5 Basic Steps to Investing – Steps 1
Investing! This is consistently given as one of the most confusing topics individuals face. In this series, I wanted to share some basic investing fundamentals. My goal is to help you understand this topic better and walk away with practical steps.
STEP ONE Evaluate & Diversify
Before we begin, you need to assess what investments you currently have. You might be saying, “Joe, I don’t have any investments.” My question to you would be: do you contribute to some type of retirement plan at work, own a home, or own a business? Investing is much more than owning stocks. To start, let’s make a list of all your investments. (A great place to list these investments is on the asset side of the Net Worth Calculator.) Now that you have all your investments listed, lets evaluate to make sure they are diversified.
I’m sure you’ve heard the saying, don’t put all your eggs in one basket. This directly relates to investing! A key step when investing is to diversify your investments. For example, you should not put all your money into one company’s stock, instead spread your investments out. By spreading out your investments you greatly lower the risk of your investment.
You can research countless times where people have put a large portion of their money into one company, only to have that company fail. Several people lost large sums of money when they invested solely in Enron during the early 2000’s and the company went under. If these people would have diversified their investments, they could have softened the blow.
An easy way for you to diversify is to invest in mutual funds. A mutual fund allows you to purchase a portion of many stocks and bonds with a single share purchase. This purchase automatically diversifies your investments, even though you’ve only bought one share! Also, don’t just think stocks. Invest in a new business or a home that can be rented out. Investing is much more then the stock market. You have a world of things to invest in – real estate, land, new businesses, or even your own business!
Next Steps:
– Review your current investments. Are they diverse?
– Are you only investing in one type of company? If yes, take steps to address right away!
– What other investments could you make outside of the stock market?
– Recommended Resource ==> OXEN: The Key to an Abundant Harvest – Learn how to maximize your money through investing