Things to Consider Before Investing

Are planning to start investing for your future but no idea how to start? Are you ready to take the risk and be financial independent in the near future?

If you are asking those question and looking for solution on how to start investing this might be helpful to you. Starting into investment without any corresponding goal will only lead you to failure. 

Here are 7 things you need to consider before investing:

1.         Write a financial plan. 

What is financial goal? How long you will be needed the money you will invest? Is this for short term (3 years and below) , mid-term ( 4-9 years) or long term (10 years or more). Your goal must specific put the exact figure you want to attain make it clear in yourself, be realistic with the figure compare to the time frame. Sit down with someone who has extensive knowledge on financial planning and wealth management and ask them to help you write your own financial plan. Be honest in giving out answers to their questions because their financial advice is just as good as the information you provide them.

List down all your priorities in life; ranking each from the most important to the least important: retirement, month-long holiday to an exotic place, brand new car, your children’s college education, healthcare plan for you and your spouse or your parents, business capital, among others. Remember that the first step to investing is figuring out your goals and risk appetite, lest you get ‘lost’ along the way.

 If you get the right plan, have the discipline to regularly follow it and let it grow over time, you should be able to gain financial security over the years and enjoy the benefits of managing your money.

"Nobody plans to failed, they just failed to plan".

No one's ever achieved financial fitness with January resolution and abandoned by February - Suze Orman

2.         Evaluate the risk.  

You need to understand that all investments involve risks. The risk will be depended on your emotions and personality. If you intend to purchase securities - such as stocks, bonds, or mutual funds - it's important that you understand before you invest that you could lose some or all of your money. These investments do not give you any guaranteed return. Always remember "High risk, high return". 

If you have a financial plan for a long term investment then the risk may be tolerable with a small assurance of great return.

"It is better to risk starving to death than surrender. If you give up your dreams, what is  left". - Jim Carey

3.      Diversify.

"Do not put you all your eggs in one basket".  This is the most common quote of an investor when referring to diversification. You need to diversify your investments to avoid or minimize heartbreaking results. You need to consider other investments like insurance, healthcare, properties, business (traditional or non-traditional), paper assets, etc. A safe investor always diversifies.

Most people consider only paper assets and real estate as their investment and forget about covering the “basic” first like insurance and healthcare. Everyone needs to prepare for the unexpected events of life so having these are just as important as your other investments.

Market conditions that cause one asset category to do well often cause another asset category to have average or poor returns.  By investing in more than one asset category, you'll reduce the risks, lose less money and your portfolio's overall returns will have a smoother ride.  If one asset category's investment return falls, you'll be in a position to counteract your losses with better investment returns in another asset category.

4.        Get for any Emergency. 

Emergency funds are money intended for unexpected financial expenses such as job loss, significant medical expenses, home or auto repairs, among others. The last thing you want to do is being forced to rely on credit cards or a loan to pay off your emergency needs, which could simply compound the problem.

These funds should be easy to liquidate hence banks are good places to store your emergency money.

5.         Pay your Debts.

There is no investment strategy anywhere that pays off as well as, or with less risk than, merely paying off all high interest debt you may have. If you owe money on high interest credit cards, the wisest thing you can do under any market conditions is to pay off the balance in full as quickly as possible.

The blessings of becoming debt-free go far beyond the financial area. They extend to the spiritual and material realms as well. No one who is financially bound can be spiritually free. Furthermore, the effects of financial bondage on marital relationships can be devastating.

6.         Do it regularly (Cost Averaging).

Small but regular amounts in investing can lead you to huge results. Use the cost averaging method, this is simply putting your extra money into an investment every month.   By making regular investments with the same amount of money each time, you will buy more of an investment when its price is low and less of the investment when its price is high.  Individuals that typically make a lump-sum contribution to an individual retirement account either at the end of the calendar year or in early year may want to consider “cost averaging” as an investment strategy, especially in a volatile market. This strategy works for a long term investor. 

7.            Control your Emotions (or they will control you).

Many of investors fail or lose their money (in stocks particularly) because they cannot control their emotion. People tend to make wrong decisions when they are emotionally unstable. Emotions like, excitement, panic, greedy etc. must be overcome to become a successful investor.

 Long-term investors will fare much better than those who allow emotions to guide their investment decisions.

Remember: be mentally ready, stay focus on your financial goals and be disciplined in fulfilling them. These will be your keys to attaining financial freedom.


P.S. 1. Bernard B. Anduyon is a OFW based on Doha Qatar and a trainer for OFIE-M ( Overseas Filipino Investors and Entrepreneur – Movement) a group of advocates teaching OFW to start investing and be an entrepreneur. He is also a member of Bo Sanchez Truly Rich Club http://bernard.trulyrichclub.com. 

P.S. 2.  I’m inviting you to attend our Financial Literacy Talk series every Monday at POLO-OWWA Doha, Qatar where I am a regular speaker for Abundance Mindset and Entrepreneurship for Filipino. I am also a trainer of ATIKHA promoting migration issue of OFW and financial literacy both OFW and in the rural area of the Philippines.

If you want a financial coaching you can send email to b_anduyon@yahoo.com

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