The Golden Rule of Investment

If given the opportunity here in Singapore, investment sounds good but it can be terrifying once we get to know the stakes even more. According to Victor Chng and Rusmin Ang, the founders of a finance blog called The Fifth Person, investing is our way to beat inflation.

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If we only save, our money will only be consumed by inflation but if we invest it, our wealth will grow because inflation allows us to generate more income. The inflation here in Singapore is 3-4% every year. If we consider our deposit accounts, we can only expect 1% interest per annum. This picture tells a lot – our money is just sitting in the bank.

How do we handle inflation? The answer is through investing. According to investors, there is only one golden rule of investment – always understand the things we are buying. This simple rule can make a different at the end of the day.

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We should not invest in something that we do not entirely understand. If we do not understand it because it is too complicated for us to handle, then we should not consider investing in it. If we really want to invest, there are different resources that we can consider. For instance, we can hit the books and even online sources before picking a stock.

If we study, we will know in time what makes businesses successful thereby knowing which stocks to follow and investment in. However, before plunging to invest, it is crucial that we save first. We have to make sure that we have sufficient money for investing and emergency fund.

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