Tuesday, May 27, 2014

Easy and Simple Investment Guide

One of the things I frequently do apart from posting comments on news and alike in, Philstar, New York Times, and other blogs and news site is read posts about businesses and various investments tips. One of the posts that I found very useful today (particulalry for OFWs who plan to invest their hard earned money from overseas here in the country) and would like to share to everyone, is this article from By Randell Tiongson from the Business Section of PDI. I will not rewrite it, but will post relevant sections of the article.

Where to place your hard-earned money? 

Read on and follow this guide. This could be very useful to you.

Investment objective—What is the investment for in the first place? Where do you plan to use it? Is it for retirement, education, purchase of a house? Or is it just to park your money while you are scouting for other investments?

Time frame—When do you intend to use the money you are investing? Is it short (less than a year), medium (up to 7 years) or long term (more than 7 years)? It is unwise to put money in long-term investments when you will need it in the short term—you might end up realizing capital reduction or you may be levied with steep penalties should you liquidate your investment. It is also unwise to invest in short-term instruments when the purpose of investment is for the long term like education or retirement—you will not realize a good appreciation of your investments as short-term instruments give lower yields. In other words, your investment would be drastically reduced by inflation and you’ll find yourself with not much funds when you need it the most.

Risk tolerance—Investors can be conservative, moderate or aggressive. Determine your risk tolerance. Is liquidity and capital preservation an absolute must for you? Or are you willing to risk some potential capital loss in favor of potential capital hike? Remember the golden rule in investing—the higher the yield, the higher the risks and vice-versa.

Acumen—There are simple products and there are complicated products. If you are investing in the stock market and you are not familiar with some form of fundamentals, you might regret ever putting money there. If you can’t distinguish a structured note from a time deposit, you might want to reconsider your decision. I have a simple advice with regard to this—never ever invest in something you don’t understand.

Before parting with your money, you should go through the four-step rule first. Matching the right instruments with your needs will be the best investment for you.