Common mistakes about investment and how to avoid them

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Whether it is retirement, a child’s education, a home purchase, going for that dream vacation or whatever it is that you want, proper investing can help you achieve it. However, many people tend to make the following mistakes while going about their investment decisions. Check these common mistakes out and ensure that your investment decisions are not set back due to them:

Not planning your investments – Investing is not a random activity that you indulge in whenever you have some surplus funds. Make sure that you have clear goals and objectives, understand the risks associated with each class of investment that you use and use a well-diversified strategy.

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Saving enough money for your child’s education or accumulating a sufficient corpus for your retirement are NOT clear goals. Saving $100,000 for a child’s college education or accumulating $2 million for retirement by age 60 are clear and objective goals. Once you’ve determined your goals research various categories of investments, learn the risks associated with each of these categories and choose those investments that fit your current financial situation, your risk appetite and goals.

Putting all your eggs in one basket – Older generations of Singaporeans believed almost exclusively in fixed deposits. Fixed deposits may be fine if you have a low risk appetite and want only guaranteed returns; however, even here, the September 01, 2015 roll-out of Singapore Savings Bonds (SSBs) are an attractive alternative.

Time horizon – expecting too much, too soon – This is a mistake that we see all too often with those who are keen on market-linked investments like equities, bonds, unit trusts etc. These investors are aware that market-linked investments give the best returns over the long term but are too impatient to wait appropriately.

Understand the time horizons associated with each investment category and stick to it despite market fluctuations.

Not monitoring your investments – You’ve done the research, understood the pros and cons of various investment categories, decided upon a well-diversified portfolio and invested accordingly. Job done, right? No. The job is only half-done. Having done all the ground work and having built a good portfolio it is now incumbent upon you to keep monitoring your investments and trimming some and adding others as the situation demands.

Not consulting an expert – It is not always easy for a lay investor to build up the knowledge required to devise a good investment strategy in keeping with their needs. At such times it is best to take the advise of a qualified expert.

Just ensure that the Adviser you are dealing with meets the criteria laid down by the Monetary Authority of Singapore and the rules under the Financial Advisers Act. The MoneySENSE (a national financial education programme for Singapore) website (www.moneysense.gov.sg) has a great presentation, “Dealing With A Financial Adviser: What To Look Out For?” for you to go through. MoneySENSE, is in fact, a great place for you to gain financial knowledge.

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