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Jan 2, 2014

Investing DO's and DON'Ts

"If you think education is expensive, try ignorance."

I have proved to myself that ignorance was really very very expensive. I have made alot of mistakes and it cost me huge amount. Fortunately, learning Financial Literacy helped me recovered and it even improved the quality of my life.

Let me share some ideas before you start Investing for your future. Investing is rewarding but if you don't properly follow the process, it might be a headache and cost you huge loss in capital.
Also, An Inexperienced Investor and an unscrupulous broker can be a bad combination. It might result to financial loss and heartache. So before jumping into Investing because everyone else is doing it, here are some few tips you need to understand.

DO Invest because it will help you meet your Objectives and Goals. Trust me, having a goal for you investment will help you achieve it. Goals like for Invest for your retirement, children's college fund, dream house fund  or a Travel allowance.

DO understand your Risk Tolerance. Not everyone of us have the same Risk Tolerance or sometimes it is called Risk Appetite. Losing P10,000 for others can be a heartache and may cause depression for you. So make sure you only Invest on product that you can take the risk based on your tolerance. 

DO read Personal Finance and Investment books. The best source of information is by reading books written from experts and professionals. I recommend you get a copy of 'No Nonsense Personal Finance: A Step by Step Guide'.

DO Invest for the long term. Putting your money on an investment product and getting it tomorrow, next month or even after a year is not investing. I must say, Long Term Investing is boring and it might be a reason why some investors are looking for excitement. 

DO Cost Averaging. Although markets move up and down, expensive investments you make when prices are high will be matched by cheap assets when prices are low. 

DO know your Investments. Before investing, educate yourself about the products performance history and read the Prospectus. Take note of the fees & charges you have to pay if you subscribe or redeem your investment.

DO consult professional advise. If your have a big capital and you don't know where to put it, seek advise from professional like Randell Tiongson. Never jump in the ocean if you don't know how to swim. 

DO avoid watching news about stocks. By the time news reports come in, it is usually already too late to take action. Stock news in general tend to get over-excited when the stock market rises, and panicky when the market falls, prompting you to buy high and sell low, which is exactly the opposite of what you should do.  

DO review your Investment Strategy and Goal regularly. Our Financial circumstances may change over time and so do our goals. Be open to the possibility of taking another approach or option if needed. 

DON'T Invest if you're deep in debt. It doesn't make sense that you invest while your debtis incurring interest. Pay your debt first before Investing.

DON'T Invest if you have no Emergency Fund. Unexpected events in life might force you to redeem your investment if you have no available cash or liquid assets. Be sure you have enough cash available anytime. Know more about Emergency Fund in my recent blog Makakaya Ko Ba?

DON'T do business with a broker or investment firm you're not familiar with. Before investing your money, make sure the broker is registered and you did a research about the company. There are a lot of forums, personal finance blogs and Facebook Group that can be your source of information. But, make sure you evaluate the information you gathered.

DON'T be attracted by high-yield investment schemes. There is no such thing as low risk, high reward Investment. If in case someone tells you that, beware of that person. Scammers often lure investors with promises of quick and huge returns through "risk-free guaranteed high-yield instruments" or some equally deceptive enticement.

DON'T get emotionally attached to investments that have served you well in the past, but that are no longer performing well or are no longer suited to your needs.

DON'T put all your eggs in one basket. Learn Diversification. As defined in Wiki, "Diversification means reducing risk by investing in a variety of assets. If the asset values do not move up and down in perfect synchrony, a diversified portfolio will have less risk than the weighted average risk of its constituent assets, and often less risk than the least risky of its constituent."

Mag-Invest Ka Pinoy is an IT Professional working in Singapore. He is an advocate of Financial Literacy in the Philippines. He founded Mag-Invest Ka Pinoy in year 2012 and started the website www.maginvestkapinoy.com. The mission of the website is to encourage every Filipino to learn how to SaveInvest their money and plan their Retirement.

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