Updated: November 13, 2022
“I want to start investing. What should I keep in mind? Are there basic rules?”
A friend recently asked me those questions. And I’m sure several more would in the coming days.
Why? Because it’s the end of the year, which means it’s 13th-month pay and Christmas bonus season.
So are there any basic rules when it comes to investing? I believe there are three simple but golden rules that you should follow.
This is my first basic rule. I believe any time is a good time to invest, but the best time is always today. There’s no reason to delay because the earlier you start, the bigger your returns.
When it comes to investing, it’s not “timing the market” but your “time in the market” that’s more important.
Don’t listen to people who are telling you that it’s not a good time to invest now because as I’ve said, it’s always a good time to invest. I’ll explain this further later.
This is my second basic rule. Investing should be a habit and not something you do when you find yourself with extra cash.
It’s like trying to achieve a muscular or sexy body. You don’t go to the gym and train only when you have free time. Instead, you create and schedule a time to work out.
The same goes for investing. Your “one-time-big-time” investment is good. But it’s best to follow that with affordable amounts, regularly, over a period of time.
Good thing that a lot of investments today, particularly pooled funds, now accepts investments for as low as P1,000. Thus, making it easier to form an investing habit.
My third and last basic rule. Never put your money on the first investment you see because that’s a surefire way to lose money.
Remember to invest only in things that you understand. Know how that investment works, and more importantly, the risks involved in that investment.
Furthermore, it’s essential to have an objective in mind before investing. What are you hoping to spend the money on in the future? Because your financial goal will dictate where you should invest.
Lastly, the reason why I said earlier that it’s always a good time to invest is that regardless of the status of the market or the direction of the economy–there will always be an investment that’s performing well.
Is the local stock market going down? Then maybe check out bonds or fixed-income instruments, which sometimes perform well when the equity market is down. Or maybe investing in other global markets is a better option for you.
Of course, the challenge here is how to know and find those investments. And this is where financial education comes in.
When everything seems to be going down, then investing in yourself to increase your financial knowledge is the best investment you can make.
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which should be the priority – paying off debt or investing?
Thanks for the post. I would also add, don’t invest in something just because everyone else is doing it. Do your own research.
I think there is wisdom in keeping some cash in your investment account. Cash with a purpose should be considered a position. You hold that cash position until you see an oppertunity such as a pullback in a bull run. If you missed the beginning of a bull move, you can still get in on those pullback if you have cash to do it with.