Many people are starting to invest now that the crypto news is all around them. Do you belong to that group? Then always ask yourself these three questions first.
A good friend tells you about a promising cryptocurrency, or you read a news item about a current stock at a record high. We all want to get richer, so the temptation is great to jump in at times like these. But since it would be a shame to lose your hard-earned money on a whim, here are three questions to ask yourself before you start investing.
Three questions before you start investing
Fear of missing out (FOMO) is very human, but unfortunately not without risk.
How bad is it if I lose this money?
You can do a lot to minimize risk, but make no mistake: investing is not risk-free. Therefore, rule number one is to only invest with money you can afford to lose if you decide to invest.
Always keep a buffer in reserve. Suppose your car needs an expensive repair and you have no savings for this. Shares and crypto have their ups and downs. It would be a shame if you had to sell your investments when they are in a dip.
Have I done enough research before investing?
Whether it is a stock or a cryptocurrency: don’t just buy it because your neighbor mentioned it or you read about it on the internet. Do your research. Of course, you must believe in the company or the cryptocurrency and take the time to research and understand it.
Don’t feel like looking at companies’ annual figures, but do you want to invest? Then it may be worthwhile to look at an ETF. This can be compared to a basket of shares, sometimes containing thousands of companies. That way, you immediately ensure a good spread.
Does this investment fit my strategy?
If you do not have a strategy for investing at all, you first have some work to do. We just mentioned it, but the spread is important. You do not want to put all your money into one company, only to read in the news tomorrow that the company has gone bankrupt.
To minimize your risk, it is important to spread your portfolio well with different investment products (shares, bonds, ETFs, crypto, etc.) from different industries (tech, healthcare, technology, etc.) and different locations.
Exactly what your spread will look like depends on your personal preferences and goals. Put this strategy on paper before you invest. Ask yourself questions such as: how much risk can/am I willing to take? In how many years do I want to use my assets? And do I want to spend a lot of time investing or not?