Rules of Engagement for Investing

It’s a Monday so let’s keep it simple for your investment.

Time in the Market, not timing the market
Investing is a long-term commitment. The market has a behavourial ups and downs in cycles that cannot be predicted with accuracy. can’t be timed. Investing for years or even decades will give you time to rebuild asset value even if you hit a downturn at the wrong time. Invest, not trade. Unless you have fully affirmed the confidence to partake in the risks of trading.

Diversify your investment
Keep a healthy proportion of your investment across investment classes, asset types, even across industries or markets. By doing so, you do not allow any single issues to wipe out your wealth overnight. For example, you can diversify with low-cost, index ETFs while avoiding stock picking at the same time.

Ingrain regular investment plan habit
Market experts and analysts have constantly call for a market top or bottom or recession, and no one can determine with accuracy where we are or moving towards at any given time. By investing regularly, you guarantee that you buy at “the right times” rather than at “a right time”. Make it a habit. For the interested who has the interest but not the capital just yet, you can also invest each and every month, regardless of market performance or news headlines. It is not uncommon to have regular investment plans who require a small minimal sum of $100 upwards for each month’s investment.

Never invest with money you need
Investing has a level of risks, correlating to the investment instrument investing in. While long-term trend has historically lean upwards, there were instances of deep declines that has taken many years to recover. You might have to sell your investment at a lower price when you need the money most, if the funds are required for short-term usage. If the thought of seeing your account balance drop 30% makes it hard to stomach, do not take the risks to invest those funds as well.

Check your portfolio infrequently
Contrary to what some might say, investing should be as routine and boring as possible. Once you have set up your cardinal rules to follow, the discipline to follow your pre-defined investment rules will guide you through the various market conditions of bulls and bears, times of greed and fear, and periods of high risk and great opportunity.

Also, investing is an arena whereby a “head in the sand” strategy might be the smartest method. Look at your portfolio only once every few months. This reduces the likelihood of panic selling during market gloom or following the crowd to buy during market boom.

Keep Your Fees Low
Investment instruments such as mutual funds and ETFs have expense ratios. Brokerages charge trading and commission fees depending on your trade size. Investment providers such as financial advisors and robo-advisors charge management fees. Fees eat away at your wealth over time and it is essential to optimise these fees by getting the best value for your investment.

Listen to the Experts’ Investing Advice
Warren Buffett was and still is possibly the most famous investor in history. A multi-billion-dollar net worth was created by his hands in just one generation. Some of his investment advice include:

“Someone is sitting in the shade today because someone planted a tree a long time ago.”

“I never invest in anything I don’t understand.”

“If you don’t find a way to make money while you sleep, you will work until you die.”

“The stock market is a device for transferring money from the impatient to the patient.”

“It is not necessary to do extraordinary things to get extraordinary results.”

Are you ready to lock on target and engage your investment?

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