Investing in stocks and shares has connotations of men in suits, upper class gentlemen, bankers and intelligence- and by all accounts it can seem very intimidating at first glance.
Our connotations of investments are not completely wrong, in fact, only 23% of women in the UK hold an investment product. No wonder we associate investing with men.
But that’s changing, and with more and more information becoming freely available to women (and men) of all classes and ages, it’s never been a better time to learn more about investing.
If you think you might be ready to start investing, take a look at these points below to make sure you have all the information you need to make the right decision for you.
I started investing in the stock market almost a year ago- aged 26. Before taking the plunge, I asked myself all of the below questions, and spent about a year deciding which product was right for me, and how much I wanted to invest each month.
You might also be interested in: How To Start Investing: What I Learnt After 6 Months Of Investing In The Stock Market
You have paid off all debt
An important one to consider- ensure that any high-interest debt is paid off before you start to invest. Think about it, is it going to cost you more money (in interest) in the long run if you take longer to pay off your debt?
The answer to this is likely to be yes. Paying down that debt before you start investing is usually the right option for most people.
You have an emergency fund
What is an emergency fund? An emergency fund is an easily accessible amount of cash that can be used in event of an emergency. For example, if you lost your job, if your boiler breaks down, or a relative becomes ill and you need to care for them.
Your emergency fund should ideally cover 3-6 months’ worth of expenses. The final figure that you decide upon is your own prerogative, but ensure you have a fund of money in place before you start investing so that you do not need to rely on your investments.
You already pay into a pension
When you make pension contributions, you are still investing. The difference is, is that these are very low risk investments, and you are not able to withdraw from your pension until you reach retirement age.
Take a look at my guide to pension contributions in your 20s to find out more about pensions.
In the UK, a scheme was introduced in recent years called auto enrolment. If you are on this scheme, the minimum that your employer is obliged to contribute (as of April 2019) is 3% of your salary, and you contribute 5%. However, at many workplaces your employer will pay a higher percentage, and may match your contributions up to a certain percentage.
It’s a good idea to check out your workplace pension scheme to make the most of it- usually the government will add money into your pension pot in the form of tax relief. Whereas you’ll have already been taxed on any money that you then decide to invest in stocks and shares.
If your employer does match your pension contributions, it’s a good idea to max this out before investing separately in the stock market because the contribution your employer makes is essentially free money towards retirement!
You can head to the gov.uk site to find out more about your own personal circumstances.
You understand your options
There are lots of different investment products out there, so before you start investing, it’s very important to know which product is right for you and your own circumstances.
You should also understand your attitude to risk- this will be impacted by your age, and how close you are to retirement currently.
There are also choices to be made about whether you want to invest ethically, whether you want to invest via a stocks and shares ISA, or perhaps you’d like an investment solution that you can manage via an app.
Do your own learning and research- there are even some brilliant free courses out there which can help you better understand investing and the options that are available to you. Check out this beginners guide to investing to get started.
You’re comfortable with making a loss
Although the end goal of investing is of course to accrue wealth, there is always a risk that you could make a loss on your investments.
For example, if you decide that you want to invest £100 each month into a stocks and shares ISA, it’s important that you feel comfortable losing that amount of money, should the worst happen. Find a figure that you are comfortable with before you decide what amount you want to contribute on a monthly or yearly basis.
There are several key things to consider before you start investing, the main one being which investment product is right for you. It’s important to make sure that you do your research before committing to a financial product, to make sure that it will serve you for many years to come.