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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 72% of the respondents using simple savings accounts to meet their top 3 financial goals.
FACTOID – 72% use simple savings accounts 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 MYR1,000 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.
To find out your risk tolerance, consider your financial goals, timeline, and your personal temperament. There are also quizzes available online that can help you determine if you are a conservative or aggressive investor. Expert advisers can also help you decide where to invest your money to match your risk appetite.
What should I start investing in?
A wide range of products are available in 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 like mutual funds, equities, endowment plans and so on.
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 (with a good mix of stocks and bonds across industries), can reduce the risk by spreading your investment across different industry sectors and geographies. If you don’t know how to diversify, one easy way is to choose a diversified mutual fund.
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.
Investing is easy when you know how! Our team of advisers can help with your queries.
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Disclaimer:
The article contained in this page are for general information only. This article and any material contained in this page do not constitute an offer, recommendation, solicitation to take up any products, enter into any transaction or adopt any hedging, trading or investment strategy, in relation to any securities or other financial instruments offered by the Bank. The article have not been prepared for any particular person or class of persons and does not constitute and should not be construed as investment advice nor an investment recommendation. It has been prepared without regard to the specific investment objectives, financial situation or particular needs of any particular person. You should seek advice from a financial adviser on the suitability of a product or an investment for you, taking into account these factors before making a commitment to invest in an investment or to take up any products offered by the Bank.
All information is correct at the time of publishing.
