What I Must Know First In Investing.

If you are new to investing or thinking of getting your money to work for you there are few things you must first define.

  1. Investment Goals

Investing is not the same as saving. It is also not a get rick quick scheme. You must define what is the purpose that you are investing for? Retirement, education, property purchases, wealth accumulation are some the goals that people invest for. What is yours?

  • Duration

Time is a factor. Always. And more so in the investment world. The duration for investment varies depending on your goals and your investment portfolio is greatly affected by the duration you want to invest. Investment duration can be as long as 30 years or as short as 30 days.

  • Risk Tolerance

How much risk are you willing to take? You can take a risk assessment test. Your financial adviser can help you with this. Each type of investment has its own level of risk – but this risk is often correlated with returns too. It’s important to find a balance between maximizing the returns on your money and finding a risk level at which you are comfortable.

  • Approach to Investment.

There are 2 approaches to investing. The passive approach and the active approach. Both styles have merit. But you might prefer one type over the other, depending upon your lifestyle, budget, risk tolerance, and interests. 

Passive approach is hands-off and usually low returns as compared to active approach that can bring huge returns but involves a massive amount of research and doing a lot of work yourself. Active approach can be, depending on the amount you invest, life changing, both ways- that is if you do it right you will be rewarded but if you get it wrong, you will get burned.

  • Budget

You don’t actually need a large budget to invest. You can start as low as RM 100.

The most important consideration is to have an emergency fund. This is cash set aside that is available for quick withdrawal, if needed. 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. 

The best way to invest is whichever way works best for you. You’ll want to consider all of the 5 things listed above.