Starting a new endeavor, whether it’s a new business, project, or hobby, can be intimidating, and the same can be said of investing. There are many kinds of investments that one can choose to put their hard-earned money in. One frequently asked question is about the right time to invest, especially in light of the COVID-19 pandemic which has affected the economy and has caused uncertainty.
In an episode of FUNDamentals on Plus Network, Registered Financial Planner (US-based Global Certification) Edric Mendoza answered some common questions about investing while also giving out important pointers. Here are some of them:
DON’T invest just because there’s an opportunity
DO invest towards a goal
Before getting into investments, Mendoza encourages people to set financial goals. Once this goal has been set, it becomes easier to determine its cost and establish a timeline on when it can be achieved. Once they have that number, they can set aside money that they have to reach that financial goal.
Whatever the return on that investment is, having a financial goal helps people look at the right investment to match with their goal depending on the return that they can get to achieve it. Mendoza reminds people to make sure that they diversify when investing and don’t put all their eggs or all of their money in just one investment.
DON’T invest without investigating
An important question to ask before investing is: what is the investment? What is the product or service that you will be putting your money in? It’s essential to understand how it works and be able to explain it to a child to prove how well people understand it.
Aside from understanding the investment, it’s also necessary to investigate the people behind it. Is it a reputable company that has all their records in place? During a time of crisis such as a global pandemic, there are many scammers who will try to take advantage of people who want to make investments. This is why one should investigate the investment as well as the money that you will get in return.
You should also find out the kind of investor that you are, as this will help determine the right kind of investment for you. Are you an aggressive investor? Or are you a moderately aggressive or even conservative?
DO invest only after you have protected yourself
DON’T invest without protection
When people start putting money and working toward their future goals, they sometimes neglect to protect themselves. This, however, could lead to the loss of investments, which they might end up using for protection needs in the event of an emergency. This is why it’s important to also use some of your money to protect yourself and your family.
Similar to making investments, you can also set protection goals that you can work towards. Then, you can set up an emergency fund, make sure you have sufficient insurance, and settle any bad debts as much as possible to protect yourself and your family. When it comes to investing in a time of crisis, it’s important to determine which businesses or industries stand to gain from a situation like this, or companies that can help improve the situation.
Finally, Mendoza says that one principle to remember when it comes to making investments is the principle of stewardship from the Bible. Before we invest, we need to remember that we don’t actually own anything and we are just stewards. And as stewards, we need to make sure that whatever we put in our hands goes and grows, which is why we want to invest.
For parents, investing is a way to grow hard-earned money to pass to their children and kickstart their own financial journey so that they don’t become their retirement plans. We may not own anything, but God does, and we are to use what He has given us for His purposes, to grow what we’ve got and be commended for being good, faithful servants.