Finance - Jayapal.Org

Ten Commandments of Investing – Powerful Tips For Success (Part 2)

Previously we talked about what the first five commandments of investing were and if you are still unsure whether you should start to invest, let us debunk 2 top common myths about investing first before continuing with the rest. The 2 common myths are market volatility and that investing is time consuming.

Investing looks daunting to some people because it is an uncharted territory for them. Because they also heard about negative experiences from their family members or friends, it makes them feel investing is not “good” as the stock market is too volatile.

However, even when there is day to day or year to year volatility in the stock market, the trend line tends to smoothen out over time and in an upward direction. Trying to time the market will cause problems for your portfolio but if you invest with a long term mentality, it is possible to get through the market volatility and come out on top.

It is not uncommon or hard to imagine an investor, conscientiously screening reports and spending hours adjusting stock screeners to get the right stock at just the right time. The truth aka good news is that investing does not have to be time consuming. A broad based fund does not need a lot of research and with today’s technology, you have robo advisors to help build a portfolio based on your long term goals and risk tolerance in just a few minutes.

Now that we have debunked the 2 top common myths, let’s talk about the last five commandments of investing which helps to enhance and speed up your investment journey:

1. Keep things simple

As the saying goes, simple is best. Invest within your competence and and the simpler, the better. Do not go into complicated investments that consume a lot of your time due to trying to time the market. Set up automatic purchase plans that help you stay grounded and do not entice you to try and time the market.

Staying invested at all times means you are using dollar cost averaging to buy more shares with the same amount of capital and that is how you can maximize your money in investing. Consider low cost index funds or exchange-traded funds (ETFs) if you do not feel confident or comfortable with rebalancing the portfolio so the stress of DIY investing can be eliminated. A wise option is to use robo advisors as mentioned earlier.

2. Diversify your investment

When it comes to investing, it is always advisable not to put all eggs in one basket because why risk losing all when something breaks? Practice diversification instead as it spreads your investments around and limits exposure to any one type of asset, lowering your overall portfolio risk and improving your long term returns.

Do take note that while diversification is great, over-diversification is not. This happens when you invest in too many assets with similar correlations and it ends up increasing your portfolio risk which in turn lowers your potential returns. It is also referred to as diworsification.

3. Rebalance your portfolio annually

While you should invest with the long term in mind, it does not mean you can set your investment portfolio and leave it to run by itself forever. A good investment strategy is to review your portfolio at least once every year to ensure that assets remain allocated in a proportionate manner that fits your risk tolerance and overall strategy.

Different assets will perform differently over the course of time and the review is a good time to reallocate assets back to target and in tune with your risk tolerance. It might also mean buying of more assets that have declined in value and selling off some assets that have performed well.

4. Invest in yourself

When you look at the people who make lucrative money from investments, you will realize many of them are knowledgeable about investing and that means you also need to start investing in yourself by picking up the necessary knowledge to boost your success in investing.

Knowledge is power and it is no surprise that the richest among us are also one of the most voracious readers. Study, learn from others and make your own decisions. At times, errors are inevitable but investing is a lifelong journey as the market is always subject to changes. It is a commitment until you cash out on your investments.

5. Cut the investment costs

High and unrewarding investments will significantly dampen your returns in the long term and leave a foul taste in your mouth for investment. Not all investment fees are bad but there must be a balance between the fees spent and returns you receive just like how a business monitors its profit loss margin.

Most of the high Management Expense Ratios (MER) charged by active fund managers are not rewarding. Transaction costs are also something to watch out for if you are trading ETFs or stocks actively. Fees add up to rob you of better returns on your investment capital and these include front-end loads, back-end loads, MER and brokerage commissions etc.

Investing is an art and you should not go into it blindly. Achieving investment success is a skill that requires knowledge and practice to refine continually over time. We hope you will enjoy learning about investing just as much as you receive lucrative returns. Happy investing!

February 25, 2021/by Editor

Finance

Ten Commandments of Investing – Powerful Tips For Success (Part 1)

Have you heard of The Ten Commandments before? They are a set of biblical principles related to ethics and worship that play a fundamental role in Christianity and Judaism. Translate to today’s modern language and you will understand that The Ten Commandments is actually a generic term to tell you about the fundamental principles on any topic. They serve as a generic guide be it for the old or young.

Today we are going to talk about an all time favourite topic – investing. Every of us, in one way or another, has either tried investing or is thinking of investing. Why? Because it is one of the ways to get potentially higher returns aka making more money compared to saving your money in banks.

Even if you have a full time job and side hustle, the temptation of what investing can bring you in the long run is definitely “sinfully delicious” and your regular paycheck pales in comparison considerably when you put these two parallels together.

Do you agree in life, there are always certain success formulas or principles we need to follow in order to achieve the kind of success we want? Likewise, the same applies to investing. This is particularly useful for newbies, the fast track to investing.

So let’s talk about the first five commandments of investing that will help every investor in making wiser investment decisions:

1. Do not speculate

Many experienced investors will tell you this definitely ranks high among some of the common mistakes an investor can make in their layman days. When we talk about stocks, we always feel that we must get “insider information” per se and invest in the next big thing or hot selling stock.

However, you will soon realize that this is no different than gambling and before long, you will eventually trade yourself out of capital before you even break the profit loss margin, let alone becoming a self made millionaire! This speculation approach takes on excessive and unnecessary investment risk.

Investing is the exact opposite because it gives a balance of risk and return, taking into view of a medium to long-term harvest approach on returns which makes use about understanding the fundamentals of the investment portfolio and looks for value.

2. Set clear goals

We need to set clear goals of what we want to achieve so we can decide on the best investment strategy. Some people are comfortable with high risk investments because they are hoping to retire early or lead a luxury lifestyle so they usually invest more in equities but some people feel that stability is better and their objective is to continue to live their current lifestyles so they usually invest more in low risk stocks like bonds.

There are many ways to investing so if you don’t have a purpose or a set of clear goals, it is probably advisable not to invest just for the sake of investing because without any SMART goals, you will soon be lost in the deep ocean of stocks.

3. Invest within your means

We always feel that we need to invest big amounts of money in the hopes of maximizing our returns. However, if you are already drowning in the sea of overdue bills and credit card payments, it is probably appropriate to have more cash in your own bank account rather than try to invest in the “big boys” like property investment.

Liquidity is the most important when it comes to finances and it is better to start small when it comes to investing. Eg. Value investing. You can start value investing with three thousand dollars and scale accordingly as your finances become more fluid.

4. Invest with a long-term mentality

Investments should always be made with the long term in mind and with that, patience is indeed a virtue. Studies have shown that investors who stay the course often come out on top over time. With investments, time and compounding interest are your best buddies when it comes to harvest time.

Markets, without a doubt, will rise and fall because that is the natural cycle. Like a ship, it will experience occasional storms in natural conditions but once it overcomes the storm, things fall back to normal, as calm as a light sea breeze. So if nothing fundamentally changes within your original investments, just continue to sail until the storm is over and your patience will reap better dividends!

5. Set aside an emergency fund

It is imperative to set aside an emergency fund in any situation, more so when you decide to use a part of your monies for investment. A good amount will be 6 months of your income but if you have dependents, it is probably advisable to set aside at least 12 months to 18 months should unforeseen circumstances happen.

Because you will not want to be forced to liquidate your long-term assets in a hurry and when the market is in decline as you will lose out on the returns later. Use only the funds you can lose for investment purposes without hindsight regret as all investments carry a degree of risk.

Investing is a good alternative to growing your money but only do it when you have pretty good finance fluidity. After all, investments are supposed to make your life better in the long run and not the opposite. All the best in starting your investment journey!

February 22, 2021/by Corinne Wong

Finance

8 most powerful wealth creation tips

Do these wealth thoughts always come fleetingly in your mind?

“Sarah got a new Louis Vuitton bag again.”

“Tom always flies first class, he is so lucky!”

Have you felt envious of these people, at least once? Or you often wondered how they achieve wealth freedom easily despite you trying your best? They seem to have it all, living the good life. If you find yourself nodding your head, you are not alone.

Achieving financial freedom is not rocket science, but yet, many seem to be far away from reaching this goal. You must be thinking “What is their secret formula?” If I tell you “There is no secret formula”, would you believe me? You will be surprised that a minor tweak in our daily habits will help us be one step closer to achieving financial freedom. All of us have blind spots and sometimes, it just takes a gentle reminder to push us forward in our financial journey.

Here are 8 effective steps to achieving wealth freedom:

1. Set financial goals

Take some time to think about what financial freedom means to you and what would you like to achieve – specific goals at a certain age. Eg. How much money you should have in your savings account by age 25 or touring Europe when you are 30. The more specific you are, the higher the likelihood of achieving them.

2. Make a monthly budget

Set aside specific amounts of money for every expense category. Eg. Groceries, utilities and transport etc. This way, you can guarantee that bills are paid on time and savings are on track. It also protects you from impulse buying and unnecessary expenses. It’s always important to be organized to maintain a good wealth.

3. Wake up early

If you perform a study on successful and rich people, you will realise all of them have a common habit and that is to wake up early. Most of them usually wake up around 5am when the whole world is still asleep because that is the golden period of undisturbed time. Time when they can meditate or exercise, plan their day and start working without any interruptions – productivity at its best.

As the saying goes, time is money. By the time the world wakes up, you would already have completed some work and it makes you feel good, boosting your focus and productivity even more.

4. Pay off credit cards in full

Having credit cards are good as some of them offer rebates or flight miles as you spend. However, their interest rates are high and if you are not careful in managing your payments, you will find yourself deep in debt very soon. Make it a point to pay off the full bill every month so you will not accrue interest and still get to enjoy the privileges that come with the credit cards.

5. Do not procrastinate

Everyone has 24 hours a day and we should be mindful of how we spend our time. If you have things that you need to do today, choose to complete them today rather than putting them off to tomorrow. When we use our time wisely, it creates a higher probability of success in achieving financial freedom because we are always active and “doing”.

6. A little goes a long way

Some of us have a habit of buying coffee from Starbucks every morning or at other times of the day. Think of it this way – you might think it is just a couple of dollars but when you multiply the amount for a cuppa by 30 days, you would discover that it adds up to two hundred dollars easily. Instead, choose to drink your coffee at home or better still, invest in a coffee machine to enjoy the same luxurious coffee at a much lower price and it helps you to maximise your savings.

7. Create an automatic savings account

You don’t need a lot of money to start a savings account but you need discipline and commitment to build one. Some of us might lack the discipline to save up a certain percentage or amount of our salary every month so the best option is to create an automatic savings account to help us save for rainy days and earn some interest too. This is a simple but yet fundamental method to accumulating wealth.

8. Invest

Start investing at an early age. For beginners, it is good to start small and try investing in low-initial-investment mutual funds or value investing. As you understand how investing works, you can venture into other types of investments like the stock market or real estate where larger amounts of capital are required.

Related topics –> How to build positive energy?

November 2, 2020/by Editor