When You May Be Ready to Investby InvestorGuide Staff
If you've transitioned from a debt situation to a paycheck-to-paycheck situation to a saving some money every month situation, you're ready to begin investing what you save. You should start by amassing enough to cover three to six months of expenses, and keep this money in a very safe investment like a money market account, so you're prepared in the event of an emergency. Once you've saved up this emergency reserve, you can progress to higher risk (and higher return) investments: bonds for money that you expect to need in the next few years, and stocks or stock mutual funds for the rest. Use dollar cost averaging, by investing about the same amount each month. This is always a good idea, but even more so with the dramatic fluctuations in the market in the past 10 years. Dollar cost averaging will make it easier to stomach the inevitable dips.