29 Aug 2020
I’m a full-time degree student, also juggling with occasional freelance photography jobs at the side. I do earn some side income thanks to that but nothing is firm. I have a debt for my degree studies, and I do have enough in my savings to pay for it fully. I am considering on taking a small sum out to start investing, is it a wise decision or if not — what would you guys suggest for me to do to gain more financial freedom while I school?
Hi there, I too was a student like you thinking of taking the plunge into the world of investing. By reading your write up, I have a few food for thought you may consider.
1) Opportunity cost. Consider the loan interest rate vs the potential returns of your investments (be it through robos or self manage). Work out the potential gains/loss and decide if you’re better off repaying the loan to become debt free or invest your money to “outperform” the accrued interest. You’d have to do the maths yourself for this.
2) Zero knowledge. Most common mistakes new investors make is they’re too excited to jump into the bandwagon, blindly putting their money into securities that online forum recommends without having basic financial awareness. Take the recent Tesla, Apple boom as an example. I’m willing to bet my money that most new “investors” commit their money in the 2 companies purely based on hearsay with zero investment knowledge. Although I personally think Apple is a good stock to consider based on their financials and position in the tech arena, but that’s a different story altogether.
Bottom line is, read, read and read. Arm yourself with the knowledge!
3) Pre-Investment checklist. Before committing to investment, make sure you have the following available
i) Emergency funds. Hold onto at least 6-9 months of cash flow to aid in rainy days. But of course 6-9 months is just a guide. You need to consider your financial commitments before coming up with your own rule of thumb.
ii) Insurance to hedge against massive liability. Minimally, plan for hospital, Critical illness, Disability and life insurance. Ensure you have the means to afford them before putting your money elsewhere. As we all know medical bills are crazy expensive here.
iii) Knowledge. As mentioned in the point 2, have the knowledge to know what you’re doing. DO NOT put your money into securities just because this forum said so or that friend said it’s good etc. Because chances are, when you decide to buy a certain stock based on hearsay, you’re probably the last in the world to buy it and prices would have already skyrocketed.
Just my 2 cents. All the best!
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