What you need to know before you start Investing

What you need to know before you start Investing by Nira Arcales

Know yourself

Many people when they hear someone who made money in a particular investment, wants to invest in it too.  "oh I doubled my money in this particular stock" or "My mutual funds investment is now twice its value today." or "there's this business who promises to deliver 50% of your money after a month", these phrases attracts the investors to put their hard earned money to whichever they think gives them the highest profit without even knowing what that investment is all about. That is why a lot have been victims of investment scams.  Most of us wants to have the highest earning investment in the shortest period of time.  Who doesn't want that?  The truth is, each and every successful person didn't make it to the top using the short-cuts,  they invested in knowledge, worked hard, failed a couple of times, and learned from failures and most importantly, they took the time to know themselves.  It hadn't been easy even for Manny Pacquiao before he made it to top.  You need to take some time to know your wants and needs.

Miranda Marquit via Money Ning said that when you invest without self-knowledge, and without a plan, you’re setting yourself up for failure.

Understand Your Risk Tolerance

Another important trait to understand about yourself is your risk tolerance. Everyone has a different level of risk tolerance, and it’s important to know where you stand. There are two elements to risk tolerance:

§  Financial: This is the numbers part of the equation. Look at your finances. What can you afford to lose? How much money can you put away right now? You need to know how your finances would handle a worst-case scenario. Can you afford to put Php 5000 a month into a VUL funds, thereby tying the money up? If you pick the wrong dividend stock, and payouts are slashed and the value tanks, can you absorb the loss? You need to know this information before making your investing plan.

§  Emotional: Don’t forget your emotional risk tolerance. If you have a high emotional tolerance for risk, you might put your finances in danger by making ill-advised and risky decisions. Understanding your appetite for excitement and risk is vital, and you need to recognize this issue and rein in your exuberance. On the other hand, it can also be a problem if you are too risk-averse. A super-low emotional risk tolerance can lead you to invest only in “safe” assets, and prevent your wealth from growing. If you have this issue, you might need to consider money market or bond funds or other acceptable-risk investments.

Look at your risk tolerance, and understand what you can handle, as well as where you might need to make changes in your behavior. This can be a big help in boosting your investing success.  That's why in Sunlife, before we let the client sign the policy or give them the investment they want, we let them answer some questionnaire forms that would evaluate themselves, their risk tolerance and what type of investor they are.  This would help them choose what investment is good for them.

Make a Plan

Can you stick with a plan? Do your best to create a plan based on what you know about yourself and your tendencies. Then, stick to it. You might need to make a few tweaks now and again, or rebalance your portfolio — but in the long run, following a plan based on what you understand about yourself offers your best chance for success.

What type of Investor are you?

More Blessings!

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