Investing for Beginners

Beginning to Invest

I was born in a “hand to mouth” poor family of seven siblings aging from infant to 14 years old. My mother had to do odd jobs or simple small businesses to supplement my father’s meager income to feed 10 hungry mouths. Some businesses she ventured into were kind of illegal and I hated them but I was unable to do anything. Our environment does not give us encouragement to excel in our studies although my mother was adamant that all her children will grow up to be literate unlike her. My sisters and only brother did not do well in their studies and I was about the same in my primary years but I suddenly had this inspiration to work hard when I was in my secondary and I managed to work hard in the ensuing studying years.

As the norm, I started to work after my secondary education working as a Receptionist cum operator cum general worker in a hotel with a starting salary of RM80. At that time I was sure I will not want to repeat my parents situation, they were always fighting over money and it’s an unpleasant family environment for the children. I wanted different for my children. I vowed not to remain poor but how am I to get rich with my miserable salary?

I grew up still in my dream to be rich. I got married to a working man and had 2 beautiful children. I still work for others.

I started my investing with whatever I have saved from my salary, going into share market but what is the guideline, what are blue chips shares, to play it safe or to take risk. I was a new comer to this environment, I buy when my friends said they heard its good. I ended up losing money over a long period of time. To this day I still hang on to those shares that I bought 10 years ago and has lost its value by 80%.

I have learned through my investing experience to know what to do before venturing into investing. Here are 10 simple rules to guide young people who are starting to have a need to invest but do not know how……

1. Calculate Your Worth

Make out a list of all your assets, no matter how small they may seem right now. You may do it singly if you are not married or do a combine if you are married and your spouse is keen on a combined investing. You may have at this moment committed to a car for your own use or a house for your own dwelling. Remember that these mortgages are liabilities not assets. EPF (Employee Provident Fund in Malaysia) savings may be considered part of your assets for long term investing purposes only.

Making a list of your assets will assist you in deciding what type of investment will suit you and over what time frame.

2. Do not live in Debt

Nowadays with the easy access to credit cards, young people tend to spend more than they earn. Most people these days spend before they earn which is a very bad habit. If you are already living in debts, get out of it as fast as you can. There is no point considering investing in stock if you are already in this predicament. PAYING HEFTY CREDIT CARD INTEREST CHARGES monthly will eventually eat away any investment returns you may earn. If you are reading this it shows that you are ready to make a change. Do it and get out of debts as fast as you can by daily budgeting your expense; spend only on necessity. You will be surprise how fast you can get out of this hell hole. Continue to visit this post and you will have more stuff to learn as we go along.....

3 Know your risk levels

Think carefully of your future plans, talk it over with your spouse to get the general consensus. Where would you like to be in a few years’ time. How much would you like to have in liquid cash. Have an objective behind your decision to invest. SET YOURSELF GOAL. You may be aiming to retire young, or have a few houses all paid up to live on the rental earnings and free yourself time working for others. Your age, your drive, your circumstance and economic situation will determine what and how your investing will be. Remember low risk, low earnings and high risk high earnings but you may also lose your money faster.

4 Have available cash

Keep at least 3 months of your salary aside in available cash. Your investing should only involve any extras out of what available cash you have in fixed deposit. This is to keep you free of any financial entanglement and you will not lose out by suddenly having to liquidate any poorly performing investment at any unfavourable time.

5 Learn the basics

Find out about various assets classes and their characteristics. The market for property may appear favourable for first-time homebuyers, but a house is an illiquid investment. Equities are relatively volatile, but can be liquidated quickly.

6 Dollar-cost average

First time investors have a lot to learn. By contributing a small amount to a savings plan each month, you avoid having to decide when the time is right to buy or sell – a skill even most mature investors fail to get right. Regular contributions take the emotion out of investing.

7 Take Advice

Avoid following the herd and buying into the latest fashionable initial public offering. News takes a long time to filter down to the guy in the street and chances are that any hot tip is past its sell-by date. Spend some time with a financial adviser, read the papers or books on investing. That way, you can make educated decisions. Here, I would like to stress for people who are about to plunge themselves into investing to take time to study all kinds of investment avenues before making a decision on what and how to invest.

8 Build a core position

Create a core investment portfolio in something solid such as blue-chip stocks that will bring in steady gains over the years. Or if you do not have time to keep an eye on your share portfolio, you can consider Mutual Fund investment. Here again .... do your research.

9 Diversify

Once you have a core position, look around for satellite investments that may spice up your portfolio. Do not only buy equities, consider bonds, property or collectibles to protect yourself against poor performance in one asset class. Remember the age old saying of “Putting all your eggs in one basket”. Diversify......Diversify......Diversify.

10 Hang in there

Patience is a virtue. Stick to your plan, even if your investment seems to be floundering. New investors are often driven by emotion and react at the wrong times. Financial experts will tell you that timing the market is almost impossible, but time in the market will eventually pay off. Your financial adviser is only there to advise. He/She may not predict the market a hundred percent. You will have to make your own decision for the right time to sell or buy. Remember, do not be driven by emotion. If you follow the previous chapters correctly, you will not fail in your bid in investing. You may face some set back some of the times but mostly you will get out of it in time. Time is your best teacher.

These 10 guidelines are good for the starters......however reading them is not going to help you very much but by making a decision now and take charge of your life will. PUT YOUR THOUGHTS AND FEELINGS INTO ACTION!!!!