Four Signs That You’re Ready to Start Investing

The world of investment can be extremely inviting to many of us, particularly in instances where you’re dealing with assets that offer you access to enhanced leverage and potentially higher returns over time.

However, most markets also encounter at least some level of sustained volatility, which means that investors must incur significantly higher risk in the pursuit of returns. This is most evident in the forex market, where it’s thought that as many as 70% of traders regularly lose money.

But what are the key signs that you’re ready for this and able to start your journey as an investor? Here are three to keep in mind:

#1. You Already Have a Clear Financial Plan and Objectives

For you to achieve success as an investor, you’ll need to first have an established set of financial goals and a plan to achieve these.

This includes an understanding of the risk and reward ratio associated with specific investment assets, while it should also incorporate timeframes (either in terms of when you require a particular return or how much you hope to recoup within a predetermined period of time).

Without this, it’s almost impossible to create an effective investment strategy, as you’ll have no defined boundaries or any understanding of how much risk you can take on in order to achieve your financial goals.

This also helps with the management of expectations, as the failure to do this can lead to emotive trading and more sustained losses over time.

#2. You Have Money in an Emergency Fund and Financial Savings

We’re in the midst of a cost-of-living crisis, where it’s incredibly difficult to imagine having enough disposable income to invest in assets of any description.

We certainly wouldn’t recommend investing all of the disposable or discretionary income that you have, not least because this leaves you vulnerable in the event of losses or sustained market downturns.

Instead, you should prioritise your disposable income in the current economic climate, with a view to creating a viable emergency fund that affords you access to cash in instances where you’ve suddenly or unexpectedly fallen on hard times.

You can subsequently put any amount of capital that remains into your investment portfolio, and if you already have savings or an emergency fund, you may be ready to enter the financial markets.

#3. You Understand Investing and the Financial Markets

Last, but not least, you may be ready to invest if you have an understanding of the financial market and its underlying mechanisms.

You should also have a broader understanding of wealth and investment management, in terms of how to build and diversify a portfolio and adjust this effectively in line with wider market changes.

This should also create an underlying sense of determinism, which ensures that you understand the unspoken laws that govern change in financial markets and are able to make informed and strategic decisions as a result.

#4. You Understand Risk Tolerance

On a final note, you may be well-placed to thrive as an investor if you have an understanding and appreciation of risk tolerance.

In simple terms, this describes the extent to which you’re willing to incur loss in the pursuit of returns, while this is central to the notion of successful forex trading strategies. Assets that deliver short-term returns tend to be noticeably more volatile and deliver a more delicate risk-reward balance, where returns can be high in line with the increased threat of loss.

Assets of this type are usually speculative and highly leveraged too, with forex and international currencies offering a relevant case in point.

In the case of longer-term investment options and assets, these tend to be ideal for those with a lower tolerance for risk. This is because longer-term assets are designed to naturally ride the peaks and troughs that occur within particular markets, and often underpin the main strategies to trade forex preferred by risk-averse investors.

Make no mistake; if you’re going to create a viable forex trading plan, you’ll need to have an understanding of risk tolerance and its impact on your portfolio.

So, if you already have this, you’re well-placed to start investing and create a portfolio that can survive even the most challenging market and economic conditions.