Most people not familiar with investing usually think of it as a high risk activity. They often prefer to keep their money 'safe' in bank deposits, especially when they see how stock markets can rise and fall.
However, this impression can be misleading. Genuine investing is about buying value and watching it grow over the long-term. Many inexperienced investors also associate investment with the stock market. Nothing could be further from the truth as the universe of investible assets is both large and ever-growing. That is why a good education on investing is of utmost importance in financial planning.
In today's market, the variety of investment products ranges from stocks, bonds, unit trusts to foreign exchange products, just to name a few. Even for unit trusts, there are many different categories, depending on the fund's choice of assets 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", produced by The Association of Banks in Singapore. This guide contains a checklist of matters and key advice that all consumers should know before making an investment decision.
Now that you have a suitable checklist in place, you have a better chance of matching yourself with the right investment. Ensuring the right match means that you invest in accordance with your financial objectives, desired time horizon and finally, your tolerance for risk.
For a guide to understanding the A,B,Cs of investing, please read the MoneySENSE guide called "Introduction to Personal Investing" produced by the Investment Management Association of Singapore. The guide explains important investment concepts, discusses the characteristics of cash, bonds stocks, and unit trusts; and describes how to build 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. This will help to increase your chances of earning a higher return on your investments.
Finally, always bear in mind that there will be inevitable 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 that the rewards of investing will come in the long run. Make the right choice to harness the potential of your idle cash by making it work harder for you.