People love to invest. People love the returns. People love the yields that they can get when their stocks would amazingly go up. But what people don’t see is that there are risks when it comes to investing and one way to somehow beat or move around the risks is to try to at least have all your bases covered. After all, it’s your money you are investing and its best that you do due diligence on how you manage it.
This article by our Tuesday Columnist Rienzie Biolena is very timely as it gives us all a friendly reminder to cover our bases first before we jump the gone in investing. Our eyes should not just be set on the money that we disregard all other things. As what I always tell my private clients, returns are just a by product of what you have studied and by the strategy you employ. It is not a one time big time thing. I want you to be profitable not just in bull markets but have the stamina to injure and earn in season and out of season. I want you to use your investments to help you reach your goals of being financially free!
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The heart of why I do this seminars is I want to build a generation of Filipinos with the right foundation in stock investing. I want to bring smart investing to every Filipino around the world! If you would like to know more on how you could time the market checkout the trainings below.
As what I always tell people I meet, Investing is one of the wisest decisions a person can make. With investing, one can beat inflation, have income and secure a comfortable lifestyle at present or in the future. The gains received through investing cannot be overemphasized. I for one have enjoyed its fruits, from funding trips abroad, buying a laptop, and other things that might not have been possible with just relying on the bank interest rate.
But before jumping into the fray, it would be wise to check some things first. Yep, before investing—whether in stocks, bonds, real estate, forex, or whatever instrument—there are some things that need to be in place for the experience to be truly rewarding. Here are five things to have before investing:
1) An Emergency Fund.
Too many people jump into the pen without having any Emergency Fund. Lured by the prospect of higher returns, they commit their hard-earned money to ventures or instruments without having any safety net in place. The key questions for investors to have an Emergency Fund is this: if all of my money are in the market, and if I needed it for an emergency like hospitalization, can I have it on the same day at least? What if I am in a losing position and I needed the money? What if I cannot sell it outright? What money will I use?
The recommended level for Emergency Fund is 3-6 months’ worth of expenses and should be parked in bank accounts, time deposits, money market funds, or a combination these. If the investor has this standby fund in place, s/he will feel more secure knowing that there is ready money should things go awry.
Yes, most of the time, when people hear the words “insurance,” they run from it like a rabid dog. But give it a chance: insurance serves as a back-up plan should the plan holder die before their desired time. As the investor may have families or responsibilities to leave behind, having an insurance in place automatically gives the beneficiaries the funds needed for their living expenses into the future—without them having to run after all the investments, liquidating them and paying taxes just to get the funds.
3) An Investment Plan.
Investing is just a tool and a means for an end. It is not the end itself, nor the profits it bring. Investing is done in a much larger context: like a retirement fund or for a child’s education. For instance, in my case, I need to invest P24,000 a year for the next 15 years at 14% rate of return to fund my daughter’s education.
What this means is that I need to find an outlet that will give me said return for the next fifteen years or, I can do the trading myself and should get 14% every year for that particular stock portfolio for the next fifteen years to fully fund my daughter’s education. The Investment Plan at the very basic details these: the required rate of return, the target amount, the investment strategy and the investment vehicle(s).
4) Due Diligence.
Do not go with the herd mentality. Always back up sound investment decision with proper research from reputable firms as well as your own research. A lot of sales people or advisers may goad their prospects into a course of action, but having your own research will give you the level head not to be swayed by sales pitches or marketing gimmicks.
5) Risk Management.
Investors make money thru gains, and these gains may be eaten up by not setting the proper measures for managing risks. One such measure is diversification—spreading investments in different instruments such that when one goes down, another one goes up so whichever way the market goes, the investor emerges as a winner.