Smart Investor Malaysia


5 Investment Tips For Beginners That You Should Know


Everyone loves it when it comes to investing. Seems like we can never get enough of it, although our capital might not be that big. Here are some investment tips for beginners that you can apply for a steady growth despite the market’s uncertainties.

1. Set Your Goals

They say if you fail to plan, then you are planning to fail. The first investment tips for beginners, is begin by listing down all your financial goals such as:

  • Saving up for a property
  • Retire at age 55
  • Sending your child to private university
  • Travel the world

Everyone have their own goals in life. Be specific with what you want, and allocate the funds to each goals.

For example you need:

  • RM100,000 as down payment and renovation costs to purchase a property
  • RM5,000 per month living expenses each month when you retire
  • RM100,000 as tuition fees and living costs for your child when entering university
  • RM100,000 fund to be used to travel to Europe and United States during the summer

Read: Best Investment In Malaysia

2. Dollar Cost Averaging Or Regular Savings Plan

Graph 1: The Cost of Market Timing The Risk of Missing the Best Days in Market, 2000 – 2019. Source: Morningstar, 2020

According to a research by Morningstar, investors who stayed in the market for all 5,035 trading days achieved a compound annual return of 6.1%. However, that same investment would have returned 2.4% had it missed only the 10 best days of stock returns.

Further, missing the 50 best days would have produced a loss of 5.5%. Although the market has exhibited tremendous volatility on a daily basis, over the long term, stock investors who stayed the course were rewarded accordingly.

That’s why it is important to invest regularly either each week or each month instead of trying to find the best time to go in the market. Because even the most seasoned professional investors can’t get the timing right, what chances do we have?

Even when faced with an uncertain market, the best thing to do is keep on investing. Allocate a certain amount from your salary to invest. A good figure to start is 10%, if your salary is RM10,000 per month – make sure you invest RM1,000 each month.

3. Portfolio Diversification

“Don’t put all your eggs in one basket”

This words of wisdom can’t be much further than the truth, and is very important as one of the best investment tips for beginners. You should be diversifying your portfolio into several low-risk instruments with low returns, medium-risk instruments with medium returns, and high-risk instruments with high returns.

Still remember the RM1,000 per month investment that you are allocating each month, which is 10% of your salary?

You can split it into:

  • RM250 into crypto
  • RM250 into equity (stock market)
  • RM250 into REIT (property)
  • RM250 into fixed income (fixed deposits)

Crypto and equity are high-risk investments, REITs are medium-risk while fixed income are low-risk.

Read: Follow These 5 Steps For An Effective Asset Allocation In Your Investment

4. Focus On Fundamentals

Either crypto or stocks, you should be looking at those with great fundamentals. For crypto, the stablecoins are the ones to invest for long term, Bitcoin, Ethereum, Binance Coin (BNB), Ripple, Solana are good choices.

Bitcoin is the grandfather of crypto, Ethereum and Solana are mostly used for NFT, BNB being used on Binance the world’s largest exchange, while Ripple are used for real-time gross settlement system, currency exchange and remittance network.

As for stocks, you can use one of the most popular fundamental analysis – 5 Magic Numbers:

  1. Earnings Per Share (EPS)
  2. Price-to Earnings Ratio or P/E Ratio (PE)
  3. Return On Equity (ROE)
  4. Net Tangible Asset (NTA)
  5. Dividend Yield (DY)

By using the 5 Magic Numbers, you will be able to filter companies with resilient earnings, strong track record and ability to pay dividend.

5. Invest For Long Term

The final investment tips for beginners, is that I can’t emphasize enough on the importance of investing for long term. Instead of looking for short term gains, have a more longer term view when it comes to investing.

Ignore all the hypes of current investment that is making waves, instead go for the tested and tried instruments. All investments have their ups and downs, and if it can go up very fast, it can also go down in a flash.

Read: The 4 Stages Of Side Hustle For A Bigger Investment Capital

5 Investment Tips For Beginners

Well there you go with some of the best investment tips for beginners that you can probably use as part of your investment strategies. Just be patient and keep on investing regularly, you should be able to reap what you sow and meeting your financial goals.

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