So you’ve been working for some years now and have done well to heed by your parents’ advice to ‘save for a rainy day’. But perhaps the realisation has hit that you know how to save money but not how to multiply it.
Saving money and investing it are closely connected. Like saving, investing is a marathon, not a sprint. This life-long skill takes time and patience to harness so the sooner you start, the better you get.
Before you start looking at investment options such as stocks or unit trusts, you’ll want to address two important questions:
Should you invest or pay off your loans?
Your first instinct may be to eliminate all your debtfirst, however, it really depends on the interest rate. Look at the interest rate on your loans and the potential profit you can gain from investment. If your interest rate is higher, then it’s better to focus on managing your debt for now, but if your interest rate is much lower, it makes sense to begin investing before your debt is paid off since you earn more in return.
Do you have an emergency fund?
One rule of thumb is to set aside at least six to eight months’of living expenses to prepare for any unforeseen expenses. Since investments are for building wealth or long-term savings goalsworth , do not invest with your emergency fund.
Now that you know you’re in good financial shape, here’s what you need to know before considering the type of investment you want to venture into.
Know your investment goals
Retirement fund? Further education? New business? All these investments have different time periods. It’s important to identify your goals, how long it would take for you to reach it and how much you need.
Understand the risks you’re taking
You should never invest more than you can afford to lose. First assess your personal risk tolerance – or how much of your investment you can really afford to lose – before choosing the kind of investment you want to explore.
Put your eggs in different baskets
Diversify your investments rather than investing all your money into one stock or account. That way if one of your investments turns sour, you haven’t lost everything.
Seek trusted financial advisors
Information overload? If you’re still at a loss, seek council. Turn to your most trusted financial advisors – parents, guardians, or knowledgeable friends.
You can also pay a visit to a CIMB Bank near you to consult on your investment options and to learn more about how you can multiply your money through investment.
This article is for informational purposes only and CIMB does not make any representation and warranty as to the accuracy, completeness and fairness of any information contained in this article. As this article is general in nature, it is not intended to address the circumstances of any particular individual or entity. You are advised to consult a financial advisor or investment professional before making any decisions based on the information contained in this article. CIMB assumes no liability for any consequences arising from your reliance on the information presented here.