Before you Invest

Published On: October 21, 2016 07:26 AM NPT By: The Week Bureau

KATHMANDU, Oct 21: Investing can be scary. The fear of the unknown always is. However, it’s important that young adults overcome their fears and start investing to secure their financial future. Waiting too long and starting too late can result in not having saved enough for retirement. After all, the stock market doesn’t plunge every other year and investing volatility is why experts always recommend you pick long-term investments, not short-term trades.

So if you are ready to take the plunge, The Week has some tips for you. We asked the Director of Golchha Industries, Shekhar Golchha to share his insights on investing in Nepal. The bank interests are almost negligible, our stock market is yet to mature and though historically land has proven to be a reliable investment in our context, there are more options coming to the fore. So before we look into those, how can we prepare ourselves?

Here are some of the things you might want to consider before making an investment.

Get started
The single most important part of investing is getting started. Life is all about habits, and if you never get into the habit of investing, you could be financially impaired for a lifetime. One of the primary reasons people don’t start investing is because they feel they don’t have enough money to do so. But even if you start investing with little money, it may be all that’s needed to kick start your way to greater investing later.
You don’t need hundreds of thousands of rupees in order to start investing. You can start investing for as little as a few thousand rupees a month. You can start small, then increase investment contributions as your income grows, and as you gain more confidence in how investing works.

Are you financially fit?
You should check where you are financially. It does not make sense to invest money when you have a lot of debt and no savings on hand for emergencies. By clearing up your debt and saving for emergencies, you will free up more cash for investing. Take the time to get out of debt. Ideally, your emergency fund should be between three to six months of expenses. If your career field is unstable or you are self-employed you should go with six months to a year of savings. You do not want to pull money that you have been investing, it is important to allow it to grow.
Then next, do evaluate your risk taking ability. It’s simple, if you have five hundred thousand and decide to invest the whole amount in a venture, you will be putting yourself in a bit of a risk. So do you have the appetite for it? One must consider the worst case scenarios before making any decisions. Similarly, majority of the novices are always on the lookout for quick returns. Sometimes, it’s hard to make them understand that it might take years to get returns from investments. In this case, one thing that people must understand is that anybody looking for a quick return must also be prepared for higher risks. It’s just the way it works. There isn’t a way around this, thus your appetite for risk also comes into play here. Are you ready for this?

What are you going to do with the money?
Generally where investments are concerned, what I see in Nepal is that most people tend to follow the crowds. It seems many people automatically feel secure if a particular investment option is popular. If a large number of people are putting their money in it, they assume it will be smart for them to do so too and go ahead with it. This isn’t the best logic for deciding where you are going to put your hard earned money.
Each individual will have different factors for determining what they are planning on doing with the money that they are investing. Some may be planning on using it to build a house or to pay for abroad studies or perhaps maybe even their retirement, so accordingly you can evaluate the most suitable option for you. For instance, if you are planning on using it in the next five years, you will be better off choosing a more conservative account for your money. If you are looking at longer than five years, you can be more aggressive in your investments and you might consider IPOs or stocks.

Do you understand your investment options?
People who earn the most from their investments are those who go seeking opportunities. Again, they aren’t the ones who simply follow the crowd. So let’s make informative decisions. It may be challenging to begin with but the best case scenario is if those looking to invest put in a little effort to understand how it all works. Do your research, network with people from the scene, discuss the options, collect information and then go ahead with your investment plans. This way you will find that there are many other alternatives for investments as well. Once you educate yourself on the matter, you can easily seek opportunities for yourself.
If this is the first time you are investing, it is important to realize that there will be many enticing offers. Individuals or groups may come over with business ideas, someone may offer to help manage stocks for you or even engage in individual trading. For all we know, these may be good opportunities but rather than relying on somebody else’s word for it, it’s best if you can analyze the situation yourself. The most common mistake people make while investing is believing the hype. There are some people who don’t even bother to check how a particular share is performing in the market. These are situations where people need to proceed with caution. In this age, information is very easy to come by and it’s never too late to learn.

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