The Onset of Any Investment
Copyright (c) 2007 CashFlow Avenue
If you want to be serious in trading, you must look at
trading as a business. Before you set up any business,
planning is essential. Although tempting, before you pour
your hard-earned savings into this venture, the first step
is to establish your investment goals and objectives. It
is best to have this written down because there will be
moments that you will forget your goals and purpose of
investing.
Keep your "mission statement" of this business as simple as
possible. Each time you feel that you are losing your
discipline; this is the time to refer to your goals that
you have set.
As a guideline, decide on what you would like to achieve
financially. Develop a plan, tactic or method to achieve
your goals. The method that you choose or develop must
have a proven track record for you to eventually arrive at
your destination.
Your mission statement should contain, but not limited, to
the below:
- What is your Target Net Worth (set a realistic goal)?
- What is your target Monthly Residual Income?
- What is your initial investment capital?
- How much would you allocate a month from your savings in
this new venture?
- How much time will you allow for this investment to
mature?
- How much time per day would you allocate to achieve the
above goals?
- What type of investment vehicle would you specialize in?
When setting your target net worth, set a goal that is
achievable. Of course, it is always in many of our
dreams to be a multi-millionaire. Set an initial
achievable goal as a stepping stone. Periodically, you can
always review and revise your goal. For example, if you
currently are starting out with $10,000, you may want to be
realistic by setting an initial 3 year goal of $50,000,
which would represent a 500% return on investment. After
the initial goal has been accomplished, you may then set a
bigger goal. If you arrive at this goal before the 3 years
is up, you can always review and re-set a new goal.
Setting achievable goals will keep you motivated to strive
further with your investments.
Investing can be risky no matter how safe it looks. Always
use only risk capital for all your investments. Risk
capital is money that you can lose without affecting your
lifestyle. If you need these funds for your next meal,
your kids education, or to pay your house rent (you get the
idea), then please refrain yourself from investing. Risk
capital should only be a small percentage of your monthly
savings. For example, if you currently save $1000 per
month, you may want to allocate 20-30% of your monthly
savings for investment purpose. It is prudent to be
conservative while taking risk. You do not want any bad
investment to ruin your current lifestyle.
Establishing the "big picture" before you start trading or
investing will provide you a roadmap as a reminder of why
you even bother putting your hard-earned money at risk.
