Investing can be intimidating. Here is how you can begin investing if you have NO IDEA where to start.

Deciding if you’re ready to start investing can be hard especially when you’ve never done anything like it before. We all hear about how we can ‘make our money work for us’ and the stock market blah blah blah so naturally we feel like we should be investing our money somewhere. But before you even decide to jump out there throwing money at any investment there are a few things that you should consider.

How much money do you really have saved

Ask yourself this question. Do you have enough money saved to cover 6 months to a year of expenses?  Things happen. You lose your job, a family member gets sick you get in a car accident. You have to be prepared as best as possible. If you can’t survive at least 6 months without an income then you might want to reconsider investing at all.

How much debt you have

 I don’t necessarily think that if you are in debt then you shouldn’t be investing but you do want to consider the options. Have you considered how much interest you’re paying on your debts vs how much interest could you potentially make investing money in the market? If you are paying 8% interest on your debt then it might not make sense to invest in the market which only has the potential to yield a 5% interest rate. Even if your investments did yield 8% interest you would essentially only be breaking even and that doesn’t even account for the fees that might be associated with investing.

Why you want to invest

There are many ways to invest from day trading where you try to make a quick profit to long-term investing for retirement such as IRAs, 401ks etc. Investing for the long-term future is completely different than for short term gains. Usually, investing short term comes out to be riskier and involves more active management than other options such as mutual funds, ETFs, or money market accounts. Decide when you would want to use the money and determine the type of investments that work best for you from there.

How investment fees work

Load fees, expense ratios trading fees etc. can eat your profits in any account you chose to start. Some funds take a percentage of your initial investment some take a percentage of your earnings. Some investments charge expense ratios which help to pay a fund manager, operating fees etc. Most fees are a seemingly nominal percentage but it’s important to ask or find out how all the fees work before you purchase any investment.

How active you want to be in managing your funds

Some people are DIYers and others want someone to help them through the process. If you like having a person there to ask questions or advice about investing then you might consider working with a financial advisor. You have options here too as far as how involved you want your advisor to be in your investment process. You could hire a personal financial advisor where you work one on one with them and have a working relationship or go with a bigger company that charges little to no fees. In that case, you might be able to call and speak with someone but you might get a new person every time.

Your risk tolerance

High risk, high reward, low risk, low reward. Factors that you would consider when assessing your risk tolerance would be your age, how long you want to keep investment and your ability to withstand market changes. If you’re going to cringe every time you see you investment value has dropped a few bucks then you might want to consider some very low-risk investment options. Also if you are very young and investing for the long term then you might want to consider some more risky options. Yes, people make a lot of money in the market but people can lose money too. So make sure you’re comfortable with the risk.

Have this conversation with yourself before you start investing. Everybody is different. There is no one size fits all solution with it comes to investing.

Are you investing right now? How did you decide what investments were best for you? Leave a comment below.