Most Singaporeans view investing as a vital step towards financial stability later in life. It adds up to the hope of early retirement or perhaps a retirement at ease, going to places and affording the finer things in life. However, while many want to delve in investing, it can get quite tricky.
Here are some reasons why many failed ahead of you.
1. Putting all eggs in one basket
Do not pour all your available resources into just one industry. You can invest in a medical company, a property developer and a shipping company. These companies have various unrelated industries. Since you are not sure of how the industry will fair in the future, you can still be assured that some of your investments will not be affected should there be any negative circumstances in a certain industry.
2. Being satisfied with 3-4% growth
Do not be satisfied if your investments have been returning 3-4% growth. Take note that the inflation rate in Singapore ranges in 3-4%. This means you are not really earning anything. Your funds are actually in a shaky situation. You have to aim 5-7% growth to actually have earnings.
3. Investing out of whim
Some people purchase financial products just because of social reasons. This means they bought because a relative or a friend is selling it. There are times when people get tricked by the ones they trust. This usually happens in ponzi scheme. This scheme is literally letting the older investors earn from the investments or money of the new investors instead of a product or the service of the company.
Say, for example, your friend asked you to invest on certain health products, and to earn more bonus cash, you should also invite two more friends to join in. Photos of older investors with new cars might also be shown to you to further convince you.
The simple fact that you were asked to invite more people to gain extra cash is already a red flag. Older investors only gain from new members. One they get yours and other victims’ investments, they will suddenly disappear.
4. They go with the flow
Just because most people do it, does not mean that you too should follow suit. Despite how the investment seem good now at its peak price, you will have no idea how soon it will fall. You might end up selling less than the amount you have actually purchased it.
5. Investing right after a loss
Imagine being in the casino. You have been winning for some time and you did not expect to lose all in one shot. What are you going to do? Most gamblers will find a way to bet more in the next round in an attempt to get back the lost money as soon as possible. Do not do any financial decision such as this under stress. You might lose even more. Wait for two weeks or more before you make a new investment.
6. Buying non-valuable investments
Many thinks that a lot of items bought at a certain price will fetch higher value after a period of time, much like with the antique furniture. However, be mindful that this is only applicable to limited items. Know that most seemingly tangible investments will depreciate its value.
Be critical on the real value of your tangible investments.
• Musical Instruments
A Stradivari viola has been auctioned in Sotheby’s with the opening price of $45 million. The viola is a rare masterpiece created by a famous Italian crafter Antonio Stradivari in 1719. Only ten pieces exist in the world and this one remained intact over the years. It was even used by the virtuoso Peter Schidlof of the Amadeus Quartet. However it failed to go under the gavel.
• Comic Books
A copy of Action Comics No. 1 fetched $2.16 million in 2011. It is a comic book where superman debuted and the rest was as they said history. A building contractor David Gonzalez found the comic book in an old house he had bought for US$10,000. It was used for insulation on the wall, however it was still in mint condition, thus it fetched the astounding sum,
• Collectible Toys from Famous Fast Food Chains
With original price of S$4.50 per pair with any McDonald’s Extra Value Meal, the entire line of Hello Kitty toys fetched as much as S$980. This was during the Hello Kitty frenzy in year 2000.
7. Investments are savings
Investments are not yet savings, they are non-liquid and hard to transform into cash during emergencies. If you get hospitalized, it will be hard to liquidate your assets at their peak prices. In worst case scenario, you might even have to sell it at a very low price just to get instant cash.
8. Not shopping around
Research first on the products you are investing and compare them online. At the comforts of your home, you can actually take some time to do some research on investment products. Do not put your money on things you really don’t know. Should you want to try something new, put in the amount of money you can afford to lose.
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