Investing means putting your money in a company or in different kinds of businesses on a short, medium, or long-term basis with an expectation to earn something in return. Basically, investing simply means allowing your money to work for you. This sounds so great to read, but, how and where should you invest your hard-earned money?
1. The Art of Saving
Before you could go for investing you must learn its solid foundation which is the art of saving. This is very important because going directly to investment without its basic knowledge will only lead you to lose your bunch of money.
To learn the art of saving you may apply the Abundance Formula of Bro. Bo Sanchez which is the 10-20-70. Once you received your income or your salary divide it immediately into three part prior to spending. The 10% of your salary should go to GOD. The 20% should go for saving and investment. Lastly, the 70% will go for your expenses. It’s not necessarily that you must follow the 20% and the 70%. What’s important is you follow its principle, to learn this formula you should always put in your mind that you don’t have the right to spend unless you divide your salary into three.
2. The Emergency Fund
The main goal why you are saving is to build an emergency fund, which is equivalent to your three (3) months of your salary if you’re single and six (6) months of your salary if you’re married. The concept of Emergency Fund is very important because this fund is used for unexpected circumstances which lead you to urgent spending. Additionally, some percentage of this fund should be placed in a Bank and some should be placed in your home for immediate access. In order to know when to use your emergency fund, make a list of possible emergencies that you may encounter. If something happens and it’s not included in your emergency list, then don’t deep into your emergency fund. Remember, A “SEAT SALE” is not an emergency!
3. Heath care and Insurance
Together with the Emergency Fund, it’s also very important to either have a long-term health care or insurance for the breadwinner. If you’re investing without any of these two, there’s a possibility that you might end up losing all your investments. In the situation that something happens to you which you could not afford its expenses, you may be forced to redeem all your investments regardless of market condition.
4. Know your risk Appetite
Before you begin your investment, you must also know your risk appetite. If you’re the person who has a conservative risk then, it’s recommended that you invest in mutual funds because an investor can choose its risk appetite. On the other hand, if you’re the person looking for high earnings, then go for the stock market. Just put in mind that the higher the earnings, the higher the risk.
5. Long-term Mindset
If you already have the four, then you can already start your investment, but, just make sure that you have a long-term mindset. In simple words, you’re going to invest your money beyond five (5) years. Having a long-term mindset will help you minimize the risk of your investment. Aside from this, having a long-term mindset means treating your investment as your retirement fund.
6. The Blue Chips
If you make your investment, it’s best if you invest in Blue Chips, these are the companies which have the ability to last for many generations. Some examples of Blue Chips companies are Jollibee Foods Corporation, Ayala Corporation, SM Prime Holdings etc. Never invest in penny stocks for long-term, these companies may have the lowest price but has no strong foundation yet.
7. Diversify your Investments
Diversify your investment, if you have a huge amount of money don’t invest it on a one-time basis instead spread it across multiple legitimate investment vehicles. As they say “Do not put all your eggs in one basket.” One rotten egg may affect the others. The same principle holds true to investments.