4 Of The Best Investing Habits To Start Now!
Business | 22 Nov 2019
The thought of investing at any age sounds very intimidating to most. However, if you don’t start right now you would look back on your time and regret not taking action today. To help you secure your future early on, here are four investing hacks that I wished I knew when I was younger.
Understanding The Impact Of Inflation
A dollar today is worth less than a dollar in 10 years’ time. Back in those days when your parents were your age, they probably didn’t know that. This is known as the effect of inflation. Due to inflation, the prices of goods and services will increase in cost. The most relatable example is the cost of food. 10 years ago, a plate of chicken rice cost $2. But today, it takes a lot of effort to find something that costs only $2 and fills your stomach.
If you do not invest your money, the value of your money will be “eaten away” by inflation. Even if you saved $1,000,000 in your bank today, it is going to be worth less than $1,000,000 in 10 years’ time. Thus, you need to invest to ensure that you at least beat inflation to maintain the dollar value of your money. The impact of inflation should become one of the main motivations for you to start investing.
Learning About Different Investment Styles
One important investing hack is to understand the different investment styles to help you become a better investor.
Resources relating to investment is harder to come by during your parents’ time. But in today’s digital age, these resources are everywhere on the internet. You can easily find out about value investing, growth investing or income investing online. You can even learn more about how to balance your portfolio and thematic investing. Armed with access to more investment knowledge than ever before, you will now be able to invest and generate a higher return on your investment.
Dollar-cost averaging is an investment technique where you commit a fixed dollar amount to invest in a basket of stocks/ETFs every month. Since the price of stocks/ETFs fluctuates, the quantity that you buy every month will be different. When the price is low, you will buy more quantity. Less quantity will be bought when the price is high. In the long run, you will be able to average out your cost, which is how the technique derives its name.
Dollar-cost averaging has two distinct advantages for investing. Firstly, it protects your investments against market fluctuations and the downside risk of the market. It also encourages you to be consistently investing instead of trying to time the market. Since the stock market will be on an upward trend in the long run, your dollar-cost averaging technique will eventually pay off. This can help you to retire even earlier than your parents.
Finding out more about Government Schemes
While you cannot withdraw your CPF money until the statutory retirement age, your parents will tell you that you can take advantage of it to invest and enhance your retirement nest egg. If you have at least $20,000 in your Ordinary Account (OA) or $40,000 in your Special Account (SA), you are eligible to be investing your CPF money under the CPF Investment Scheme (CPFIS).
You can invest your CPF money in a range of investment products, from unit trusts, investment-linked policies (ILPs), annuities, endowments, Singapore Government Savings Bonds, ETFs to fixed deposits.
This seems like a very long goal ahead of you if you are young, but it is always better to know about them early so that you can make full use of government subsidies, grants, schemes, policies to kick start your investment journey as soon as you are financially capable of doing so.
Aside from that, if you are between 25-35 you will soon be making plans to purchase your first property, which is one of the biggest assets you will own in your lifetime.
Therefore, It’s never too young to learn more about the available grants and subsidies that the government has to offer so that you can make the best of your investments.
Whether you start your financial planning journey by managing your own DIY portfolio or through advisor-assisted guidance, we believe you have the power to take control of your financial future.
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