5 Questions To Ask Yourself Before You Start Investing


Although most of us hope for a way to make money without working longer hours, investing may not be something that’s suitable for everyone.

It requires time, effort, a curiosity to learn and of course, some funds before you can start investing. That’s for a start.

You’d also need to determine your own risk tolerance, as it can affect the way you invest, the type of instruments suited for you as well as the type of returns you can expect.

In a way, your investing journey is a type of self-discovery and it can be a rewarding experience (not just in the monetary sense). So fow now, I want to share with you 5 essential questions you should ask yourself before you start investing!

1) Do You Have A Personality Suited For Investing?

Yes, investing is not for everyone. If you are the kind who checks the stocks markets constantly, fretting about the stock you buy may fall a few cents or percent and selling at the first sign of crisis then investing is not for you.

Having said that, remember that there is a huge variety of investment products catering to different risk appetite and for those seeking different returns.

Read our article on investing according to your personality here.

2) What Are My Strengths And Weaknesses?

You have probably been asked this question many times when you go for a job interview.

In a way, the question is legit because it not only reflects on your self-awareness, it also give you a heads-up on what are some of the pitfalls you might fall into.

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For instance, being optimistic may mean you can get over-confident about your investment and not cutting loss when it is appropriate.

Being critical may mean you will never find a stock that suits your stringent criteria, or perhaps you end up with a prized stock which you confidently dump all your money into (putting all your eggs into one basket).

3) What Type Of Returns Am I Looking At?

There’s a well-known caveat when it comes to investment – no risk, no returns. If you are expecting some returns of more than 10% per year, maybe you want to temper your expectations.

Let us look at some investment returns number before you pluck a number from the sky.

Annualized returns from common investments:

Bank deposits – 0.05 to 0.8%

Timed deposit rates – 0.65 to 1.25% (1 to 3 year lock-in period)

Singapore Savings bonds – 1.73 to 2.19% (5 or 10 year lock-in period)

STI Index fund – 4.19% (10-year annualised returns)

Returns for individual stocks are definitely hard to place a benchmark on, but for comparison’s sake, 2015’s best performing stocks in Singapore included ComfortDelGro, Starhub and SATS, which averaged a 9.4% dividend-inclusive return.

However, keep in mind that this is out of the hundreds of stocks available here and not everyone will be able to pick out the best.

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The importance of asking this question is to set your expectations right, before you ask yourself the next question – what are you willing to do to reach these expected returns?

4) What Am I Willing To Do To Reach My Investment Goals?

Building wealth and investing is not a walk in the park. If you think that you can throw an amount of money into something and watch it grow exponentially, then you need to get back down to earth.

It’s also not about splurging on some “get-rich-quick” course or buying a shelf of books that you will probably end up not reading.

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5) How Much Of Investible Funds Do I Have?

Contrary to common perception, you do not need a lot of money to start investing.

In fact, you can start with just about $200 a month. Think of your investible funds as something you can afford losing(although most of us would rather not), which means you cannot rely on these funds based on needs.

You’ll need to set up this set of funds after you’ve got your basic budgeting done, including about 6 month’s worth of living expenses that you set aside as emergency funds.

With these 5 questions, you’ll have a better idea of whether you have the personality to start investing!

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Lynette Tan

Lynette has more than six years of experience in financial analysis and writing, having stepped foot in the financial world as a commodities analyst. With a passion for personal investing and financial literacy, she hopes to help others gain investment knowledge by making investment concepts plain and simple for the man on the street.



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