When it comes to financial matters the problem isn’t that there is not enough information, it’s that there is so much that it becomes overwhelming and can lead to analysis paralysis. If you want to get started and you would like to know more about magic formula investing, this article can help.
This method is very easy and it’s a great way for a beginner to get started, but there are a few things you will need to do first in order to be ready to start investing.
Here are the things you need to take care of to make sure you are in the right financial place to get started with you investing career:
1. Even the most savvy investor likely won’t consistently make over 20% on investments so you should make sure to not pay out this kind of money in interest payments. For that reason, take some time before you start investing to pay off all your credit card and car loans that have a high interest rate. Once you get these paid off you will have more money to invest, and it won’t put a crimp in your budget since this is money you were already spending every month anyway. And if you calculate all the money you’ll save on interest, you can really add a lot to your nest egg.
2. Once you’ve tackled your credit card debt, set some money aside in a savings account. It’s a sad truth but many people have gotten away from the habit of saving, and when the economy gets bad, many people will really be in trouble. Take the money you were paying on your credit cards to establish a savings account. Don’t even consider investing until you have enough in the savings account to cover your basic living expenses such as mortgage, food, utilities, insurance, etc for at least 4 months (though 6 months worth would be better). Once you’ve got your emergency fund set up you can start thinking about investing, not before!
3. Since the magic formula will require you to buy and sell a lot of stocks you want to make sure that you aren’t paying through the nose when it comes to the brokerage fees you will be charged. Take some time to shop around and find a low fee broker that you can open an account with.
No one is going to win every time they buy a stock. There are no guarantees involved with investing in the stock market, however, if you use the magic formula investing method you can greatly diminish your risks while increasing your profits. The biggest thing you have to do before you jump in with both feet is to get your finances in order.
That way you’ll not only free up some money for investing, but you will also enter into your investing with a better attitude. You should never start investing because you are desperate to make money, if you do you will be going strictly on emotion and that is the very best way to make sure you lose everything. Get in the right financial position first.