The dos and don’ts of investing
Investment can seem daunting to the uninitiated. There’s a wide range of available products, from fixed-income bonds to stocks and funds. Whether you’re an experienced stock market trader or a first-time investor, there are a few key ‘dos and don’ts’ you should heed to get the best from your investments.
Be aware of how risk-averse you are
How willing are you to lose money? More importantly, how able are you to lose money? If you don’t have a large financial security net then investing is much more risky, and you should be more conservative with your investment decisions. If this is the case for you, consider opting for fixed-income products rather than riskier options such as stocks.
Save additional funds for emergencies
It’s not a good idea to pour all of your disposable income or retirement savings into locked-down investments. Keep an appropriate portion of your savings in another account or in low-risk liquid assets, eg some foreign currencies and certificates of deposit, that you can access if you need to.
Keep track of your investments
Rather than just letting your products stagnate, keep an eye on them, ensuring that you’re up to date on any relevant market updates including those on stock suspensions. If you can’t keep tabs on your products online, you can contact the listed companies, their intermediaries, or the HKEx for updates.
Click here to check our stock suspension tips for elderly investors.
Play the long game
Some of the biggest investment winners, such as Warren Buffett, have played the game for years – even decades. While you may see a return month on month, you should expect some ups and downs with products like stocks, for example, so don’t panic if your products appear to drop in value.
Invest in products you don’t fully understand
If you’re not sure about what the product you’re purchasing actually is, or how risky it is, then hold off from investing until you know more. Apply the same level of caution to choosing intermediaries.
Borrow money to invest
Only spend within your means. While there’s a larger chance of a pay-out with investment products than with one-off purchases, you could also end up losing money you can’t recover. It’s not a good idea to borrow money for the purpose of investing. For more information, see IEC’s guide to borrowing money responsibly!
Follow the herd
Only invest in products that you feel comfortable with, and make all of your decisions logically, following the advice of your broker or adviser if appropriate. After gathering advice, make your own judgement based on what’s best for you, rather than feeling that you should automatically follow everybody else.
Try to go it alone
Find an intermediary adviser or broker that you trust, and learn from them. The same goes for experienced family members, friends, and other professionals – build on your knowledge to improve your understanding of investment. It’s worth seeking input from a few independent sources to see if you get a consistent opinion.
For further information, check out the IEC’s guide to all things investment-related.