So you've mastered saving and are ready to move on to investing. Are you a risk taker? Do you think you should follow the individual strategies that have made other people multi-millionaires and even billionaires? Hold on. Do you think they started out making high-risk investments that might make them lots of money, or lose all their money?
Definitely not. All successful investors have to start out in the same place: they make safe investments to build up their capital, and eventually when they have enough to cover their current and future needs, they can start thinking about making big money. Unless you have money that you can afford to lose, you shouldn't be investing in things that might lose you lots of money.
Let's look at a systematic process of investing that you can use throughout your financial life; even if you become that big risk taker later on. Remember, if you try to skip steps or jump ahead of the game, you may find yourself losing money instead of gaining money.
The Five Stages of Investing
The best financial planners have various strategies for people at different stages in their financial lives. These strategies are based in stages from lowest risk to highest risk. One example is the Five Stages of Investing from Joan S. Ryan, Managing Your Personal Finances (South-Western Educational Publishers, 5th edition, 2006). Watch the presentation to see what these stages are and where they fit in your financial life. Click the player button to begin.
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