Buy High Sell Low? Fear Might Be the Greatest Enemy to Your Investment Success
“Investment is only a game for the rich”, “I have no money, there is no need to manage my finances” …these may sound familiar, they may even be the excuses you procrastinate on your financial management.
Are you still being misled by the four misconceptions about financial management below? If yes, it’s time to break them!
Misconception #1: I have no money, there is no need to manage my finances
Many believe that they are merely small potatoes with so little money, there is no need to manage their assets, and investment seems a distant idea to them. This is, however, a great misunderstanding. Investment is the delay of current consumption for future consumption. Therefore, savings or cash deposits into your bank account in exchange for interest payments is, in fact, a kind of investment. Plus, it is simply safer to save up in case of any unexpected needs.
Misconception #2: Save Up and I Will Become Rich One Day!
Cutting down on unnecessary spending to increase your savings is, of course, a good way to manage your finances. Saving alone, however, cannot make you wealthy. If you don’t invest, cash will depreciate against inflation, eroding its actual value. Proper investment is thus a way to combat inflation by adding value to your assets. But remember, evaluate your risk tolerance before making any investment decision, don't bite off more than you can chew!
Misconception #3: Investment Means Speculating Stocks and Buying Insurance Policies
Many are under the impression that investment means stock speculation, and you need to invest a sumptuous amount to buy low and sell high, blah, blah, blah. Investment in fact comes in many forms, and you can make your own decision according to factors such as your objectives and risk appetite. If capital protection is your objective, a portfolio weighing more on time deposits and fixed bonds may be more suitable. If you are more aggressive, your portfolio may weigh more on equities. Furthermore, instead of speculating stocks in the short run, holding quality blue chips for interest payments in the long-term is also another viable option.
Misconception #4: You Can’t Lose If You Don’t Invest
That is simply, completely wrong! Even if you don’t make any investment, your assets will still depreciate against inflation. The real purchasing power of money decreases. Proper investment is therefore a way to combat inflation. Quoting The Investor's Manifesto, "(t)he goal is not to maximize the chances of getting rich, but rather to minimize the odds of getting poor." It highlights the importance of having clear financial and investment objectives, proactively learning what you don’t know, and acting according to your personal circumstances, so you don’t chicken out because of your ignorance in these matters.
The original content and opinions above are provided by New Media Group and Principal has no editorial responsibility for the content of the article. This information is for general reference and investor education purposes only. Investment involves risks, and prices of fund units may fluctuate. You should not rely solely on this information to make investment decisions.