6 Tips On How You Can Start Investing Based On Your Income Level According To Experts

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Investing can seem intimidating, especially if your cashflow is tight. But that doesn't mean it's impossible.

We spoke to three financial planners for tips on how to start investing at any income level.

- Kuah Soo Yee, Senior Associate at IPP Financial Planning Group Malaysia
- Ian Wong, Founder of Uno Advisers
- Linnet Lee, Director at Resolute Planning Sdn Bhd

From left: Kuah Soo Yee, Ian Wong, Linnet Lee.

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1. Understand your individual goals

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According to Ian Wong, individual goals are heavily influenced by one's income category. Wong explains, "As you earn more, you will also need to spend more."

For the B40 group, common goals revolve around building financial stability and having enough emergency savings. Medium-income earners, or the M40 group, often prioritise purchasing a home, children's education, and retirement planning.

Meanwhile, the T20 group tends to focus on wealth preservation and distribution for future generations.

2. Build a strong financial foundation, especially if you're a fresh grad or in the lower income bracket

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Linnet Lee emphasises the importance of laying a solid financial foundation, particularly for those in the lower income bracket or fresh graduates entering the workforce.

Lee suggests focusing on money and debt management to establish financial resilience against unforeseen circumstances.

"Financial planning is the heart and emotion of a person's wealth and finances," she says, highlighting the role of financial planners in ensuring not just monetary success but also family harmony.

3. Know your investment vehicle suitability and risk tolerance

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Kuah Soo Yee delves into investment vehicle suitability and risk tolerance considerations.

She suggests that individuals with limited finances, knowledge, or time may find unit trusts to be a suitable investment vehicle.

However, those with more resources and time to monitor investments might opt for securities, financial instruments that represent ownership, or debt obligations of an entity. Examples include stocks, bonds, and derivatives, which investors trade in financial markets to generate returns on their investments.

Kuah emphasises the importance of aligning investment choices with one's risk tolerance, illustrated through conservative, moderate, and aggressive portfolio allocations.

4. Tailor your investment strategies based on your current financial situation, how much risk you're willing to take, and how long you intend to invest

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To customise investment strategies, Lee recommends considering financial circumstances, risk profiles, and investment durations.

For lower-income individuals, options like EPF or unit trusts with lower investment outlays may be suitable.

Medium-income earners might explore stocks or alternative investments, while higher-income individuals could consider private equity or offshore investments.

Private equity involves investing in private companies to acquire ownership stakes and drive growth, while offshore investments refer to investing in financial markets or assets located outside your country's jurisdiction.

5. Balance your risk and return

Wong stresses the importance of striking a balance between risk and return, advocating for a diversified portfolio tailored to individual risk profiles.

He suggests adjusting portfolio compositions based on income levels and affordability, with the aim of maximising returns while minimising risks.

A diversified portfolio is a mix of different types of investments. Here's an example:

  • Stocks: Invest in stocks of different companies from various sectors such as technology, healthcare, finance, and consumer goods. This could include large-cap, mid-cap, and small-cap stocks.
  • Bonds: Allocate a portion of the portfolio to bonds, including government bonds, corporate bonds, and municipal bonds. These bonds may vary in terms of duration and credit quality.
  • Real Estate Investment Trusts (REITs): Invest in REITs that own and manage a diversified portfolio of real estate properties, providing exposure to the real estate market without the need to directly own property.
  • Mutual Funds or Exchange-Traded Funds (ETFs): Include mutual funds or ETFs that track different indices or sectors. 
  • Commodities: Consider investing in commodities such as gold, silver, oil, or agricultural products to diversify further.
  • International Investments: Allocate a portion of the portfolio to international stocks and bonds to gain exposure to economies outside of your home country.
  • Cash or Cash Equivalents: Maintain a portion of the portfolio in cash or cash equivalents like money market funds for liquidity and to seize opportunities as they arise.
By diversifying across these asset classes, you spread out your investment risk. If one sector or asset performs poorly, others may perform better, helping to mitigate losses and potentially increase overall returns.

6. Take advantage of government initiatives and incentives

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Lee highlights various government initiatives and incentives aimed at encouraging investment and financial planning.

These include tax breaks for investments in Private Retirement Schemes (PRS) and incentives for education savings through schemes like Skim Simpanan Pendidikan Nasional.

Bursa Malaysia also offers programmes to assist investors at different levels, such as the Mirror, Learn & Trade program.

Disclaimer: Readers are advised that the content does not constitute financial advice or endorsements. Always consult a professional for personalised financial guidance.

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