Whenever I examine the topic of investing, I often receive responses from readers who want to learn more about how they can make their money work for them in some type of investment. It seems that while they have a desire to invest, many persons are unable to proceed because they just don’t know where to start.

When I first learnt about the concept of investing many years ago, I was initially hesitant about putting money into anything that couldn’t guarantee a positive return. While I understood about saving and receiving interest on my money, it seemed like a risky idea to commit my hard-earned funds into an endeavour, hoping that it would generate a profit.

I remember doing a training course that required the students to create a portfolio which included stock investments. At the time, I didn’t know anything about the stock market, and I was annoyed that I was being forced to invest in something that could lose money.

Very reluctantly, I placed 20 per cent of my ‘pretend’ funds on a few stock picks, and prepared for a disastrous result.

And the end of the three-month exercise, I received a pleasant surprise when the smaller portion of my hypothetical portfolio, which had been invested in stocks, had dramatically outperformed the other investments.

The major lesson that I learnt from that course was that being uneducated about investing could be a potential stumbling block in my goal to be successful with money.

Laying the foundation for investing

Gone are the days when you could choose to live frugally, save sacrificially and be able to obtain more than the basic necessities of life. The rapidly increasing cost of living has led to skyrocketing prices for cars, homes and tertiary education; if you hope to attain a higher standard of living without being in debt for your entire life, then you will need to know how to succeed with investing.

While investing can help you to progress towards your goals, you have to lay a proper foundation before you begin to invest. You must first assess your current financial situation by putting all your expenses and income into a budget, and calculating your cash inflow and outflow. Then write down the value of everything you own and list all your debts and obligations.

You will need to have a reliable and reasonable cash flow in order to invest on a regular basis. If you’re currently not earning enough to meet your needs, then one of your first goals should be to look at ways to increase your income. If your net worth is negative because you’re overburdened with loans, then a debt-reduction strategy must be designed.

Once you have worked out how you can free up funds to invest, then the next step is to decide on your short- medium-and long-term objectives. After looking at where you are today, create a vision of where you want to be in the future. It’s best to seek assistance from an experienced financial planner who can guide you in establishing realistic costs and timelines for your goals.

Discovering the secrets of investing success

With your objectives clarified, the next step is to select investments that can help you to achieve your goals. This process may actually confuse many potential investors, as sometimes they are unsure about the recommendations made by advisors. Many don’t really understand how the investments work, and wonder if they are being sold a plan that just suits the financial institution.