The current economic meltdown has taught us a number of things and I think one of the foremost things it will teach many people is that we must be very careful with our investments and our hard earned life savings. Investing your savings is certainly a good idea, but before you invest there are several things you should do. I put together a top five list of things to do before investing:

1. Know what you are investing in- This one is obviously the most important. Please make sure you never invest in something you don’t understand. If you don’t understand it, you shouldn’t be putting your money in it.
2. Figure out your time horizon- The way you invest will be very dependent on what kind of a time horizon you have for those investments. Sit down and think about when you might need that money and plan accordingly.
3. Understand your risk tolerance- The fact of the matter is some people can just handle more risk than others. Don’t invest in the stock market and as soon as you see it drop quite a bit decide it isn’t for you. Understand going in that the stock market has its swings and you have to be able to tolerate them if you want to invest in it.
4. Make sure you can diversify- Diversification is a huge key when investing your money, especially in things like bonds and stocks, so you need to make sure that you are able to keep your portfolio diversified. If you have a small amount of money you might want to consider a mutual fund.
5. Find the best broker for you- If you are going to be controlling your own investments then you should consider an online broker with low fees. If you need a financial advisor then look for one who will be able to implement the plans you have for your portfolio.

These five things need to be done BEFORE you invest your money. A common mistake among investors is to get so excited about investing and earning money that they forget these basic and important steps. Don’t let yourself make that mistake!