Ask yourself the right questions before investing in stocks

Investing in stocks for the first time can be a daunting task, especially since there are so many options out there each with a different risk to return ratio. Consequently, many people who are thinking of investing are reluctant to do so until they better understand their options. Here are the questions you need to ask yourself and know the answers to, so you can gain that understanding and make your first investment in stocks:

What do I hope to gain through investing?
The first thing you should know is what your objectives of investing in stock are. Are you investing to diversify your investments? Hoping to gain extra income? Making this your primary source of income? Each of these objectives has a different route, and some are more difficult than others. Know what you want from investing before doing so.

What portion of my income should I invest and how much am I willing to risk?
Ideally when beginning your seed investment should be that part of your income which you are able to set aside a bonus or monetary gift. At least until you’re comfortable with investing and trading, do not put your savings on the line. Or start putting aside a small portion of savings that you are willing to risk on investments. Determine how much you are willing to risk as it is important when deciding on your investment type.

What sort of stocks do I want to invest in?
Different types of stocks come with different risk levels and different returns on those risks. Be sure to research your options and see which types you’d like to invest in. Some are more stable but yield lower returns, while some are volatile with higher returns.

Which industries do I understand well?
Investing in the biggest thing because others recommend it is not always the best option. Invest in what you understand pick companies from industries or sectors that you are knowledgeable about. This way you’re more likely to understand how the stock you’re investing in will be impacted by external forces.

Do I need a broker to help me?
This is largely a personal decision do you want professional help in managing your stock portfolio? If you have a busy professional or personal life, it might be better to have a professional who can dedicate the time to understanding your needs and managing your investments.