APPL, AMZN or TSLA . You’ve probably heard from friends who are investing US technology stocks. Or perhaps seen fin-fluencers on social media who are sharing their “expert” views on investing.
Intrigued to start investing? Not so fast.
Or maybe you have a comfortable job with a decent salary and enough savings. And you’re wondering why you even need to invest? Isn’t having a savings account that is earning interest enough?
Here’s the biggest reason why you need to invest - inflation or rising prices. Take the nasi katok, a much-loved local dish that is available at any corner coffee shop. Before the pandemic, the price of nasi katok was $1. Today, it’s about $1.50. That’s a 50% increase in price over the course of two to three years!
Or if fast food is more your thing, you’ve probably noticed the increase in Jollibee’s signature items. The vanilla twirl ice cream used to be 50 cents. It’s now 80 cents. Their Yumburger used to be $1.80 and is now $2.20.
In Brunei, inflation is expected to moderate to 1.3% this year but this is still at historic highs. If you have noticed the small increases, you probably will soon at your favourite café, at the grocery store or even at the nail spa. And if your income isn’t increasing as fast as the inflation, you probably won’t be able to enjoy as many lattes or as many pedicures.
Leaving your money in the bank is safe but it won’t increase your returns substantially, and this is why you should consider investing - to potentially grow your returns.
Intrigued to start investing? Not so fast.
Or maybe you have a comfortable job with a decent salary and enough savings. And you’re wondering why you even need to invest? Isn’t having a savings account that is earning interest enough?
Here’s the biggest reason why you need to invest - inflation or rising prices. Take the nasi katok, a much-loved local dish that is available at any corner coffee shop. Before the pandemic, the price of nasi katok was $1. Today, it’s about $1.50. That’s a 50% increase in price over the course of two to three years!
Or if fast food is more your thing, you’ve probably noticed the increase in Jollibee’s signature items. The vanilla twirl ice cream used to be 50 cents. It’s now 80 cents. Their Yumburger used to be $1.80 and is now $2.20.
In Brunei, inflation is expected to moderate to 1.3% this year but this is still at historic highs. If you have noticed the small increases, you probably will soon at your favourite café, at the grocery store or even at the nail spa. And if your income isn’t increasing as fast as the inflation, you probably won’t be able to enjoy as many lattes or as many pedicures.
Leaving your money in the bank is safe but it won’t increase your returns substantially, and this is why you should consider investing - to potentially grow your returns.
But before diving in, here are five things to consider:
1. Consider your finances
Before you start investing, examine your financial situation. Don’t invest just purely because your friends are doing so. Their financial needs and how much they have saved are likely to be different from yours. To assess if you’re ready, you shouldn’t be living paycheck to paycheck and should have extra cash set aside. In addition, be aware there are costs that could eat up into your profits like commission fees, platform fees and even withdrawal fees.
2. Understand the risks (and not focus only on the returns)
There are risks involved in any investment, like the risks you are exposed to everyday. When it comes to investing, there are many uncertainties that could impact your returns (or profit) like market declines or a geopolitical event like Russia’s invasion or Ukraine. It is possible to lose some or everything you have invested so it is important to know what your risk appetite is as this is different for everyone.
3. Investment is a long-term commitment (not short-term speculation)
Remember the meme stocks that gained a cult-like following on social media platforms? It is easy to get caught up in the hype of online platforms or social media, but this is speculative and short-term. Instead, focus on the future like for your retirement or to start a family, and take the long view on your investments.
4. Diversification is crucial
The saying “don’t put all your eggs in one basket” is very relevant to investing. When you have set aside a sum of money to invest, don’t just put all your money in one stock! It’s worth spreading out your money across different investments like stocks, bonds and unit trusts to diversify your risk. That way, if one investment goes down, you won’t lose all your money.
5. Always do your own homework
While no one can predict how an investment will perform, doing your own research will ensure you understand the investment and why you are investing in it. Start by reading news articles or analyst commentary about the company. Is the company making money and how will it continue making money? Then look wider, at the sector and the countries the company operates in or sells to. Are there growth opportunities or perhaps, challenges? In today’s Tik Tok day and age, it is common for fin-fluences to be touting a particular investment and claiming they made a huge profit. There has also been a rise in online scams with people posing as a financial adviser or a local company, pitching a 100% profit on your investment. Remember, if it’s too good to be true, it probably is !
1. Consider your finances
Before you start investing, examine your financial situation. Don’t invest just purely because your friends are doing so. Their financial needs and how much they have saved are likely to be different from yours. To assess if you’re ready, you shouldn’t be living paycheck to paycheck and should have extra cash set aside. In addition, be aware there are costs that could eat up into your profits like commission fees, platform fees and even withdrawal fees.
2. Understand the risks (and not focus only on the returns)
There are risks involved in any investment, like the risks you are exposed to everyday. When it comes to investing, there are many uncertainties that could impact your returns (or profit) like market declines or a geopolitical event like Russia’s invasion or Ukraine. It is possible to lose some or everything you have invested so it is important to know what your risk appetite is as this is different for everyone.
3. Investment is a long-term commitment (not short-term speculation)
Remember the meme stocks that gained a cult-like following on social media platforms? It is easy to get caught up in the hype of online platforms or social media, but this is speculative and short-term. Instead, focus on the future like for your retirement or to start a family, and take the long view on your investments.
4. Diversification is crucial
The saying “don’t put all your eggs in one basket” is very relevant to investing. When you have set aside a sum of money to invest, don’t just put all your money in one stock! It’s worth spreading out your money across different investments like stocks, bonds and unit trusts to diversify your risk. That way, if one investment goes down, you won’t lose all your money.
5. Always do your own homework
While no one can predict how an investment will perform, doing your own research will ensure you understand the investment and why you are investing in it. Start by reading news articles or analyst commentary about the company. Is the company making money and how will it continue making money? Then look wider, at the sector and the countries the company operates in or sells to. Are there growth opportunities or perhaps, challenges? In today’s Tik Tok day and age, it is common for fin-fluences to be touting a particular investment and claiming they made a huge profit. There has also been a rise in online scams with people posing as a financial adviser or a local company, pitching a 100% profit on your investment. Remember, if it’s too good to be true, it probably is !
Now that you understand the “why”. What should you invest in? Check out our article on the types of investments you can get started with.
Here are the main takeaways
Firstly, from your favourite dishes to groceries, prices are rising and the only way to beat inflation in the long run is to invest your money. Secondly, diversify. Don’t just invest in one stock or many stocks, spread out your exposure across a spectrum of investments. Finally, don’t follow social media trends or investment tips blindly, do your homework and understand the risks.
Trying to make an investment decision while considering your financial goals as well as doing your own research can be overwhelming, but you don’t have to do it alone. Do you have more questions on investing? Check out Baiduri Capital’s website where you have access to resources and support so you can start investing right away with a peace of mind.
You can also get in touch with us at +673 226 8588 or [email protected] to get started on your investment journey.
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