Investments 101: How to Start Investing

As you grow older, you start to understand that the journey to financial stability begins with saving money. The next step is investing. 

Investing is the act of making your money work for you. Through investing, you can continue to grow your wealth without lifting a finger. However, there are some things you need to do before you can start investing, and that’s exactly what we’ll tackle in this guide.

This guide will go through how to start your investing and its importance. By the end, we hope that you gain the confidence to start your investing journey and take active steps in securing your future. 

The Importance of Investing

A majority of people think that investing is only for long-term goals. However, this simply isn’t true. Investing is a financial action that can be used throughout your life. Through investing, you can combat inflation, build wealth, and grow your mind.

When you start to invest your assets, you’ll need to develop an understanding of the financial markets, economic trends, and businesses to get a better grasp on the global economy. The knowledge you gain from investing helps you become a more well-rounded individual. 

When to Start Investing?

As the saying goes, “The best time to start investing was yesterday. The second-best time to start investing is today.” 

The earlier you start your investing journey, the more time your investments have to grow. Contrary to popular belief, you don’t need to be rich to start investing. You can start your investment journey by consistently putting in small amounts and doing so religiously. This is because investing isn’t a one-time act.

To be a great investor, you have to do it continuously throughout your life. But, before you open an investment account and place an order, there are a couple of things you need to do to ensure that your investment can grow for a long time:

• Pay off your debts
• Build an emergency fund

Paying off your debts and building your emergency funds is something you need to accomplish before you start investing. Why? It’s because if you don’t have an emergency fund in place, you may need to resort to selling your investments to pay for these emergencies, which can lead to you selling at a loss.

Additionally, clearing out your payable accounts allows you to allot a bigger portion of your income to investing. 

What to do when it's time to start investing?

Once you’ve paid off your debts and you’ve built your emergency funds, it’s time for you to start investing. 

Ideally, you want to look for an online bank that allows you to invest and save in one place. Most banking apps have this feature, but if it doesn’t, you’ll need to open an account with a stockbroker or a different financial institution.

Some banks even have wealth managers available to help clients understand the different ways to save and invest for beginners. So, it’s best if you take advantage of the different financial services available to you for a better investment plan. 

If you’re looking to access any of these, we can guide you through the process!

Know your risk tolerance 

Investing isn’t a guarantee that your money will get returns or that it will return at all. This is why knowing your risk tolerance is the first step of the journey. 

Knowing your risk tolerance is essential to understanding which financial instruments are perfect for you. Your risk tolerance will dictate your investment strategy. It’s key to helping you make smarter investment choices that are in harmony with your comfort. 

Define your investment goals

After you’ve found out your risk tolerance, you need to set your goals. This is the step when you decide what these investments are for.

To better demonstrate the importance of investment goals, we’ve come up with two scenarios:

Scenario 1: Angela is a 21-year-old fresh graduate who’s looking to put away money for retirement.

In this scenario, we take into consideration Angela’s age and the time horizon of her goal. Since this is for her retirement, which is still 44 years away, Angela can invest in high-risk financial instruments.

Scenario 2: Miguel is a 35-year-old individual saving up for his wedding that’s happening in two years.

In this scenario, Miguel’s wedding is happening in two years, which can be considered a short-term investment horizon. Since the money is going to be used for an event, Miguel would likely opt for low-risk investment options so that the principal amount isn’t put at risk.

Do you see how your investment goals and risk tolerance can affect your investment plan? 

Calculate your investment funds

The next step is to calculate how much you can allot for investment purposes.

Each person calculates their investment funds differently. Some people allot a certain amount from their paycheck while others set a certain percentage of their salary. In the end, all that matters is that you can consistently make this deposit every month. 

If you’re investing money on behalf of your business, then it’s important that you have a business savings account. That way, you can separate your investment portfolio from your company’s. 

Understand your investment style

There are different types of ways to invest. Some people hold their money and try to anticipate a dip in the market before they place orders, while others simply opt for peso cost averaging. 

Peso cost averaging is the act of purchasing investments on the same day of every month. Regardless of the Net Asset Value per Unit (NAVPU). Some online banking apps even give their users the option to automate purchasing investments.

Diversify your assets

Often, when people think of investing, they think that they need to learn how to start investing in stocks. But there are actually different financial instruments available, and each of these has different risk tolerances and levels of maintenance.

So, to put it simply, there’s a financial instrument for everyone. Here are some of them:

• UITF – Unit Investment Trust Funds (UITF) are pooled funds that are managed by banks. There are different types of UITFs ranging from low to high-risk.
• Mutual Funds – Mutual funds are pooled funds that are managed by companies. There are different types of mutual funds ranging from low to high-risk.
• Stocks – Stocks are the shares a person has in a certain corporation. This type of financial instrument can yield dividends. This type of investment is considered high-risk.
• Bonds – Bonds are a type of investment where the individual loans money to a borrower for a fixed income. This is a low-risk type of investment. 

As you can see, each financial instrument has a different type of risk attached to it. So, you must diversify your assets to minimize your losses. 

If you’re just getting started, we recommend that you opt for UITFs. There are numerous UITFs available, and you can choose the right one for you according to the risk you’re willing to take. 

Most banks have UITFs available on their app for easy access. All you need to do is check how to start investing in UITFs online and your bank can assist you in activating this feature.

Monitor your investments

The last step in your investment journey is to monitor your investments. This is an important step because it helps you understand whether your strategy is successful or not and adjust your portfolio accordingly. 

Monitoring your investments and changing your strategy is key to success. If your online banking app has an investment feature, you can easily view this from the app. That way, you can stay updated on the current progress of your investment.

Invest With a Company You Can Trust

At any stage of your life, there’s an investment strategy for you. 

All you need to do is find the right one by first, understanding your risk tolerance, and second, determining your goals. Once you have those two steps down, you can easily figure out which type of investment strategy is for you. Look for a company that helps make these two steps easier to take and has a good reputation for stock picking and management, like RCBC.

RCBC has numerous financial instruments available for its clients. It also has some of the top-performing UITFs in the country, which is why you should choose to invest in RCBC’s UITFs.

Start your investment journey with RCBC today!