Principles of Investment
Set aside an emergency fund
First, start by setting aside in cash at least 2 to 6 months in living expenses in a contingency fund. This is to help you cope with a sudden loss in regular income in event of a period of unemployment or illness. You should also put aside some regular payment for a health plan. Now that you have done that, commit yourself to a regular savings plan aimed at meeting a future financial objective like your retirement, a new house or your children's educational fund.
Needs for Investment
"The fact is buying investments bought at market lows can give you handsome returns if you can hold on for five years or more..." Dollar-cost averaging
Dealing with ups & downs of the market
Markets rise and fall. So do values of your investments in stocks or unit trusts or mutual funds. No one, even the investment pros can profess to knowing how to "time the markets." The lay or DIY (Do-it-Yourself) investor often make the mistake of passively holding onto their shares or selling them off in panic when the market turn bearish. And only pile back into the market when it starts to run, hence missing out on gains if they have invested at the bottom.The fact is buying investments bought at market lows can give you handsome returns if you can hold on for five years or more. Generally, there are two methods that the pros use to even out the volatility of the markets. They apply not only to stocks but also unit trusts.
Asset Allocation
"The reason that most individuals tend to underperform over the long-term boils down to a failure to understand risks, which include the need to diversify their resources. Or a process known as asset allocation..."
Most individuals often make the mistake of not assessing downside risks when they make their first investments.
This is especially true when they take the first tentative steps into investing in the stock, currency, commodities markets or even buying into an unit trust.
