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Are You Ready to Invest?

Mary Dalrymple
January 23, 2008

You're fired up to become an investor and make millions, but are you really ready? See whether you fit into one of these investing profiles.

1. "I've maxed out my credit cards, but I keep up with the minimum payments every month."
If you're looking at the stock market as an easy path to riches that will wipe out your piles of consumer debt, look again. Rarely is investing more profitable than paying off debt that you know will cost you double-digit interest rates every year. Attack your consumer debt, and then invest.

Unless you want to give yourself an early heart attack, invest only with money that you know you don't need for at least five years. Don't invest the money you need for debts, medical needs, mortgage payments, utilities, or dog food. Don't even invest money that you hope to spend on a vacation or home improvements next year, unless you don't mind that the vacation gets canceled and the home improvements get postponed.

You're ready to invest when you have cash that you don't need for five to seven years, and that you don't mind subjecting to some risk for the opportunity to make money.

2. "I have an hour every day, and two on Sunday, to devote to market charting and stock picking."
By those criteria, no one with a job, or a family, or even a stamp-collecting hobby could become an investor. You don't need a ton of time, and you certainly don't need to watch the market's day-to-day gyrations. But you do need some time. You don't want to leave your money on autopilot, unless you've planned your investments that way.

If you're struggling to find 30 seconds at the end of the day to brush your teeth, buy an index fund and forget about it. You're