11 min

Ep 282: What Should You Know Before Investing‪?‬ The Leadership Stack Podcast

    • Management

What are factors I should consider before investing in anything?


Toni: Okay, let's go back to the basics. We've said this first, determine your investment objectives. The second factor would be your timeframe. Are you going short term, medium term, long term? The third would be your risk appetite. Are you a conservative, moderate or aggressive investor?


And then I would say the fourth would also be, another factor is the size of your fund because the strategy for someone investing 10,000 is different from someone who's going to invest a million. So you also have to take the size of your fund into consideration. And then the last one would be your knowledge in that investment. So how much do you know? Again, we're going back to the golden rule, never invest in something you don't understand. So those are factors to consider. Is there anything that you can add to that?


Sean: I'd say, you should have something for emergencies first. Because if you invest and it hasn't made money yet, and usually investments take time. Right? So usually you’ll have losses. First couple of years, maybe the first three years, usually you will have losses. And then an emergency happened, you had to pull it out, you're going to pull out with a loss, which is, you should have not invested it and you should have just kept an emergency fund first.


So make sure you follow the five steps to personal finance management. I would say that's very important because a lot of people make that mistake. They have no emergency fund, are not yet insured, and they went straight to investing. So I feel like that is a common problem because you get penalized when you pull out that investment to pay for an emergency.


Toni: Right. So, establish your foundation first. Like what you mentioned, emergency fund and get yourself insured. In other words, you protect your wealth before you start accumulating it through investments. Because it’s also a waste, if you're going long term, you need to pull it up because of an emergency and you’ll be back to zero. So it’s a waste, it's just going to pull you back. It's going to pull you back further from reaching your long-term financial goals.


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Join our community and ask questions here: from.sean.si/discord


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What are factors I should consider before investing in anything?


Toni: Okay, let's go back to the basics. We've said this first, determine your investment objectives. The second factor would be your timeframe. Are you going short term, medium term, long term? The third would be your risk appetite. Are you a conservative, moderate or aggressive investor?


And then I would say the fourth would also be, another factor is the size of your fund because the strategy for someone investing 10,000 is different from someone who's going to invest a million. So you also have to take the size of your fund into consideration. And then the last one would be your knowledge in that investment. So how much do you know? Again, we're going back to the golden rule, never invest in something you don't understand. So those are factors to consider. Is there anything that you can add to that?


Sean: I'd say, you should have something for emergencies first. Because if you invest and it hasn't made money yet, and usually investments take time. Right? So usually you’ll have losses. First couple of years, maybe the first three years, usually you will have losses. And then an emergency happened, you had to pull it out, you're going to pull out with a loss, which is, you should have not invested it and you should have just kept an emergency fund first.


So make sure you follow the five steps to personal finance management. I would say that's very important because a lot of people make that mistake. They have no emergency fund, are not yet insured, and they went straight to investing. So I feel like that is a common problem because you get penalized when you pull out that investment to pay for an emergency.


Toni: Right. So, establish your foundation first. Like what you mentioned, emergency fund and get yourself insured. In other words, you protect your wealth before you start accumulating it through investments. Because it’s also a waste, if you're going long term, you need to pull it up because of an emergency and you’ll be back to zero. So it’s a waste, it's just going to pull you back. It's going to pull you back further from reaching your long-term financial goals.


Youtube: https://www.youtube.com/leadershipstack


Join our community and ask questions here: from.sean.si/discord


Facebook: https://www.facebook.com/leadershipstack

11 min