5 Things to Consider Before Investing
Question: I think I am now ready to invest. What are the things I should consider first? Thank you for your helpful articles.—Caleb, via Facebook
Answer: Congratulations! I am encouraged to hear people say they are interested to invest. A lot of people have been asking me about investing —where to put their money, how much to invest, do they buy stocks or mutual funds, and others. These are good questions and are important issues to address. However, before even thinking about putting your money somewhere, there are a few things you need to take care of first:
Money management Proper management of your finances is the foundation of your quest for wealth. If you are like most of us, your money doesn’t come in one shot—they come and go regularly and your investments will do well when you can add to these investments regularly. You can keep on adding to your investments only if you know how to save properly. You can save properly only if you know how to spend properly. Create and stick to your budget, as that will be your most important weapon in building your wealth.
Emergency fund
I cannot emphasize enough the importance of building a buffer fund before investing. Investments are volatile, and there is always the risk that when you liquidate your investment, it may have not earned yet or, worse, it is lower than its original amount. The buffer fund will allow you to keep your investment funds untouched since you have another funds to use in case of emergency. A good emergency fund should be equivalent to three to six months worth of expenses.
Investment objectives and time frame
What are you investing for? Many people invest without knowing why they are investing in the first place. Knowing your objectives and time frames will allow you to pick the right investment instruments that will be best for you.
Risk tolerance
It is good to determine your risk appetite before jumping into any investment. Some people invest in risky instruments yet they are not prepared to handle investment risks. This causes frustration that leads to a lot of stress. Never invest without knowing the risks.
Time: Think long-term. There are no shortcuts to wealth and you need to be patient in building your wealth over time. Do not take short cuts and do not be in a hurry as these actions can make you commit a lot of mistakes.
Remember, investing is a marathon and not a 100-meter dash, so don’t be too hasty. You have to be patient and diligent when you invest. “Good planning and hard work lead to prosperity, but hasty shortcuts lead to poverty” (Proverbs 21:5, NLT).
If you are a Filipino based in the UAE, catch me and my friends—Rex Mendoza, Dodong Cacanando and Jovy Tuano— for Money Talks, my annual finance conference in the middle east, on March 3 at the Emirates Auditorium, Deira, Dubai. For inquiries, send e-mail to dubaifinancialevents@gmail.com. – Randell Tiongson
Source: https://business.inquirer.net/223841/5-things-consider-investing
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