Investment is not as easy as it sounds. Yes, it helps increase your earnings (even doubles or triples your money), but it will always require knowledge, time. commitment, and more importantly, patience.
That’s not all. You’re always bound to make mistakes, which could affect your financial strategies. If you’re not too careful and vigilant, you might even lose the money you worked hard for.
Don’t worry. The market may be difficult to predict but there are some things you can control, such as avoiding these investment mistakes:
Mistake No. 1: Not educating itself about what investment is.
Don’t take investment for granted. Its purpose is to grow your money, but it needs time, discipline, knowledge, and a lot of patience to make it work to your advantage. If you really want to make it work, then it is imperative that you know what investment is.
One mistake people make (not just OFWs) is that they don’t understand what investment truly means, including the variety of ways on how you can earn. You can change that by keeping yourself informed. Maximize Internet and find out everything you need to know about investing you money. The more informed you are, the better the chances of making your investment work for you.
Just in case you can’t understand certain terms or how a particular investment option works, don’t be afraid to ask. Clarify your concerns instead of saying yes on something you don’t understand. Otherwise, there is a bigger possibility of losing the money intended for important expenses, say your Retirement Fund or kids’ educational plan.
Mistake No. 2: Putting all eggs in one basket.
Here’s something you should know about investment: there is always a risk involved. It will only differ on the type of investment you chose, but risks will always be a part of it.
Therefore, diversify your investments by putting your money in different assets such as bonds or stocks. This way, you don’t lose your money “one time, bigtime,” so make sure you spread it out evenly.
“But I just want to invest my money in stocks or UITF,” you might say. That’s fine. If you plan to get UITF, make sure you go for Peso Balanced Fund (learn more about it here.) or invest in various companies to keep your portfolio diversified.
Mistake No. 3: Undefined financial goals.
It’s easy to say, “I want to invest” or “I want to grow my money,” but for how long and for what purpose?
This is another common investment mistake committed by many. Consequently, not many people realize the importance of defining financial goals according to term.
The next time you say you want to grow your money, ask yourself first about what you plan to do with it and how soon (in months or years) do you want to achieve it. Consequently, define and characterize your goals into short, medium, and long term. This will serve as your reminder on when to stop and when to keep waiting in order to make those financial goals happen.
Mistake No. 4: Investing without any emergency fund.
There’s nothing wrong with investing. What makes it wrong is that you invest without preparing for what might happen in case you lost your money.
Keep in mind that the market can be volatile. One day you are earning and the next day, you are losing your money. Without any emergency fund, you might end up losing a big chunk from your account and it will take time before you get it back.
Therefore, establish not just an Investment Fund but also an Emergency Fund. The Emergency Fund will keep you covered in case something happens to your investment.
READ: How to Establish your Emergency Fund
Mistake No. 5: Not knowing how to manage or assess risks.
Investment always comes with risks. In fact, that’s what makes it exciting. The problem lies on how you handle those risks.
One of the common investment mistakes made by OFWs is not understanding the risks associated with investing according to level of tolerance (conservative, aggressive, or balanced). Identify the risk you are willing to take and then work from there. There are many investment choices you can choose from according to your risk level, so choose based on where you are most comfortable.
The world of investing can be overwhelming in the beginning. You’re going to be fine. Just read up, keep yourself informed, and start small – for now. You’ll learn more about it as you go along this journey. Good luck!
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