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How many of us want to do investments and grow our money but are afraid to start? We hear a lot of people say that investment is a risky business or that investments can make you lose your money. But to what extent are these hearsay statements true?

Successful investing is about managing risk, not avoiding it.

Benjamin Graham, economist, professor and investor

As an ex-Remiser and a Financial Consultant, I always tell my clients that investment is important for them if they want to grow their money and reach their retirement goals earlier. And according to the father of value investing, Benjamin Graham, although we cannot avoid risks, we can manage them effectively. If you are new to investing, here’s what you need to know…

4 Basic rules that all beginner investors should follow

  1. Diversification

Diversification refers to placing your assets into different types of investment. An example would be investing in different classes of assets such as stocks, bonds, and property, instead of just investing in one. The reason for this is to minimise any volatility in your portfolio and to manage risks. 

You should also diversify your investments throughout lowly correlated industries such as spreading shares between a shipping company and an education company. Since these industries are not highly dependent on each other, a downturn in one industry will not affect your overall portfolio. 

  1. Long-term strategy

When your investment generates earnings, those earnings get reinvested and can potentially earn more. Therefore, the more time your money stays invested, the greater the opportunity for compounding and the more money you can potentially earn. This is one of the benefits of having a long-term investment strategy. 

  1. Having an emergency fund

The key to investing is to never treat your investments as savings. You must also save while you invest because savings are important for emergencies. Investment is great to help you grow your money but it does involve higher risks. In case of emergency, you cannot get your money out of a mutual fund immediately without incurring a serious loss. And because of this, you must invest and save. 

  1. Dollar-cost averaging (DCA) 

DCA is a disciplined approach to making regular investments in the market over time. You may choose to invest a certain amount of money in an investment account every month without having to oversee everything before committing to an investment plan. DCA is a wise choice because it keeps you committed to saving while reducing the level of risk. 

Many of us are adults shouldering multiple responsibilities—taking care of the family, looking after our parents, funding our kids’ education, paying the bills, and many more. It may take us a long time to save for retirement if we wish to lead our retirement lifestyle and leave a legacy. But with the right financial tools and strategies, you can reach your destination earlier. If you are interested in taking a better approach to financial planning, get in touch with me!