Investing To Grow Your Wealth

Most people who are unfamiliar with investing tend to think of it as a very risky activity, not unlike gambling. They prefer to keep their money 'safe' in bank deposits, especially when they see high volatility in global stock markets. Some may have burnt their fingers buying stocks at the recommendation of others, and vowed never to invest again.

However, this impression can be highly misleading as it is based on speculative trading rather than genuine investing. Many inexperienced investors also associate investment with the stock market only. Nothing could be further from the truth as the universe of investible assets is not only large but ever-growing. Investing wisely is the best process for many people to grow their wealth. That is why a good education on investing is of utmost importance in financial planning.

In today's market, the range of investment products can be mind-boggling. The spectrum of products spans from bonds, unit trusts, structured products and foreign exchange products, just to name a few. Even for unit trusts, there are many different categories, depending on the fund's choice of asset class and/or risk profile. Before taking the plunge to invest, investors can sharpen their ability to avoid common investment mistakes by referring to the MoneySENSE guide, "About Investment Products: What You Should Know", which is produced by The Association of Banks in Singapore. This guide contains a checklist of key factors and advice that all consumers should consider before making an investment decision.

Picking the Right Investment

Now that you have armed yourself with a checklist of things to consider before taking the plunge, it is a matter of matching yourself to the right product and right investment. Ensuring the right match means that you invest in accordance with your investment profile: these would include your financial objectives, investment time horizon and last but not least, your tolerance for risk.

For a guide to understanding these A,B,Cs of investing, please read the MoneySENSE guide, "Introduction to Personal Investing" produced by the Investment Management Association of Singapore. The guide also explains important investment concepts, discusses the investment characteristics of cash, bonds shares, and unit trusts; and describes an investment strategy called asset allocation, which is fundamental to building a diversified portfolio.

The simple facts are, the more knowledge you acquire on investing, the more empowered you will be to make informed decisions on whether to buy or sell. In turn, this will minimize the risks to your capital. At the same time, you also increase your chances of earning a higher return on your investments.

Finally, it is useful to conduct an occasional reality check on your expectations. Always bear in mind that there will be ups and downs in the financial markets. Learning to live with a certain degree of volatility is the hallmark of all seasoned investors who know the rewards of investing often come in the long run. Make the right choice to harness the potential of your idle cash by making it work harder for you. There is a wide world of investment opportunities out there.