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The 1 thing you should define before investing in ASX shares

Lloyd Prout
is it a buy

Investing for the sake of investing will serve you well over the long-term, however determining your very own ‘why’ will help to motivate you, guide you and make you a better investor.

Choice, that’s my why

2019 was a rollercoaster of a year for me. Not 1, but 2 people in my family had major health scares. I can honestly tell you that those sorts of events make you consider your priorities. Previously I had invested so that I could afford a nice car, nice house and nice holidays in the future. Now, however, I invest for the choice that financial independence and security can provide me and my family. The choice to take time off of work, or not work at all; the choice to take care of loved ones; the choice to change my priorities as I go through life.

The first reason you need a ‘why’

Before you can start buying ASX stocks, you need to save some money. As you all know, this is easier said than done. This is the first place that your ‘why’ comes into play. Sitting down and understanding what is important to you will help you to not only prepare a budget that still allows you to enjoy life, but helps with those impulse buys. Knowing why you are investing (and thus saving) is a great motivator as it is for your own rationale or purpose.

How your ‘why’ impacts your investing

Because you now have a ‘why’ (or have identified a new ‘why’), you can analyse your stock portfolio to see if it is still aligned with your risk tolerance, time horizon and goals. Your ‘why’ will dictate your overall strategy and thus which companies you buy, hold, and sell.

Some great stocks to consider investing in include Macquarie Group Ltd (ASX: MQG), Altium Limited (ASX: ALU) and ResMed Inc. (ASX: RMD).

Foolish bottom line

Investing, like anything worthwhile, is tough. There are thousands of companies on the ASX, across multiple industries, with different market capitalisations and management. Doing your ground work and knowing why you are investing in stocks will make you a better investor, allowing you to confidently choose the companies which will align with your goals and try to beat the market.

Whenever you are making an investment decision, be it your overall strategy, or your next stock purchase, pause for a moment and ask “why?”.

The post The 1 thing you should define before investing in ASX shares appeared first on Motley Fool Australia.

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Motley Fool contributor Lloyd Prout owns shares in Altium Limited and ResMed Inc. The Motley Fool Australia owns shares of and has recommended Macquarie Group Limited. The Motley Fool Australia owns shares of Altium. The Motley Fool Australia has recommended ResMed Inc. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The Motley Fool's purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. 2020