2. Your budget

How much money do you have to invest?

You may think you need a large sum of money to start a portfolio, but you can begin investing with $100. We also have great ideas for investing $1,000. The amount of money you're starting with isn't the most important thing -- it's making sure you're financially ready to invest and that you're investing money frequently over time.

One important step to take before investing is to establish an emergency fund. This is cash set aside in a form that makes it available for quick withdrawal. All investments, whether stocks, mutual funds, or real estate, have some level of risk, and you never want to find yourself forced to divest (or sell) these investments in a time of need. The emergency fund is your safety net to avoid this.

Most financial planners suggest an ideal amount for an emergency fund is enough to cover six months' worth of expenses. While this is certainly a good target, you don't need this much set aside before you can invest -- the point is that you just don't want to have to sell your investments every time you get a flat tire or have some other unforeseen expense pop up.

It's also a smart idea to get rid of any high-interest debt (like credit cards) before starting to invest. Think of it this way -- the stock market has historically produced returns of 9%-10% annually over long periods. If you invest your money at these types of returns and simultaneously pay 16%, 18%, or higher APRs to your creditors, you're putting yourself in a position to lose money over the long run.