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Investment Preparation Checklist

Ready to take the leap into the World of Investing? Before doing so, here is a ten-item investor checklist that will help you in the planning stages before simply jumping right into stock market trading or investing. Consider these points carefully within the framework of who you are and what you want to accomplish as an investor.

Are You Willing to Make the Commitment?

This is the single most important point on the list. If you can’t make the commitment to begin your plan and, most important, to stay with it for at least several years, then you may as well take your money and gamble with it (see Investment Gambling). Odds are that you won’t be successful as an investor other than by pure luck. You will need to make money the “good old-fashioned way.” You’ll have to earn it.

The good news is threefold: if you make the commitment and keep it, you won’t have to work hard, the work will be enjoyable, and your odds of success will be significant.

Is the Money You Plan to Invest Vital to Your Financial Survival?

You can’t succeed if you’re playing with “scared money”; that is, money you are afraid to lose or may need to make a car payment or pay the rent. Although your goal as an investor is to make your money grow as strongly and as quickly as possible, there will always be the risk of loss. Unless you can accept this fact, your probability of success will be low indeed.

Simply stated: The money you have allocated to investing is not to be used for any other purpose, until you have achieved a reasonable degree of success. If you can’t afford to play the game, you owe it to yourself to avoid becoming involved in the venture! Even if you can only afford $25 per month, you can become an investor. Your progress will be slower than if you start with more money, but the important thing is just to begin.

Determine Where You Stand in Terms of Your Individual Needs and Goals

The right investments for a retired automobile worker may not be the right investments for a 35-year-old surgeon. The right investments for a college student who has a part-time job may not be the right investments for a middle-aged housewife who runs a small business part-time out of her home. The right investments for someone who earns over $500,000 per year may not be the right investments for an individual whose income is in the $100,000-per-year range.

Because everyone has different experiences, risk tolerance, available investment capital, family situations, tax considerations, obligations, and temperaments, what constitutes an appropriate investment plan will vary considerably from one individual to the next. No one book, course, or seminar can give you everything you need. However, if you study the general models and techniques presented here, you will likely fare well no matter what specific investments you make within the limits and needs of your situation. Knowing where you stand, what you need, and how you plan to get there is of primary importance.

Do You Have the Time to Follow Through on Your Commitment?

People are so busy these days. They rush to work and rush home. They run to catch the train, eat lunch quickly – often at their desk while working – and rush from the office or the assembly line to the gym. They hurry to the supermarket and then home to throw something together for dinner. They carpool for the kids and take them to after-school activities, overnights with their friends, Boy Scouts, Girl Scouts, school choir, karate, and even Sunday school. We argue – rightfully – that we need more time to enjoy life, to enjoy the fruits of our labors, to go fishing or skiing, or to take a long cruise. When we add having to spend time investing our money, it just doesn’t seem fair or right. After all, we work so hard to get ahead. We give so much to our children and our jobs and families.

No matter what your situation or position in life, you can find the time to plan your investments. As in the case of having sufficient investment capital, having the time can be adjusted to your needs. You say you don’t have two hours a week – no problem. How about one hour a week? Or 30 minutes? If you can’t spend a few hours a week, then go more slowly and spend 30 minutes a week. If you can’t find 15 minutes a week to do your homework on investing, then you time would be better spent elsewhere.

Be Consistent, Organized, and Thorough in All You Do

Perhaps you are a disorganized person. Perhaps your desk is piled high with papers, notes, books, and mail. Maybe you have not mastered the skills of organization and follow-through. If you believe that disorganization will limit or even prevent you from being successful, then you will have the incentive to make changes. There is no need to completely change your life. You can continue to be a disorganized, messy person in all else you do, but when it comes to investing, you will need to change. And you’ll need to change sooner rather than later.

Out with the Old and in with the New

To a given extent, most of us are victims of the traditional approach to investing. In other words, we have been indoctrinated to view investing in a particular way. The usual approach to investing is perpetuated by economics courses in high school and college, by popular books, and by financial advisors and stock brokers. We have been told that we need to follow the time-tested principles of investing. Many of these principles are outdated ideas are no longer applicable or effective in today’s investment environment.

For example, investors have been brainwashed to believe that in order to make money in stocks, they need to know what a company does. You don’t – you need to know the market for its products, its management, its financial history and stability, its earnings, its projected earnings, and much more. You need to know the economic outlook, the probable direction of interest rates, the potential effect of domestic and international politics, the degree of professional buying or selling in the stocks you want to buy, and much more. In short, we have been led to believe that the only way to make money in stocks, or for that matter, in real estate is by becoming a financial expert.

This myth has been perpetuated by a financial community that seeks to make investors dependent on the advice of their brokers. Whether in the real estate market, stocks, mutual funds, futures, or options, we have been led to believe that we need a good broker in order to make money. This is a false assumption and that, in fact, depending on a broker for advice can, in many cases, lead you to losses rather than profits. The fact is that there are very few brokers in any field whose selections and recommendations have a lengthy and profitable track record. And these individuals are so good at what they do that they accept only the largest clients who can make their efforts worthwhile financially. In fact, some of the most successful investors do not depend on brokers for advice. They have become their own experts.

Before you accept the traditional ideas, ask yourself the following questions:

  • Why do so many people still lose money following the advice of brokers who are touted as being “good” at what they do?
  • Why do mutual funds that are managed by individual experts or teams of experts still decline in value when the stock market goes down? Isn’t it fair to ask why these experts cannot minimize declines and still beat the overall market?
  • Why have so many “top” analysts lost their jobs or fallen into disrepute for taking money to recommend stocks that they knew were likely to go bankrupt?
  • Why have various agencies of the U.S. government fined major brokerage houses for having a conflict of interest wherein they recommended worthless stocks in order to sell them to unsuspecting investors?

These are only some of the limitations to consider about the traditional view and methods of investing. The methods you will learn here will help you become an independent investor, which will help you avoid dependence on brokers, analysts, and advisors.

Be Prepared to Play Your Own Game

All too often your plans to become an independent investor and increase your wealth will be thwarted by those around you. People tend to get jealous, even over the smallest things. The fact that you are forging ahead, taking charge, and controlling your financial future will cause some of your friends and family to be envious. They may try to discourage you from investing. They may attempt to dissuade you by saying that your efforts will amount to nothing but losses.

Don’t listen to them! In fact, you should make your investment plans without telling friends or family (other than your spouse), because odds are that few people will be supportive. It is best to play your own game and decide what types of investing you want to do. Gather the knowledge you will need and then begin your venture (adventure) without announcing, discussing, or asking permission of friends or family.

Don’t Fool Yourself into Thinking You Need Expensive Computers or Programs

If you allow yourself to believe that an expensive computer and the latest programs are needed in order to succeed as an investor, then you are dead wrong! Here is yet another example of how the average investor has been tricked into believing what the professional community wants to sell to investors. The simple facts are as follows:

  • A considerable amount of quality investment information is available via the Internet free of charge. Yes, you will need a computer to access the Internet information, but you can do that with the most basic of computers or an Internet cafe.
  • An expensive computer, or for that matter, any type of computer, will not necessarily help you make money if you cannot use it properly, and if you don’t have the right programs. Even if you do have the right computer and the right programs, there is no guarantee you will do better than if you did all of your work manually without trading or investing software.
  • You don’t need a broker to get stock prices. You don’t need a broker in order to find real estate. And you don’t even need a broker to invest in stock programs called dividend reinvestment programs, or DRIPs. You can buy shares in a company directly from the company itself, bypassing the broker entirely without paying a penny in brokerage commissions. You could also setup an online broker account and do everything yourself.

Don’t Feel Pressured at Any Time, for Any Reason

If you allow yourself to be pressured into buying or selling stocks, options, futures, real estate, coins, or any other type of investment, then you are likely making the wrong decision. You need to act slowly, diligently with focus and with purpose. If you feel a significant urgency to make an investment, then you are likely being influenced by someone else, either a friend or a broker, or by something you have heard on the radio, read in the newspaper, or seen on television.

There are thousands of stocks, millions of properties, and tens of thousands of business opportunities, none of which will work for you if you don’t take the time to study, analyze, and act. Such decisions cannot be made quickly until you have experience and understanding. If you feel pressure to invest, then you are likely headed for disaster. The warning holds true for any investment, at any time, even after you have had significant experience.

Be Prepared to Diversify

Although you can seek to become an expert in one very narrow area of investing, you are better off if you seek to diversify your knowledge and investments into several different areas. Putting all your eggs into one basket will serve you well as long as that one area is performing well. However, if this one area begins to falter, then you will be left out in the cold without a fallback position.

Learn more about the diversification of investments and assets.

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