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Pre-Investing Checklist
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Pre-Investing Checklist

If you’d like to start investing, there are some fundamental moves to make before investing in the markets so that you are protected financially from market risk, maximizing your tax deductions, and assessing your tolerance for risk.

Starting out: before you spend money, spend some time assessing your relationship with investing 💸
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Why it's important
1
Identify your Why
Why do you want to invest? Make a list of all the reasons why you want to start.
Understanding why you are investing will help you fine-tune your overall investment goals and time horizon.
2
State Your Interests
What sort of things do you value? Where do you want to invest, and why? Do you want to invest for profit, or are you interested in investing in products that you like?
Narrow down your investor profile. The more you know about why and what you want to invest in, the less decision fatigue you’ll experience.
3
Define Your Risk Profile
How much are you willing to lose if the investment goes sour? Can you afford to lose the entire amount you’ve invested?
This will help you determine your tolerance for risk, so you know if you should invest conservatively or aggressively.
4
Create Your Loss Playbook
Make a list of all the things you’ll do and won’t do when the market drops.
Market drops happen. It’s important to create a playbook on how you’ll handle a dip, so you can make decisions from a rational mind instead of an emotional (panicked) state.
5
State your Investment Goals
Finally, identify important numbers, like how much you want to invest, what expected returns you would prefer, and when you’ll want to use the money you earn.
Once you’ve completed the tasks above and come up with some actual numbers, you have a solid foundation for your investment strategy.
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Up next: financial fundamentals. What should you have in place before you start investing? 💰
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Why it's important
1
Max out your 401k
Contribute at least enough each month to meet the company match, if available.
Contribute up to the limit ($19,500 for 2021 and $20,500 for 2022).
Ensures your long term retirement financial position is in place, while maximizing the “free money” your employer gives you in contribution matches, and taking advantage of tax deductions.
2
Pay off High Interest Debt
Get rid of your high interest debt as fast as possible, and look into any opportunities to lower interest rates if additional payments aren’t an option.
High interest debt costs you money every month - money that could be working for you!
3
Fully Fund your Emergency Savings
Save about one month of expenses in a Rainy Day Fund, in a basic savings account connected to your checking.
Save about 3-6 months of income in an Emergency Fund, in a high yield savings account.
These accounts protect you in case of emergencies and shocks, which can put you in the red. Having savings outside of investments can also help you make rational investment choices in a market downturn.
4
Determine Cash for Investing
Identify any leftover cash that you don’t need for 3-5 years. How much do you have to start with?
Typically, money needed in the short-term (for travel, home purchase, business startup, etc.) is held in a cash account, rather than invested.
5
Set up a Monthly Investable Amount
Even if you don’t start with a lump sum, you can set a small amount to auto-invest each month, somewhere between $100-$500 (or whatever works for your situation).
It’s good to be consistent with your investment amount, so find out what works for your personal situation.
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