DIY investing has become insanely popular the last little while, and for good reason. Investors are tired of paying their banks and mutual fund managers crazy fees. Fees that by the time you retire may be costing you hundreds of thousands of dollars, literally. So you decide to go on your own. It's as simple as opening a brokerage and buying a couple stocks no?

In reality yes, it is that simple. But, it's pretty simple to lose 10,20 or even 50% of your portfolio as well. I'm sure by now you know that nothing in life is free. These mutual fund managers aren't just charging you their management fees because they can. They actively manage and make changes to your investment portfolio. This is your job now, and if you don't know what you're doing, you can be in for a whole world of hurt. Financially of course.

In my eyes, these are the 3 most important questions you need to ask yourself before you place a dime of your money into the stock market. A couple of these questions will even apply regardless if you manage your portfolio yourself, or if you get someone else to.

Do I know what I am doing?

This is the question that is solely aimed at DIY investors. Throwing money blindly into the stock market is pretty much the equivalent of closing your eyes and betting your portfolio on a color in roulette. Maybe not to that type of extreme, as in roulette you would lose everything in one go, but you get my point. You're gambling, plain and simple.

Let's leave the gambling to high volume traders, the ones whose sole purpose is to time the markets and get out with incremental profits, which, by the way, over 90% will fail miserably at. Your money is important to you, so first you need to learn how to buy stocks.

Once you've got the basics down on how the stock market works exactly, you can begin to figure out how to analyze a company fundamentally. This includes analyzing balance sheets, income statements, quarterly and annual reports etc.

The goal in the stock market is to find solid long-lasting companies and invest for the long haul. Now, a lot of beginners have the perception that “long-term” in the stock market means anything over a year or two. I can tell you right now with absolute certainty that the stock market is completely unpredictable over this period of time. If you're going to venture down the path of self-directed investment, you've got to have long-term goals of 5,10 and even 20 plus years. This leads me to my second point.

Do I need this money?

If we have a long-term goal of retirement at 55, what do we not want to be doing with our investments? Pulling them out of course. Like I said above, the stock market is completely unpredictable over a short duration of time. You may have your money invested in an amazing company. Profits are going up, revenue and customers increasing, debts going down, everything's great. The problem is, over the course of a year and a half, the price has continually trended downwards.

You've been buying more and more of the stock convinced that one day it will be worth a fortune. On your way to work, you hear a horrible thud under your hood and find that your transmission has shifted its last year.

Unfortunately for you, you didn't think about having a rainy day fund. You simply took all the extra income you had and dumped it into the stock market. You have either 2 choices now. Put that $2500 transmission on your Visa and pay up to 20% interest on it, or sell your positions in a solid company for much less than they are worth.

All in all, you need to have a reserve available to pay for any unforeseen expenses. Your investment portfolio is not something you want to be pulling money in and out of because short-term swings of the stock market can cause you to sell your position way too early for it to realize it's true value.

That being said, it does work both ways. The stock could be trading up, and you may be breathing a sigh of relief as your transmission is now paid for with your profits. But that isn't the point of an investment account. You're supposed to be investing for the future, not the now.

How much am I willing to risk?

People have different appetites for food. Some people love seafood, some people hate it. The same can be applied to investing. It is crucial to figure out your appetite for risk prior to investing. I've always made the correlation that if you're young, you should be taking more risk. By more risk, I don't mean finding the top 3 penny stocks from Bob's newsletter and dumping your entire portfolio into them. I mean unless you're looking for your account balance to hit $0.

What I mean is as a young investor, you have a lot of time for your portfolio to grow, and recuperate any losses you may have incurred from taking some gambles. Try to find some diamond in the rough growth stocks to complement your rock-solid dividend stocks. The amount of extra capital you can earn by doing so can pay off huge in the future, even shedding years off your retirement age. And the best part about it is if you take a few gambles and they don't pay off, it isn't the end of the world.

As an older investor, you've got retirement on the horizon and you don't exactly want to be throwing your money into volatile areas. This is why it makes more sense for an older investor to focus on bonds and blue-chip dividend stocks. A 20-year-old losing 50 percent of their portfolio has 35 years to make it back if he wants to retire at 55. More than likely, the year they lost 50 percent will be long forgotten by then.

On the other hand, a 50-year-old losing 50 percent of their portfolio assuming the same 55-year-old retirement is in a whole world of trouble. There is virtually no chance of them retiring in the next 5 years, which is why it makes perfect sense to go the safer route in your older years.

Even after you've answered these, there are a lot more things to consider 

Think of these questions as a foundation to the house your building. To me, they are the 3 most important questions you can ask yourself prior to investing. But as we all know, to build a house you need the foundation, the walls, and the roof. I've been a self-directed investor for nearly 8 years now, and there are still questions I ask myself every day that I am not sure of. If there is one thing for certain, it's that you will never stop learning when you enter the markets.