Investments are tricky, especially if you are young. You are told to take risks, but not too much risk. You are told to diversify but never over-diversify.
Countless articles and never-ending advice from self-acclaimed finance gurus can be confusing and worse, can even put you off investing. But wait, investment is a very crucial part of your financial journey and being young, time is on your side.
Suzy Orman, the best-selling US personal finance author had explained in an interview why those in their twenties should seriously start planning to invest their money.
“The younger you are, compounding of money comes into effect,” Orman stressed that even a 10-year difference between your twenties and thirties can mean the loss of over half a million dollars.
We have done our research and here are a few types of investments you can look into to get the best out of compounding.
But, are you really financially ready to start investing?
1) Do you have a solid emergency fund of three to six months’ worth of living expenses?
2) Have you cleared all your high-interest debts? An example of high-interest debt is credit card debt.
If and only if you answered yes to both the questions, should you start investing.
But, wait!
Fixed Deposit
Quite possibly the safest option for investing, a fixed deposit is a better choice than letting your money quietly lose its value in a savings account.
With typical returns of 3-4% per year, a fixed deposit investment account requires you to deposit a lump sum of money for a number of years.
Fun Fact: You don’t need RM50,000 to deposit your money in a fixed deposit account. Some banks even allow you to deposit RM1,000.
What’s more, most banks offer e-fixed deposits now, making it easier and more convenient for customers to open a fixed deposit account.
Find the list of banks with their respective interest rate, minimum deposit and minimum tenure here.
ETFs and Robo advisors
ETF is just like a stock. However, ETF allows you to diversify, thus reducing the risk and offers lower expense ratios and lower broker fees. This is a perfect starting point to ease into the investing world.
If you are a beginner with relatively little money to invest and lack the time to monitor, you can always resort to Robo advisor platforms such as StashAway and MYTHEO that usually invest in ETFs.
By just providing information such as risk tolerance and your targets, these platforms will optimise your portfolio according to your target.
Read more about Robo advisors here or find out more about online investment products available.
EPF Savings
With its steady dividend rate (the dividend rate for 2018 was 6.15%), it would be a waste if you don’t make full use of your EPF contributions.
For starters, you can top-up your monthly contribution. If you want to get your toes into investing before taking a dip, EPF’s i-Invest platform is the perfect opportunity since you can use your retirement fund to invest in unit trust funds.
P2P Lending
It is perceived to be a win-win situation for both the investor and the company as companies don’t have to go through bank’s strict requirement to secure a business loan and investors can enjoy a relatively higher return.
The return rate of major platforms in Malaysia ranges from 10-15%. Although P2P lending cannot be considered a low-risk investment due to its default rate, you will be able to start investing with just RM500-RM1,000.
Read more about P2P financing platforms in Malaysia here.
