Everyone knows Warren Buffett – celebrity and arguably, one of the biggest investors who bought his first stock at the tender age of 11. Being such a successful man, you’re probably wondering what regrets could he possibly have? Well, surprise surprise, his biggest regret is not stepping into the investing world earlier.
There are so many apparent reasons as to why youth is the key to investing – the power of compound interest, greater time horizon, and you get a head start in managing your personal finance. But, yes we get it. It’s troublesome, right? Needing to understand the market, learning about technical and fundamental analysis, and finding out about the whole complicated process – who has time for that? Well, truth is, investing has become a lot more convenient for you and me with the rise of multiple platforms along with the likes of Tiger Brokers, StashAway, Syfe, Moomoo, and many more. With these means to investing being so simplified for you, there’s no excuse really to start young.
However, despite the availability of these resources, investing can still be a tricky game! So here are 4 things to consider before you start investing:
(A) Have a personal finance roadmap
Everyone’s financial situation is different so it’s important to know your starting point — the amount of capital you are willing to invest, your goals, your risk tolerance, and what types of investment instruments you would like to venture into. Having a goal would also help you decide your investment strategy.
Our gentle reminder to you is that not all investments immediately reap returns and instant gratification has no place here. However, with an intelligent plan, you should be able to gain financial security over the years and enjoy the benefits of managing your money.
(B) Research, research, and more research
Technology has made investing easier for everyday man. There are a plethora of ways to go about investing and a variety of platforms to kick start your journey, of course, each with its own pros and cons. Not learning the proper way to invest and picking the right means to do so could potentially lead to a hole in your finances. Therefore, it is extremely crucial for you to do your own research to find out which platform is best suited for you given your knowledge and experience. Don’t forget to check if there are any hidden fees too! Do not be shy to ask around and get help from experts before starting your own investment journey. Always take your time to research, learn and talk to trusted friends and family members before investing.
(C) Consider various means of investments
“Diversification is Key!” or “Do not put all your eggs in one basket!” Sounds familiar? These are common phrases or advice a veteran would usually give to a newbie. This is because by diversifying your assets into the various asset categories with investment returns, you can help protect against significant losses. Hence, when you invest in more than one asset category, you’ll reduce the risk that you’ll lose money. You would also be able to counteract your losses if one asset category’s investment return falls, with assets from another category.
(D) Create and maintain an emergency fund
Even when the investment market is doing well, do not be too eager to dump all your money in! You still need to maintain a healthy amount of money in your emergency funds. An emergency fund is a sum of money set aside for accidents, sudden injury, or an unexpected loss of income. It gives you the buffer you need to pay out-of-pocket expenses, so you don’t have to turn to loans or credit cards to cover the short-term lack of cash.
It is recommended to have up to six months of their income in savings before investing and to continue adding to the sum after getting returns. This will provide you with a sense of security knowing that you have financial resources when you absolutely need them.
Psst: More investing tips in our Investing Guidebook! You definitely do not want to miss it! Sign up here to get a FREE copy for yourself!