Now that you’ve planned adequately your basic finances to support your primary needs and commitments, it is probably time to look at how to grow those cash reserves at a steady pace for your future.
Most people mistake Investing for Returns to be a GUARANTEED activity to make money. THIS IS OBVIOUSLY UNTRUE. Investments all come with a level of RISK. RISK is often associated with capital loss, but to professionals,
RISK = Capital Loss + Opportunity Cost
So I cannot emphasise the need to do your due diligence when it comes to investing and constructing your investment portfolio. Many times you’ll be distracted and confused reading from difference information sources. But do your best to find your own investment style and sweet spot which best fits the following:
1) Time Horizon – How long are you prepared to lock in your funds without ever needing them for any future commitments
2) Risk Appetite – Your risk tolerance to how much loss is enough before you pull out of the investment.
3) Affordability – How much you can afford to LOSE in expectation of a return
4) Investment Objectives – Does the potential investment return, time horizon and amount match what you intend to do with that amount (for kid’s education, car purchase, investment property purchase etc.)
I hope the articles above help you to understand the risks and also raise your awareness on investing on different investment products as well as asset classes.
Remember when you invest, always know why you have carefully and selective narrowed down to the choices you have made. This will greatly improve your ability and system to manage RISK, and thus, your knowledge and experience will grow as well.
“Know what you own, and know why you own it.” – Peter Lynch