Why do you want to invest in the stock market?
Do you know why?
Before you do anything, you usually know why you are doing it, right?
The same is true with learning how to invest in the stock market.
You have to know why you want to learn how to invest to be able to get your motivation for what you need to do and eventually how you are going to learn this skill.
There are many reasons why you would want to learn how to invest in the stock market, but only you know why you want to learn. You should have that specific reason(s) written down so you know what you working towards and why you want to invest. There are both general reasons and specific reasons. For example:
1. You want to be financially free
When you are financially free, you don’t have to worry about how and when you will be able to pay your bills. You have the ability to buy what you want without worrying about how much something will cost. You have your basics in place and can afford food, a roof, health care, etc. You can go beyond the basic requirements and do what you want when you want. That is true financial freedom. It is so important that let me repeat it: You can do what you want when you want. Money gives you the freedom to be financially free and to live your life the way you want.
2. You want the choice of how and when you work
If you are working for someone to earn money, you will be at the mercy of how much you make within those hours. And as your responsibilities grow, you must increase your hours at work to keep pace or you need to somehow earn more money. Investing is not a get-rich-quick scheme – Investing is a long-term way to grow your wealth. And the sooner you start, the better it is for you. When you are financially free and don’t have to work for your money, you can live life on your terms, the way you want to. When you invest, you don’t work for your money, your money works for you. That is powerful.
3. You have certain goals you are saving for
While having more money and increasing your wealth are always goals that you should work towards, having specific goals sometimes makes the entire process of learning how to invest and just starting to invest easier. So, what are some specific goals that you are working towards? These could include:
Your child's education
A vacation, such as paying for a round-the-world trip
Buying a home
Have enough for retirement
Once you figure out why you want to invest and what goals you want to reach, that can help you formulate your investment plan. For example, if you have a short-term goal, it is not a great idea to invest in the stock market, as stock markets are volatile and can go down in the short-term, which would compromise your reason to invest to achieve that particular goal. But knowing why you want to invest and for what reason will help you in formulating how you invest.
So, how do you figure out why you want to invest?
Ask yourself the following three questions:
1. What is it that you are investing for?
You should know what you are investing for and why. Investing for specific or general goals is fine. Having multiple goals to invest for is fine too. You just need to have something to invest for. Just thinking that you should invest simply because someone else says it is good for you won’t keep you going in the tough times. And investing is a marathon, not a sprint. You will have good times and tough times and having a reason for being in the stock market will keep you going.
Do you need some more motivation? We would recommend that you download our awesome Motivation Guide.
2. Is it a short-term or a long-term goal?
If you are investing for a specific goal, it is important to know if the goal you are investing for is short-term or long-term. This will help you determine the path that you want to follow for your investing journey and will inform your investing plan as well.
3. How much do you have to put towards getting to that goal?
And if you have a specific goal that you are working towards, then we would recommend that you use the SMART framework to define your goals.
Specific – make each goal clear and specific
Measurable – frame each goal so that you know when you have achieved it
Achievable – you need to take practical action to achieve a goal
Relevant – determine whether your goals relate to your life and are realistic
Time-based – assign a timeframe to each goal so you can track progress
Why is this important?
This is important because while you should know how to invest anyway, having a goal makes it concrete and helps you establish an investment plan to get to that goal.
For example, let’s say that you want to invest to take a trip next year. That does not lend well to investing in stocks to achieve that goal as the stock market is volatile and could go down in that timeframe. But if you were looking to invest to have the funds to take a trip in 10-15 years, that would be a different investment plan that you would put in place now to achieve that goal.
So, knowing why you want to invest and for what purpose is critically important as it will end up determining and driving your investment plan.
We still think that you should invest to increase your wealth long-term, but having a specific goal can make it easier to envision reaching that goal, actually investing your money and sticking with your long-term investing plan.
Check out our website SHALnCO for more resources on investing, including courses and eBooks.
Nothing in this email is intended to serve as financial or investment advice and you should do your own research and consult with appropriate advisors.