We all know we should be saving for our financial future, but for some this can be a daunting task. If you are new to investing it can seem overly complicated, but the good news is it doesn’t have to be.
1. Set Goals:
Before you start investing, ask yourself “What am I looking to achieve?” If your goal is to save SGD1,000,000 over the next 20 years, you can start with this is mind and work backwards to figure out how you are going to reach this goal.
2. Start Now:
One of the biggest obstacles to investing as a beginner is getting started. Many people wait for the perfect time to do this, but this simply doesn’t exist. Start now and learn to accept that your investment will fall in value some years. This is a perfectly normal part of investing and is to be expected. Delaying your decision to start will only make your goals harder to achieve and may mean that you will have to save more over a shorter period.
3. Don’t take too much risk:
You should only take as much risk as you can comfortably tolerate. If you’re lying awake at night worrying about your investments, then you have likely taken too much risk. The level of risk you take is determined by your asset allocation. The path to long term success is having a diversified portfolio which includes Equities, Bonds, and other asset classes.
4. Keep things simple:
It’s easy to get overwhelmed by the choice of investments available. Start with broad-based investments, rather than individual stocks/shares. Actively managed funds and ETFs are a good choice. A Global Equity ETF would give you exposure to approx. 7,000 individual companies across North American, Europe, Asia etc.
5. Minimise costs:
It’s important not to get preoccupied by the performance of an investment and also pay close attention to the costs involved. Over the long term, higher fees can erode your investment returns. You have no influence over how markets perform, but you can control the fees and charges that you pay.
6. Ignore the media:
The media’s goal is to get views, which they do by writing sensational headlines. This often results in people buying at the top of the market for fear of missing out, and then selling at the bottom when panic sets in. In the words of Warren Buffet “the stock market is designed to transfer money from the active to the patient” Trying to outsmart the market almost always results in losses. Being patient and letting your money compound overtime is the best strategy.
