Once you have settled a budget for rents, car loans, utility bills and debts repayment and you still have extra…set aside some for investing. If you are new to investing, you probably would be asking how much money do I need to start investing, how do I start and what would be the investing strategies I should adopt? Let us share some experiences and try to assist you as much as possible.
START YOUNG OR AS EARLY AS POSSIBLE
Silence is golden and TIME is money. Due to the compounding effect, money makes money. The compounding effect allows our money to snowball over time. It has been claimed that Albert Einstein once said, “Compounding interest is the 8th wonder of the world. He who understands it, earn it. He who doesn’t, pays it.” I am not sure whether Einstein did say this or not, but the power of compounding interest, allowing money to make more money is unquestionable. So start as early as possible.
DECIDE WHAT IS YOUR GOAL, TIME HORIZON AND HOW MUCH TO INVEST
Plan according to your budget, your financial situation, your financial goal, and time horizon. Don’t let these questions stress you out.
Examples of financial goals are education, 1st payment for a house or car, retirement, and vacation. These are the most common financial goals that people save to invest.
CHOOSE AN INVESTMENT STRATEGY
How to strategize depends on your financial goals, investing budget and time horizon. Your risk tolerance level is also important.
If your goal is to save and invest for retirement, and you have a time horizon of 20 years to reach the target, you can take on higher risk investments in stocks or unit trust equity fund. However, if your time horizon is short term and you need your money in less than 5 years, it is better to invest in financial instruments that are relatively less volatile, example bond fund or money market.
UNDERSTAND THE INSTRUMENTS
Every investment carries its own risks. Before investing, it is important to spend some time to learn and understand, at least the basics of the instruments you are choosing to set up a portfolio. Knowledge is power. Ensure you are choosing the financial instruments that are aligned with your goals, time horizon and risk tolerance level.
Unit trust is a relatively stable and safe financial instrument to start a portfolio. There are basically 4 categories of unit trust to choose from, i.e., Equity fund, Bond fund, Mixed fund, and Money Market fund. Each serves a different objective or goal for investors. Investing in unit trust is flexible, you can start from a minimum of RM100 per month and gradually increase it as your income improves. If you are interested to learn more about unit trust, please contact me HERE.