10 things to know
- Before you get started, set some investment goals
- Save and invest now!
- Invest early to beat inflation and to benefit from compounding
- Invest consistently
- Balance risk and return
- Invest in different products, not just one!
- Avoid high fees
- Do NOT sell in panic
- Do NOT take on debt to invest
- Beware of scams
- Quiz: Investing 101
So up top we said put aside a small amount every month from your monthly salary. You should be using this money to invest consistently.
Why? Turns out it’s very difficult to time the markets. By that we mean that it is almost impossible to know when to buy and when to sell. Even professional fund managers struggle to get a better performance than the index. That’s why you should keep investing small amounts no matter whether you feel the market is up or down.
For a more detailed explanation click here:
If you look at the graph below of an index tracking the Malaysian stock exchange, you can see that over a longer time period, you’d have made money regardless of when you invested. However, if you’d chosen to save all your money and make a large investment at only point A when you thought it was the perfect time, then you would have taken a huge loss, especially if you sold at point B.
Source: Yahoo Finance
This is why you should invest small amounts consistently. You’ll sometimes buy when prices are low and sometimes buy when prices are high. In the long-run you are more likely to make a safer average return on your investments by not timing the markets.