Sunday, 24 August 2014

5 Reasons Why You Shouldn't Be Investing

How weird, why am I posting about this when I'm into investments myself? Read on :)

So, I've been at work, trying to introduce Investing techniques to my friends without being too obvious. I am trying to keep my identity as private as possible after all.

Why do I want to keep my identity private? It's not like as if I'm a famous celebrity or a VVIP. The fact is, I have relatives that may or may not come across this blog. And, my parents don't exactly approve of me investing. Why?

Simple. They, like many other parents out there grew up during an era where they either witnessed or heard of people losing all their savings in the stock market when it crashed. Not only that, there must be hundreds of Television Dramas out there that depict the cases of husbands or wives playing with the stock market and eventually losing all their savings. Worse still, they brought their families / friends down with them.

Anyway, I digress.

The thing is, by trying to help my friends with tips on how to invest, I learned that Investing is not for everyone. Why do I say that? Simple. We are all born different, and our mindsets will eventually shape the way we do things. That includes investing.

Let me elaborate.

1. You're afraid of losing money.

This is the most important reason why you shouldn't be investing if you cannot take that risk. We are investing for the long run. And in the long run, the movement in the stock market should not affect us. In the long run, the market always go up. This has been shown repeatedly throughout history. If you're afraid of losing money, simply watching your investments lose even by a dollar will bring you into a panic and lead you on a selling spree in an effort to minimise your losses. In that case, why even begin investing? Saving the money in a bank would be a better alternative.

Solution: Before you begin investing, you must be prepared that your investments take a certain level of risk. Furthermore, any money you set aside for investments should be after you have allocated a proper amount to your savings, emergency fund etc. In short, money that you won't be needing in the short - medium term.

2. You don't have the money.

I believe this is pretty self explanatory. If you don't have the money to invest, don't. If you want to, save up. NEVER use your short / long term savings or your emergency fund. Save aside some cash each month and you will have the necessary funds to invest to your heart's content. What if you are living from pay cheque to pay cheque? Is that fair that you can't invest because you're in a critical financial condition? My advice would be, to get out of that condition. By any means possible. At this point, investing for retirement should not be anywhere near your top priorities now. Your top priority is to review your financial condition and see what expenses you can cut down on so that you are not relying solely on your pay cheque.

3. You don't have the slightest clue what's going on.

Speaking from experience, I would say that the information on the Internet while useful can be pretty confusing. Take me from example, when I first started out, I read numerous financial blogs. I read government websites. And what did I end up with? A mixture of information and a HUMONGOUS headache. Many times, I considered giving up. I told myself I would figure this out later. I told myself it wasn't worth it. But there was always this nagging feeling instinctively telling me that I should never give up. But I digress again. What I'm trying to say is, if you don't have the slightest clue what's going on and you hope to gain your knowledge just from reading blogs and forums you're going to have an infinitely hard time. And you're going to make a lot of mistakes and end up cursing the stock market and everyone else.

4. You have no patience.

Again, if you don't have the patience you're going to sell your stocks when the price increases just a little, hoping to lock in however small or big that profit is going to be. Sure, you can do that. But that's not passive investing. If you plan to invest by timing the market like professional traders by all means. But most of us simply don't have the time for that! How would you like to tell your grandkids someday, oh I spent most of my teenage life watching and monitoring charts. Life is short, enjoy it. Don't spend your life doing things that while could bring you lots of money, it is solely at the expense of quality time that could be spent with family and friends.

5. You're not prepared to leave your money locked up for long periods of time.

You're investing for the long run. That in turn, means that when you invest, your money will naturally be tied up with your shares/bonds. Agree? However if you plan to invest and then only to withdraw your money to say, purchase the latest iPhone 6 or iPhone 7, 8, 9 10 whatever. Then maybe it would be better to deposit your money in Time Deposits where it's relatively risk free. For example, I have $1k deposited for a 1 Year Period and another $1k deposited for a 2 Year Period. Why? I would be enlisting for National Service and this naturally would state that I would not need to use these funds for the next two years. Why not let it earn interest for me? That would be a better alternative to investments for you if so.

That's it! That's the basic reasons. There may be other reasons but these are the main factors in my opinion.

Signing off,
Teenage Investor

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