5 Signs You're Ready To Invest Or Trade Your Extra Funds

5 Signs You're Ready To Invest Or Trade Your Extra Funds
7 min read
05 October 2022

During the pandemic, people’s financial savings were tested, used, and emptied due to unforeseen needs. Most of us were still digesting and understanding the gravity of the COVID19 virus during that first year. And since everything was moving too fast, people affected firsthand by the virus had no choice but to rely on their savings to stay alive.

For others who were lucky not to go through that, they took the opportunity to learn and educate themselves about trading and investing. Because many businesses were struggling, they had no choice but to lay off their employees to reduce business costs. It gave people no choice but to start their businesses, invest their money, or learn trading to keep their finances afloat.

This motivation to grow money during that challenging time allowed people to explore the stock market, forex trading, cryptocurrency, and more. And since then, people have started looking into investing and trading platforms that could help their money grow. The thing is, investing and trading are not as easy as most people think. You must be knowledgeable, wise, and ready to invest and trade wisely. 

If you’ve been wanting and planning to get into investing or trading, it’d be better to do it when you’re ready to avoid disappointments and losses. To help you know whether you’re ready, let’s look at some signs to help you decide if it's time to invest and trade your extra funds. 




1 - First, you already have extra funds. Not the money from your emergency fund, life savings, and other income sources.

Your account balance is the first thing that’ll tell whether you are ready to invest or trade. If you’re planning to use the money from your life savings or emergency fund, this is your sign that you’re not ready to trade or invest yet. Why? Because investing and trading come with risk. 

One of the main rules most financial advisers advise is only to invest or trade the money you’re willing to lose. If you use your life savings hastily to buy foreign currencies without understanding how the forex market works, I can guarantee that you wouldn’t like the ending.

So to avoid blaming the investment or trading type you’ve chosen, only use your extra funds. Never use your emergency fund, life savings, or other income sources. Allot money for your EXTRA funds first before investing or trading. If you have one already, that’s the first sign you’re good to go.



2 - You don’t have any debt to pay. Or, if you have, your other funds can cover them.

One of the mistakes many people make is investing or trading when they’re at the peak of high-interest debt. Other people might have varying suggestions regarding this point. Some might say investing is still doable even if you have an unpaid debt. Maybe if you’re wealthy, that will do. But if you’re a middle-range earning professional, you might want to rethink and review your financial standpoint.

Now is not the best time to invest or trade if you still have a remaining car loan, property mortgage, and high-interest credit card debt. Unless you have other income sources and savings allotted for your debt, you’re good to invest. But if you’re relying solely on your salary for debt payments, you’re likely not yet financially ready to invest and trade. 




3 - You are mentally and emotionally stable about money losses and gains.

Many first-time investors and traders are often impatient and rash in decision-making. Sometimes, when they lose a hundred dollars, they tend to get emotional and spend more money in the hopes of gaining it again. Once it's over, they’ll realise how much money they’ve lost due to impulsiveness and poor emotional control when it comes to money.

If you tend to become emotional when losing or gaining money, I suggest working on improving that first. You should not let your emotions rule you when playing the game of investing and trading. Instead, you should be wise and strategic with your every move and decision. 




4 - You understand that investment and trading will not grow your money overnight.

Many find it disappointing that no investment or trading will make them rich overnight. Unfortunately, many still don’t understand or grasp this fact. The success stories they hear about investing or trading have made them live in the fantasy that it is the key to being wealthy quickly. 

If you’ve been researching and learning about investments and trading, you probably understand that that belief happens rarely. Only 1 out of 10 people could grow their money overnight, and usually, that is because they’re knowledgeable about what they’re doing. It’s rare to find people who don’t know about trading or investing who made it big instantly. 

If you understand that no investment and trading type will make you rich overnight, then it’s a good sign that you know what you’re getting into and not the other way around. 




5 - You know your risk appetite.

The last sign is you know your risk appetite. Overall, I believe that this sign summarises the four previous signs I discussed. If you don’t have any extra funds, still have a debt to pay, and still believe that investing or trading will make you rich overnight despite losing thousands of dollars already, then you probably don’t know your risk appetite. 

In business, risk appetite is the amount of risk an organisation is willing to accept to achieve its objectives. If you’re doing the opposite of all the four signs I shared and are still willing to trade or invest, it’s clear that you don’t understand the risks of your actions. 

Your risk appetite is poor if your expenses do not balance or are more substantial than the potential benefits from your investments or tradings. Before you dive into any of it, be sure to understand and know your risk appetite. It will help you plan and be smart with your financial choices in the long run.



Are you ready to invest or trade now?

Hopefully, my five signs will help you answer my question. If you find yourself sighing and shaking your head at each point, I recommend giving it some time before starting. Allow yourself to learn, save, and be financially ready to start the game of investing or trading. That way, you’ll be able to mitigate your losses and play the game smartly. 




About the author:

Bianca Banda is a writer for FP Markets, one of the best regulated Global forex brokers with over 40 global industry awards—and counting, making them the trusted trading broker by many. 

 

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Bianca Banda 0
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