Establishing Investment Goals

When first starting out with investing it is important to determine what your overall goals are. Sure it's a good idea to want to start saving and investing, but it'd be silly to have heaps of money laying around and not know what you're going to do with it all. You do not have to allocate goals to all of the money that you will be investing, but you should have your major objectives covered. This is important because having an objective helps you figure out how long you have to invest your money. Let's look at a few examples of why this information is important.

If you will be using your investment returns to pay for the down payment on a house you want to buy, you will need that money sooner rather than later. Since this is the case, you do not have sufficient time to make risky investments. You will need to choose an investment vehicle that is stable, with measurable and predictable returns. You will also need an investment where you can quickly liquidize your assets. If it will take you too long to get the cash out of your investment, or you have to wait for one of your stocks to go back up in value, it may sour the real estate deal you have on the table.

At all times your investment decisions should fall within a level that is comfortable for you in regards to how long you have to invest, and what your personal comfort level is with losing money. You do not want to stack up a bunch of high-risk investments that make you sick from stress, and then end up using all of your profits to pay your medical bills.

If you are saving in order to retire in 20 or even 30 years from now, you'll have more wiggle room in regards to time. You can make riskier investments, like stocks, because you will be able to wait out the low points and hold onto that stock until such time that you are ready to retire and live off of its returns. That way as the years go by, and the stocks rise and fall, you will not worry about it because you will not be in need of that money for any short term use.

Regardless of which investments you choose, do not be afraid to get started. Sitting on the sidelines is no way to make money. If you make a few mistakes starting out, you can overcome these later and the lessons you learn will be invaluable. You can read about the mistakes other people make as many times as you like, but until it's your own money that on the line the lesson will not sink in.