Tip 85: Steps to I.N.V.E.S.T.

Previously, I blogged about accumulating in times of recession and investing long term around 15-20 years for your children's education or your retirement. Investment simply is the decision to get higher returns than simply putting your hard earned money in a bank savings account. Over time, with rising cost of living, the value of your savings would drop, hence the need to protect against the risk of inflation. But, more importantly, in your eagerness to invest, be more cautious on the risk of loss and the risk of investing in the wrong type of investments that does not suit your needs. I reflected on the key considerations before investing and coined up I.N.V.E.S.T. (Investment broker, Needless amount, Variable Returns, Management Expenses, Surrender options, Time horizon).

There are various companies, banks and Investment Brokers who could provide information on various investment options that could provide higher yields. If you are looking at a company to manage your money, you need someone with integrity, ability to provide objective and complete information, expertise, good past investment track record, sound financial reserves and international accessibility where ever you go should you need to relocate. Next, decide on what is your Needless amount or spare cash. In your financial budgeting, put into account the possibility of loss of job of 3-6 months or financial needs in the future. Then, decide if you are looking at high Variable Returns that are accompanied with the risk of high volatility, or medium rate of returns with lower volatility as you survey the different investment options. Each person has a different risk appetite and the ability to withstand volatility. If we hold on to the belief that in the long run, economic growth increases with higher populations, higher technology and better education to facilitate stronger productivity, investments generally will grow over time even if they would go through up and down cycles. But, our returns will also depend on the Management Expense or fees imposed for managing the investments. If we decide to be more involved in managing the investments, you would pay less fees when you select your own stocks, bonds and ETFs (exchange traded funds that track stock indexes). If you pay higher fees, you expect higher returns by experts who understand investments better than you. Next, the need to find out if there are options to bail out from your investments, called Surrender Options. Sometimes, you would need to pay a surrender penalty especially if you withdraw from the investments too early. Hence, the need to read the fine print carefully or insist that your financial advisor share the risks carefully with you. This is pretty much tied to your Investment Time horizon. Sometimes, daddy needs to instill discipline and perseverance and decide on a long term plan. If times are tough, it means being more innovative in searching for jobs and not neglect investing/saving. The hardwork will certainly bear fruit one day when you taste your fruits of labor. Sometimes sticking to a rigid regular savings plan that comes with a penalty for quiting, gives daddies more stress, yet stress builds maturity and creativity.

Any investment principles I missed? Of course, the more precious treasures are the people around us and having sufficient time to be thankful to God always. Being good responsible daddies, we can be good guardians of the wealth God blesses us with, so we can manage it well and bless others.