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COMMENT
There appear to be lots of new investors dipping their toes into the stock market right now. That's great news. I'm a strong believer in long-term investment in shares, and I'm delighted if more Brits are becoming aware of that opportunity. That said, I've read some messages on our discussion boards where I fear the writers should have waited a little longer before they bought their first share. We've also had a couple of e-mails along similar lines from readers. I'm particularly concerned when I read about people who are unemployed, have a few thousand pounds in the bank, and hope to turn that into a much larger sum at high speed. If you're in that position, there's a very small chance that you'll achieve your objective. There's a much greater chance you'll lose money. I know this from experience. When I first bought shares, I had very little knowledge, lots of self-confidence, and I lost money as a result. I wish I'd waited longer before I first took the investment plunge. So, if you're just starting out, are you ready to buy your first share? The first thing to look at is your debt, especially on credit cards. We live in an era of low interest rates, but many credit cards still expect borrowers to pay interest of 15% or more. Most novice investors are going to struggle to generate a return greater than that. True, rate tarts who switch their cards on a regular basis are able to pay a much lower rate, sometimes 0%. But it's still short-term debt, and I think you should clear it first. In fact, apart from a mortgage, I think you should clear all your debt before you buy any shares. Secondly, do you have some spare cash tucked away for a rainy day? I reckon you should have at least three months' salary in a high-interest savings account. Even if you have some rainy day money, you still shouldn't invest if you think you might need some more cash in a year's time. No one can predict the short-term movement of the stock market with any certainty; there's always the chance of an unexpected crash or pullback. However, history suggests that the longer your investment timescale, the greater your chance of making a decent profit. So invest for the long-term. In this next article, I look at a couple of ways to improve your investment skills before you buy your first share.
