28 Aug Investment is important but where to start
If you trying searching from the net or reading investment related, a lot of authors and successful people always emphasize on investing and not saving. I took investment more seriously a couple years ago even before I became a financial coach. Having attended seminars to have structured way of investing in stock market, read and subscribe to Youtube channels to further equip myself. Without me further elaborating, the returns I got from investment is of course much higher than what you get from a savings or FD account. However, the skill, knowledge, experience and all other factors come into account in order for you to gain the return.
The problem starts with a lot of friends surrounding me is “Where to start?”. Some common questions I have:
1) Should I start with bitcoin?
2) Should I invest some into stock market?
3) Should I get some REITs and collect dividends
4) Should I get a self service laundry as I am still a full time employee
5) Should I buy a property and stay first instead of investing it. The property price will increase and I can sell it of and get another one later.
6) Should I just go to the bank and buy some funds.
There will be thousand and one question, on where to start. Of course there is no direct answer to this question. Also, there is no right or wrong answer to this. Just to help you streamline where to start, maybe something I thought worthwhile to think about.
Consideration 1: Long term or short term
First question to ask yourself, are you planning to have returns on a short terms basis or you can have patience to wait for the return.
Short term here is referring to have returns monthly, quarterly or annually. With that you can filter of your investment aligned to this. Some example I can give such as:
1) Dividends from stock or bonds
2) House rental
3) Business returns
However for long term investment, the main thing you should be looking at is capital appreciation. You don’t mind your investment does not give/give you very little return frequently but your main focus is the appreciation in value. The investment for this area is slightly different:
1) Investing in stock market using the Value Investing strategy
2) Investing in mutual funds/unit trust
You get the idea. Short term and expecting frequent return or long term, pretend it did not exist and “Surprise!!, after 10 years down the road”.
Consideration 2: Am I expecting “a monthly salary” or is this a “bonus”
You might want to further drill down on which is best for you. You will need to visualize here. If you are looking for investment that you want to hold it “till the cow comes home” I would take it as your expectation will be you will be drawing $$ from this investment. Investment vehicles such as house rental & dividend will be suitable and align to your objective. Regardless how much the price of your house or stock appreciates, you will continue to hold as you want to get the dividend out of it.
However if you are looking for a “6 months” bonus, things might be slightly different. You will flip properties, time the market (getting in low price, selling it and high price), etc. In this area, you will monitor closer to your investment as you want to get quick investment gain and exit the game.
So some of you might think, this is still confusing should I go with long term or short term, monthly returns or quick capital gains. Needless to say, there are of course risk associated to the different types of investment that I have mentioned above. What happen if my objective is to flip a property but couldn’t get out? What if I time the market wrongly? What if my long term unit trust fund is not giving the return 10 years later?
So my take to this and especially for someone starting from ground 0 on investment. When I say “ground 0” I would assume you do not have a high net worth and you are just a basic average Joe which will need to decide whether to go for frequent returns or “bonus”. I will fall back to my Dave Ramsey system (don’t forget I’m a play safe guy) meaning I will clear my bad debts and having minimal loans for my investment. I would focus on capital gain investment which I have listed above within short period of time. So the suitable vehicle will be timing the market or flipping properties. Reason! I want to have “something” to jump start with. Agree that you can invest on a monthly basis and compound the returns. However, this will still be slower than someone started investing after receiving the “bonus”.
That being said, risk associated is bonus might not come but then it boils back down to your financial knowledge and how it is being managed. There might also be questions on why we can’t have all investment focusing on high return and what are the pros and cons for each of the area. I will write another page to share my thoughts on this.
Feel free to comment below if you think otherwise and we can discuss more about it.