Investment 101: How Should I Start Investing?
Key Points
- Investment is an asset or item that’s acquired to generate income and appreciation.
- Understanding your needs and budget before investing.
- Research is essential for investors to avoid unnecessary troubles
With the recent stock market fluctuation, younger investors might find themselves getting into stocks that are more financially risky than they are used to. However, the experts say that now is a good time for people who want to invest their money. They recommend starting investing or adding more funds into stocks if you haven’t already started doing so, and it will be worth your while in the long run!
Investing is an important and complicated topic that everyone should understand. Still, no one can give you the perfect answer on what to do.
There is no one-size-fits-all answer for investment. But, if you’re looking to get started with your money, many things need consideration, such as budget limitations and investment style preferences. Understanding what you need will help build one suitable investment portfolio for you.
As a newbie to the world of investment, there are many questions you’ll want to ask before getting started. Such as, ‘How do I get started and what kind of investments are suitable for me’. No worries because we’re here with everything newbie-friendly that’ll set your mind at ease!
What is investment?
Before we start, let’s understand what investment is. Investment is an asset or item that’s acquired to generate income and appreciation. Investing in tangible assets is a great way to build your net worth. You can also buy stocks, bonds and other types of investments that will grow over time thanks to their resale value!
How does investment work?
Investing is all about making intelligent decisions and seeing your investments grow. When you buy an asset at a low price and sell it for more than what was bought (a capital gain), you make money by buying low and selling it at a higher price.
Appreciation is when investment gains value between buying and selling it. This includes purchasing bonds, stocks, gold, or real estate property. Nowadays, people are also investing in cryptocurrency and non-fungible tokens (NFT). We will talk more about it later.
When should I start investing?
Investing early is one of the best ways to see solid returns on your money. That’s because of compounding earnings, which means investment returns will start earning their own interest and eventually turn into more money!
No matter which type of investment you are into, there will be fluctuation. Investing at a young age means you have a long time to ride the ups and downs. Therefore, even investing in small amounts can grow over decades!
What should I consider when investing?
Individual preferred style
Before you understand what investment is, you should understand your needs. Different people should have different investment styles. Whether you’re looking for a quick buck or want to build wealth, there are two major styles of investing that will suit your needs: active and passive investing.
Active investing
- Do the investing yourself
- Tons of research needs to be done
- Potential huge or life-changing returns
- Short term investment
Passive investing
- Do not need to involve directly
- Fewer capital gains tax
- Moderate returns
- Long term investments
Active and passive investors both have their benefits. Still, it’s essential not just focus on short-term gains if possible because the long-term performance can be better with some risks involved too!
Budgets
If you’re looking for ways to invest your money without taking too much risk, you should consider building a portfolio with a lower budget. The most important thing about starting your investing journey is being financially ready and having the money set aside regularly.
Setting up an emergency fund is essential before investing. Not only does this allow you to withdraw funds quickly if you meet any emergency issue, but it will also protect your investments. This is because of the risk involved with all types of investment. High-interest debt is not worth the hassle, and you should get rid of it before you start investing!
Risk tolerance
The level of risk you are comfortable with will differ for each person. There are no one-size-fits-all investments when it comes to investing your money. So, make sure that any investments fit within the parameters set by yourself and those close to you before taking on more than what you can handle comfortably!
Robo-advisors are the perfect solution for beginners with little or no experience investing (such as StashAway). Brokers offer financial services to construct portfolios that meet your risk tolerance and goals for potential returns while keeping everything within an appropriate range.
Types of investment in Malaysia
There are a few types of investment in Malaysia that you should know before investing.
- Fixed deposit
- Stocks and shares
- Gold
- Unit trust
- Investment-linked Insurance Policies (ILPs) / Insurance
- Cryptocurrency
- Private Retirement Scheme (PRS)
- Robo advisors
Verdict
Whether you’ve never invested before or are a seasoned pro, you should remember to figure out how much money should be supported to protect it from the risk of loss. Reserve the emergency fund so you will not lose anything if your investment fails.
Moreover, consider during an investment journey which involves determining your tolerance levels. Last but not least, be extra careful when investing your money. Research the company thoroughly, and don’t be afraid to ask for help if you need it!
Remember, investing is no gamble; therefore, prepare yourself before investing.
Related: Types of Investment in Malaysia | Top 5 Low-Risk Investments in Malaysia
