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Brush up on your financial literacy to make the most out of your investments

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Brush up on your financial literacy to make the most out of your investments

5 questions to ask before you start investing

Many people have so many questions about investing that they don’t know where to start, so they don’t bother at all. Here are the top five questions you need to ask to help you grow your wealth.

Many people think that a savings account is enough to reach their financial goals. And they are not alone. While six in 10 people know that investment knowledge can help them reach their financial goals faster, most still don’t feel confident enough to invest. As a result, basic financial products still rank top in the recent Emerging Affluent Study
2018, conducted across 11 countries, with 78% of respondents using simple savings products to meet
their top 3 financial goals.

FACTOID – 78% use simple savings products to reach their top 3 financial goals

That’s understandable; for first-time investors, without the right information, investing hard-earned money may seem like an intimidating, risky and complicated process. To help gain a better understanding of investing, here are the questions you should never be afraid to ask.

How much money do I need to start?

Not as much as you think! You don’t have to dip into your emergency funds or sell off family heirlooms to scrape together a large sum of money to start investing. For example, if you invest in  mutual funds, you can do so with as little as $1,000 and you even have the expertise of a professional manager to manage the funds for you.

What is “risk tolerance”?

Do your hands sweat at the thought of losing money, or does the word “risk” thrill you? Basically, risk tolerance is how much risk you are willing to take. In other words, how much money are you prepared to lose? Understanding your risk tolerance is key; if you are a conservative investor who takes on too much risk, you may end up panicking and selling your shares at the wrong time.

What should I start investing in?

A wide range of products are available on the market and the ideal mix of investment products will vary from person to person, depending on risk tolerance and financial objectives. To know what’s what, start by understanding the basic products

What is diversification?

How many times have you been told not to put all your eggs in one basket? This proverb is especially true when it comes to investing. Imagine you only invest in ride-hailing companies. If the drivers decide to go on strike indefinitely, the shares in that sector will suffer — and the value of your portfolio will drop significantly.

A diversified portfolio (can reduce the risk by spreading your investment across different industry sectors and geographies. If you don’t know how to diversify, speak with your investment  adviser to find out which other products suit your investment style.

Who should I trust?

According to the same study, the top three sources of financial advice include friends/family, websites of financial institutions/banks, and financial planners/advisers. Regardless of who you choose, make sure that the person or organisation has a good track record.  It’s your money after all.

Disclaimer

This article is brought to you by Standard Chartered UAE.

This information is neither an offer to sell, purchase or subscribe for any investment nor a solicitation of such an offer. This information is general and does not take into account a person’s individual circumstances, objectives or needs. Investments carry risk and values may go up as well as down.

Standard Chartered is not liable for any informational errors, incompleteness, delays, or for any actions taken in reliance on information contained herein.