With markets going up and down and becoming more volatile with each day it is especially important to have a plan or exit strategy in place. The next step is to consider what type of an investor you are based off your personality. Below is a list of questions to ask yourself before getting started with your plan for investing.
Are you an active investor or a passive investor?
Do you know what your risk tolerance is for how much you are willing to lose?
Are you investing for the long term or are you in the markets with the intention of gaining quick returns and getting out?
These are all questions that should be answered before ever playing a stock and the stock market. Remember the golden rule to investing is NOT to lose your money.
The biggest question people have presented to me in the past 6 years of my investing journey is this...Where do I invest my money? I can't answer this question for anybody because everyone is different but I can touch on the different approaches you can take with investing, so you have an idea of what path you can take.
There are two different approaches that you can take to investing. You can take the short term approach, which consists of growth investing in individual companies, day trading a stock, day trading currency pairs on the FOREX market or you can take the long term approach to investing by creating a portfolio by holding mutual funds or investing in something like an annuity. Either approach has its advantages and disadvantages which we will cover in the next section.
It is very important before getting a plan together that you have a feel for your personality. More importantly though it is imperative that you have all your debts paid off and your living expenses reduced to a minimum, that way you have cash flow after you have paid all your bills so you can invest. Having no debt or being debt free gives you a huge advantage in saving money to invest.
The secret to building wealth isn't as hard as people may think it is. It is just a HABIT of paying yourself first before anyone else or investing the difference of your cash flow after you have paid your bills. Living below your means is one of the most powerful HABITS you can instill in yourself in my humble opinion and a great start to any plan that you may implement for playing the stock market short term or long term.
If you want to know how to play stock with as much reward and as little RISK as possible, then keep reading because the next few sections below are the most crucial when you are getting ready to put money on the table and start investing your hard earned $$$. We will touch on risk/reward for investing for the short term and the long term.