A Beginner’s Guide To Investing In Anything and Everything, Part 1
This article is posted under Investing.
Where can I invest my P20,000?
This is a question I often see in business and investing forums everywhere, although of course, the amount varies.
After the first post, I’d often read invites from other forum members to join him or her in various affiliate programs and multi-level marketing companies.
At other times, the answers would be business ideas which are currently doing good and sometimes, the replies are vague references to mutual funds, unit investment trust funds (UITFs), forex, e-gold and the stock market.
After a couple of weeks, the thread starter stops posting and the discussion ends without feedback regarding where the money was finally invested.
Whenever this happens, I’d imagine a simple employee who received a salary bonus or an unexpected windfall and was too lazy to do personal research on investment opportunities. That’s why he decides to ask online forums where he can invest.
A few days after, he’d experience information overload and succumb to laziness. Finally, he’d decide to just buy a new cellphone, a new car or whatever luxury he can afford.
Is the story familiar to you? Has this already happened to you or someone you know?
The next time you find yourself with some extra cash that you may want to invest, I suggest you follow these simple tips. It’s my personal step-by-step guide to investing in anything and everything.
Ask yourself these questions and not only discover the right investment for your money but more importantly, help increase your financial literacy.
Step 1: Do you already have an emergency fund?
Before you start investing your money, you have to first assess your current financial situation. Track and anticipate your expenses and save up for an emergency fund. Three to six months worth of your monthly expenses is recommended.
Once you have an emergency fund, you become more confident in taking investment risks.
Step 2: Why do you want to invest?
The main reason you want to invest is to make your money grow. Unfortunately, this reason is not enough. You should have more specific objectives. Are you saving up for retirement? Do you simply want extra income?
Knowing how you are planning to use the profits from your investments helps in determining the best investment product for you.
For example, if you want to prepare for the college education of your children, instead of investing in a business franchise, you may consider getting an education insurance instead.
If you’re simply preparing for a special occasion such as your wedding next year or a vacation out of the country in four months, then it’s wiser to put your money in short-term, low-risk investments such as treasury bills.
If you have several objectives, list them down and assign their importance to you.
Step 3: How much money are you planning to invest?
Determine your investing budget. Knowing exactly how much money you have provides a better perspective on the investment opportunities you can afford.
Furthermore, decide if you will be rolling over your returns into the investment. This means that whatever income you receive, will it be reinvested back into that investment? If so, then consider putting your money in assets that easily compound as the principal value of the investment increases.
Lastly, remember to put out as much as you can afford, specially if you’re going into high risk investing such as currency trading. And more importantly, stay within that limit.
Step 4: How long is your holding period and how much risk can you take?
Investments take time before they return income. Furthermore, different assets increase and decrease in value at different rates. This is the reason why I asked for your primary objectives in step 2. Knowing your personal goals helps in determining the length of time and the level of risk you can take in your investments.
Keep in mind that long-term investments generally give low to moderate returns for less risk, while you have greater chances of losing your money in short-term investments with high yield. If you opt to invest conservatively, be sure that the modest rate of return you’ll receive is acceptable to you.
More importantly, determine if the profits will be high enough to cover for inflation. Finally, whatever length of time and level of risk you decide to take, be certain that under the worst case scenario, your financial stability will not be affected.
This is the end of the first part, click the link below to read the last part of this article. To receive more investing tips, subscribe to Ready To Be Rich.
A Beginner’s Guide To Investing In Anything and Everything, Part 2
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Photos courtesy of SERENDIPITY™ and sash/ slash
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Hi, my name is Fitz and this is my blog entitled, Ready To Be Rich.
Nice writing. You are on my RSS reader now so I can read more from you down the road.
Allen Taylor
great tips fitz! I educate my kids to manage their finances at a very young age. One needs to set aside a set amount every pay day to that emergency fund, investment etc.
@Allen
Thanks for subscribing and I hope to likewise hear more from you.
@Noemi
Thanks for the visit.
Your kids are very lucky. I’m sure they’ll grow up to be financially successful someday, just like you.
fitz,
my readers constantly bug me on writing about how to start investing, the basics. i think i finished it already. i will link this entry you made.
on multi-level marketing, i am sooooooooooooooooo wary about this.
on risk, i’d like to add: not only how much risk you are willing to take (losing the full principal or losing the full interest earned, etc) but also: what KIND of risk are you willing and is able to handle. (currency exchange risk – fluctuations and big in Manila like the Hao case, thieves.)
Yes I agree, aside from how much, there are also different kinds of risks which you must consider. I’ll integrate that point to the second part of this article. Thanks reynz for the additional info.
Wow! relly nice! I have added you in my RSS reader. It’s great to find a place to learn things about investments!
nice info here and very helpful. thanks!
HI…I HOPE U CAN HELP ME… ITS BEEN A LONG TIME THAT I WANT TO TALK TO A FINANCIAL ADVISER… I HAVE A SAVINGS BUT DNT KNW WHAT TO DO WITH THAT.. I WANT TO BE A PASSIVE ENTREP.. MY PRLB IS WER? AND WEN WILL I PUT MY MONEY? I HAVE SO MANY QUESTIONS BCOZ IM AFRAID BOUT THE RISK…. I ALREADY READ BOOKS, TREADS.. IM DOING THIS 4 THE FUTURE OF MY BABY… PLS HELM ME.. THIS IS MY # (edited) I HOPE TO TALK TO YOU PERSONALLY AND PROFESSIONLY
Hi Ian, I’m not a licensed financial adviser. But if you want to know my thoughts, do send me a personal email through my contact form and let’s see how I can help.
Hi Mr. Fitz,
This is my first time to visit your site and i’m so glad i found you…In just a matter of little time,i learned a lot already and can’t wait to read more. I do have so many things in my mind but don’t know where to start. I used to work in a cruising ship for 7 years and for the last 4 years i ventured into a retail business. I still have the shop presently, however the income won’t suffice anymore with my monthly expenditure. I have a little savings but i’m skeptical on what’s best to do with it. I can’t afford to make wrong decision for the future of my children. I hope you can help me decide. Thanks and more power.
Wow,
It’s great blog very impormative.
I already subscribed and looking forward for more info in finance.
thanks for providing all the guidance.
i sir! It’s my fist time to visit your page, your poss are very informative. I wonder why you have those information specially on bpi investments. Hope to get more tips from you! Thanks!
Hellow Fitz,
Your blog is very informative especially for a noob like me. I will start investing in stocks soon and now I’m in the process of scouting good companies to put my hard earned bread. Could you give us factors to consider in choosing the right company? ex. those Price to Earnings ratio, the record of the company.
Thanks in advance.
hi,im diane,im just interested on investing my money but i have no no such idea on how,i just been thinking to invest some of my earnings.i got morethan a hundreds thousand of me.i just wanted to retire soon.can my money gets more or its better to open up business instead.im now 27 and i just want to travel around just stayed home.is really investing is worhted?please can anyone give me help?
This is the day that i made up my mind to try investing. By reading your blog lets see how i can manage to move forward successfully. This is great and i am very excited to try “investing”.
I’m thinking i need to invest now. Because i don’t want to end up begging in the streets when i grow old. nice. gusto ko pang magbasa. ang sarap ng pakiramdam pag may bago akong natututunan.