Finance > Investing in the Stock Market
Should I Start Investing?
With stock market investing becoming far more accessible with the advancement of online platforms and very low fees, we have seen a rapid rise in retail investors. As such, you may be wondering whether you should start investing.
Ask yourself the following questions first:
- Do you have any debt?
Before you start investing, it is best to pay off any high-interest debt first. This includes bank loans, credit cards, high-interest overdrafts etc.
- Do you have an emergency fund?
An emergency fund is a pot of cash, usually equating to 3-6 months of living expenditure, held in an easily accessible and risk-free account. Consider it your ‘get out of trouble’ money. You may never need it, but it is always there in case you do. Emergency funds stop you from pulling out of an investment early and potentially making a loss during market downswings.
The amount held in the emergency fund is fluid, and you must add to it to suit your personal circumstances. For example, if you move from living rent-free with your parents to renting your own apartment, your emergency fund must increase to cover your new rent and bills.
Bottom line: If you had no income, how much cash would you need to survive the next 3-6 months? Save this amount before investing!
- Can you invest for at least five years?
To minimise risk, it is advised that any investment you make should be viewed to make long-term profits. With this said, most investments should be held for at least five years. Essentially this ensures that any short-term blips in the market won’t impact your returns. For this reason, it is important to plan what you might need cash for over the next 5-10 years. So, for example, if you’re looking to put a deposit down on a house in the next few years, then maybe a high-interest savings account is more suitable.