quarta-feira, 19 de fevereiro de 2020

Know why you want to invest







First of all, you need to understand why you want to start investing. Your reasons to invest will matter a lot on how you are going to invest.

There are many reasons to invest in the stock market. But they can be grouped into two categories:
  1. Investing in the short-term to buy something. It could be to buy a new house, for instance.
  2. Investing in the long-term for your future. It could be to pay for your retirement. Or you could invest in the long-term for the education of your child.
Now, it is essential to know that investing is a long-term game. If you want to buy a house in the next year, it is probably not a good idea to invest now. Why is that? As we will see in the next section, the stock market is volatile. It will provide good returns, but only on average. If you invest now and the market goes down 20%, what are you going to do?
So, I would only recommend investing if you are investing for the medium or long-term. You need to answer a simple question: Can you wait until the market recovers if it goes down?
For instance, if the market went down 20% next year, will you be able to wait one year or more until it recovers?
If you cannot answer yes to this question, you are probably better off investing. There will be some negative years in your investing journey. And you will need to wait until it recovers. Selling in a downturn is the worst thing you can do!

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