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Financial investment checklist: Important signs that you're ready to invest

02 January 2023

4-minute read

Plan Well Healthy Finances Listicle

This financial investment checklist can help you prepare for investing. (Credit: Getty Images)

Making financial investments is a big step towards income security, but it comes with risks. Before making an investment, ask yourself some questions to test your readiness. Keep reading to learn the three signs you're ready to start investing.

1. Do your homework before you invest

Basic financial investment knowledge is essential for making the right decisions. (Credit: Shutterstock)

In the 1990s, American philanthropist Warren Buffet, widely seen as the most successful investor of the 20th century, offered this simple advice, "Investment must be rational; if you can't understand it, don't do it."

Buffet's words remain true today. Understanding capital markets and portfolio management are crucial when crafting long term retirement goals. Knowing the basics helps you create a strategy with realistic expectations.

Ask yourself the following questions before making investment decisions:

What is my risk tolerance?
What is my time horizon? When do I need the money?
What is my ideal asset allocation? How do I diversify?
Is my investment goal specific, measurable, achievable, realistic and time-bound?
Do I need the help of a certified financial planner or investment advisor?

2. You can afford your investment plan

Your finances should be healthy before starting a financial investment. (Credit: Shutterstock)

Save for an emergency fund and get insurance before putting money in other financial investments. Your chances of reaching your financial goal decrease if you pull out because you suddenly need the money.

Only invest money you won't need anytime soon. There will always be the possibility that your money won't grow at the rate you expect, or your investment may even lose value because markets are cyclical.

Start with a modest amount and keep adding to it regularly.

Ask yourself these questions before investing:

Does my income cover monthly living expenses, including debt payments, and the amount I plan to invest?
Does my emergency fund cover at least three to six months' living expenses?
Do I have insurance for unforeseen events?
How much should I set aside each month to hit my retirement goals?

3. Stick to the plan and beware of emotional biases

Being in control of your emotions will help you make the most of your financial investment. (Credit: Shutterstock)

Stocks tend to have higher returns than some other asset classes, Jeremy Siegel points out in his book, Stocks for the Long Run.

Investing can be a stressful experience, and there is a learning curve, not just in the theoretical aspects but psychological ones. Maintaining control of your emotions is essential.

If you react instinctively and emotionally to market swings, you may have a more challenging time reaching your goal. Instead, be clear about your plan, know what to expect and prepare yourself mentally for the markets to go up and down.

Investment decisions require knowledge of how financial markets work. Consult a financial planner to help analyse how market development affects your investment.

Knowing and investing in line with your risk profile is important. Taking unsuitable risks may cause you stress and anxiety.

Ask yourself the following questions to understand your risk tolerance:

Are you willing to take on a high-risk investment to get the highest potential returns?
Do you prefer low-risk investments and are okay with lower returns?
How long are you ready to wait for the investment's return?

Ready to invest

Completing thischecklist will help you pick the right financial investment for you. (Credit: ShutterStock)

Shortlist investment options that match your situation after you've done your homework on investing knowledge, financial wellbeing and emotional readiness.

Consider investing in savings insurance if you need protection and a way to grow your money. Such products combine aspects of traditional insurance with savings and investments, making reaching separate objectives more straightforward.

Your financial investment will play a big role in determining your financial freedom in the future, so get started on your checklist today!

A "scarcity mindset" may be preventing you from achieving goals. In this episode of AIA Voices, finance experts Anna Haotanto and Lachlan Campbell, with AIA Ambassador Nico Bolzico, explain how this way of thinking prevents financial wellness. Watch as they share tips to put you on the path to financial freedom.

AIA Voices is a community of influential and educational voices from around Asia to talk about life, health and wellness. A platform to educate, motivate and inspire people to make positive behavioural changes on their health and wellness journey. Providing an opportunity for communities across Asia to connect, collaborate, and learn from each other. Designed to drive AIA One Billion, our ambition to engage a billion people to live Healthier, Longer, Better Lives by 2030.

References:

Investor.gov. Save for a rainy day. [online] [Accessed on 17 August 2022]

MoneySense. 2018. What is investing? [online] [Accessed on 17 August 2022]

Disclaimer:

This is general information only and is not intended as financial, medical, health, nutritional or other advice. You should obtain professional advice from a financial adviser, or medical or health practitioner in relation to your own personal circumstances.