February 12, 2021

Soft Truths About Investing for Beginners

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Investing is all the rage these days. Even if you’re not actively investing, you probably would have felt its rise in popularity with the numerous YouTube and Facebook ads by so-called “investment gurus”.

I’d hazard a guess that the financial instability and uncertainty in 2020 (now spilling into 2021) has got more people thinking about ways to make more money. Investing is surely one way for that to happen.

But let’s not forget that investing in itself bears a certain level of risk – and therefore instability and uncertainty as well.

Though it might be tempting to jump into the investment bandwagon when you see the kinds of returns that people claim to have received, the truth is that there are no guarantees to investing.

So for everyone who’s just beginning to invest, or even just thinking about investing, here are some soft truths to think about before you put your money anywhere.

Make sure that you’ve got a solid foundation to stand on

If you’ve got a large debt to pay for, and only a not-so-stellar savings account to depend on, it’s probably a wise move to sort through your finances first before committing to anything.

Like mentioned above, investing is a risky move to make. If your current finances are already standing on shaky ground, adding more risk factors into play can easily topple your balance.

While I’ve heard of people that managed to turn their finances around by investing, the flip side is true as well.

We need not look far for examples. The shockwaves from the 2008 Global Financial Crisis could be clearly felt in Singapore, and the aftermath of it still a stinging memory for many.

It’s important to note that sometimes putting your money into investments may not be the best way to manage your current situation.

I’ve read that by making extra payments for a high-interest debt, it’s also equivalent to investing that money and getting an annual percentage return. And there are many more boring but necessary financial management tips that we should probably heed, rather than jumping into some shiny investment vehicle.

Which leads me into my next point.

Do your research

This is really straightforward, but something that’s often ignored especially for beginners who aren’t financially savvy. 

It’s easier to just trust what a friend says or watch your financial advisor scribble away impressive calculations and simply take it as that.

But nothing beats doing your own research and making your decisions for yourself.

I know it’s boring to plough through the numbers. And with investment schemes available, it’s not necessary to do all the legwork ourselves.

However, I think it’s wise that we know what’s going on with our money rather than sign it away on some mysterious plan.

The best teachers? Books. That’s where you can get detailed explanations by investment experts. But if that’s too much content for you, hey, blogs like these and YouTube videos are your next best bet for investment tips.

Know what you are investing for

The next thing to think about is your investment goals and timeline. What exactly are you investing for, and how much time do you need to raise this amount of money? 

We all have life/financial milestones. Some of us want to own a house by 30. Others are eyeing for that dream (but expensive) car. It’s perfectly fine to splurge, just make sure that you’ve got everything sorted out before you make that huge purchase.

Especially if you’re planning for a big purchase, like a house, a car, or a big wedding, making an investment plan will help you to move faster towards that goal.  

It’ll also help you to answer very important questions like: How much money should I invest in? What should I invest in? How much risk can I tolerate? These are the questions that usually boggle beginners the most, but can be answered with relative ease once you know where you want to go with your money. 

Money goals can get quite existential at times, simply because of how tightly linked it is towards our life goals. And it can just get tempting to put the entire accounts aside and not have to face the truth.  

There’s really no two ways around it other than to look at it and start making plans to clear up debt and start making plans for the things that you really want.

It’s pretty simple. Begin by making a list of your financial goals, find out how exactly how much you need to achieve them, then start planning the best route to get there.

All the best in your investing journey folks! 

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