Your first step as an investor is deciding what you’d like to achieve.
What are your financial goals? Do you want to make a down payment on a house in two years? Will you need to help pay for your children’s education in ten years? If you’re employed, you may also need to plan for your retirement.
Here are some questions to help you decide your investment goals, and ultimately, your investment strategy.
1. How much money do you have to invest now?
2. Will your employment income allow you to invest additional money in the future? How much? Are you confident that will continue?
3. What are your monthly financial obligations and how much do those obligations change from month to month or year to year?
4. Do you have other valuable assets that will play a role in your financial future?
5. Do you have any outstanding debts that you’d like to pay off?
6. Do you plan to make any major purchases in the future?
7. Do you need money from your investments each month to supplement your regular income? If so how much?
8. Do you have dependents to care for, and will their needs be changing over time?
9. What are your life and property insurance requirements?
10. Are there income tax considerations that are particularly important to you?
11. Are you a participant in a registered pension plan?
12. Do you expect to inherit money at any point in the near future?
13. How much money would you like to have readily accessible in case of emergency?
These questions are a good place to start to help you have a clear understanding of your financial situation and thereby help to clarify your investment goals. The idea is to pool all incomes then subtract all obligations and then, depending on the disposable income left , decide whether you want to save or invest.