Every prospective investor must know what his motives are for wanting to invest in the stock market. Do you want to build long term wealth from safe shares, do you want a quick boost in your bank account from high risk high return shares? These are the questions you have to ask yourself before you even start investing.
So, before you venture into the market, determine whether you want to invest for retirement, education, a holiday or whether a monthly income is necessary, how risk averse you are or if you're looking for long-term capital growth. Or if you want to 'play' with short term trading.
Never invest more than you can afford to lose!
How much can you safely afford to lose in the event of a stock market crash or correction? How long will you be prepared to wait for the market to stabilise? And will you have the courage and foresight to continue investing when prices are at their lowest ebb? Your honest answer will determine the extent of your capacity to balance risk with reward.
Either way, the golden rule is to invest only as much as you can comfortably afford after meeting your personal and household expenses. Use this "disposable income" to build yourself a portfolio of stocks and you could have a lot more income to dispose of once those dividend cheques start arriving.
Don't trade on borrowed money. And never risk money you can't afford to lose.
You should be able to find a stockbroker that's prepared to take on a client with as little as $1000 to spare, so you don't need to go huge to start out with. The formula: Start small, invest wisely and stay the distance. Who knows? One day, you too could be a high net-worth individual.
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