A great investing opportunity does you no good if your finances aren't prepared to take advantage of it.
There are many great opportunities out there. Indeed, many of us have financial opportunities daily — even if we don't recognize them. You might even have access to a great investing opportunity.
But that opportunity does very little for you if you cannot take advantage of it.
Prepare Your Finances for an Investing Opportunity
A few years ago, the stock market was in pretty bad shape. While many people were selling, I upped my monthly investment for my emergency fund. Being able to increase my regular investment at that time has meant that the extra shares of the ETF, bought “on-sale,” have resulted in some pretty solid gains by now. I was able to do this because I live within my means.
An investing opportunity does you no good if you can't take advantage of it. This means that you need to get your finances in order so that you can take care of opportunities that come along, whether you want to put a down payment on a rental property that has dropped in price or whether you want to boost your retirement account contributions, or whether you think that there is a promising IPO for you to invest in, you need to be ready.
Live within your means
This was one of the hardest things for me. Back when I had debt, was in school, had a newborn, or any number of issues, living within my means was difficult.
There are plenty of systemic issues that make it hard to be ready for an investing opportunity. Figure out how to cut back on unnecessary spending and make more money. This can be rough, depending on the situation. When possible, do what you can to bring your finances in line with your values and priorities, and see if you can start living within your means.
Work toward paying down your consumer debt
You can work on multiple financial goals at once. One of them should be to reduce your consumer debt if possible. High-interest debt makes it difficult to position your finances and prepare for what's next. Create a plan to reduce your debt. As you pay down debt and become freer financially, you'll have less debt and more room to take advantage of an investing opportunity.
Save money in a special, liquid account
Keep some money in an account that's liquid enough to tap quickly. While my emergency fund and travel fund are kept in taxable investment accounts, I do have a pool of liquid assets. I want cash ready to deploy if an investing opportunity pops up. As a result, I've been able to:
- Buy extra shares of index investments for my core portfolio during downturns.
- Run experiments with different types of assets, including individual stocks and even cryptocurrencies like Dogecoin.
- Buy into local businesses or other projects that potentially lead to gains.
It's a helpful way to know that you'll be able to get more bang for your buck if needed.
Educate yourself about investing
Find out about various assets. Learn about how investing works so that you make better investing decisions when the chance arises. Knowing how different asset classes work and paying attention can be helpful. Even if you're like me, and you mostly index, understanding how indexing works will keep you on the straight and narrow as you position yourself for opportunities.
Start small and simple
Don't get caught up in needing to have a huge amount of money right now. Set aside a few bucks a week, and increase gradually if possible. Just creating the habit and thinking ahead can help so much. Being intentional about how you set aside money can also help you focus on what's possible. When you do this on purpose, you're thinking about opportunities, and that can help you identify them.
Consider your situation, and figure out what you can do to be ready.
Watch Out for Investing Scams
Of course, there are plenty of legitimate investing opportunities. Preparing yourself to take advantage of them makes sense. However, you also need to be on alert and know the difference between an investing opportunity and an investing scam.
Be on the watch for those who promise you high gains with low risk and those who try to make you feel like an “insider,” getting in on “special” information that no one else can access. And be especially wary of those who insist you borrow a great deal of money or drain your emergency fund to invest in a “one-time” opportunity. If you feel pressure to make a fast decision, there is a good chance you are dealing with a scammer.
You want to be ready for a true investing opportunity. Get your finances in order, and learn about investing. That way, your finances will be ready when a true opportunity comes along, and you will be less likely to be taken in by a scam.
Definitely some good points. There are many people who set themselves up for failure when they could use a reminder to have enough cash on hand to make leaps like this.
This is excellent advice – it’s important to have cash on hand to be able to take advantage of major sell-offs in the market. While most people believe the best time to invest is when everything is going up, my philosophy is to seek great values when everything is going down. This plays into the old saying, “Buy Low, Sell high”, and allows for huge returns even when the market is doing poorly overall.
It’s true! You never know when you have a chance to get a bargain. Reminds me of Warren Buffett’s advice to be fearful when others are greedy, and greedy when others are fearful.
Great advice! Investors should always watch out for scams. The is especially true is you are trading over the counter stocks. I also that there are always bargains. As Jim Cramer says, “There is always a bull market somewhere.”