversification does not ensure profit or guarantee against loss.