7 min read I Date: 16 August 2022
You want to start building your wealth, but you are not sure where to start? You have heard that you can make a lot of money with little effort through many platforms, but they can be risky. Perhaps you have even considered learning about how to invest from scratch, but you don’t have the time to learn. You don’t want to wait for five long years before you become an expert and start investing.
Ever wondered how regular people who work a 9-to-5 job, and have commitments, can build their wealth sustainably? Forget millions, you're not even sure how to earn a few thousand Ringgit from investments– you’re clueless!
In this article, we endeavour to guide you through helpful tips that can initiate your investment journey. Here’s how to make your first RM100,000 with investments.
Have a Goal
Before investing your money, you need to know why you’re doing it. The worst reason to start investing is that “everyone else is doing it” or someone told you it’s important for your future.
Yes, it’s important, but why? What kind of future do you want to see for yourself? Will your spending habits change? Are you accumulating wealth to give yourself a comfortable retirement? Or are you starting a fund for your children’s tertiary education? Perhaps you’re planning your wedding or starting a family? How much will you need?
Whatever your goal is, understand that this initial RM100,000 is your first step towards it. It is your opportunity to gain experience about investments, identify your risk appetite and calculate how much you can commit to every month for investments.
Set a Time Frame
Now that you know what you’re working towards, the next step is to identify when you want it to happen. In this case, what kind of time frame are you working with, to earn your first RM100,000. It should be based on your current earnings, so you need to be practical. There’s also the 60-20-20 budgeting rule based on your gross salary. This approach suggests that you put aside 60% of your income for daily expenses and essentials, 20% for emergency savings and 20% for investments. You should be able to identify how much time it will take you to earn your first RM100,000.
For example, let’s say that you are a fresh graduate or a young investor who aims to earn your first RM100,000 in 10 years. In this scenario, we’ll round up your monthly income to RM3,000 after EPF and tax deductions. Based on the general rule of thumb, you will need to put aside 20% of your salary every month for your investments, without fail.
Assuming investment returns are at 6% per annum and every year you get an average of 4% salary increment. How long would it take you to make your first RM100,000? Based on these assumptions it would take about eight and a half years to reach your goal. For an in-depth calculation based on your salary, reach out to one of our certified financial consultants.
Know Your Monthly Commitment
Let’s say you’ve received a pay raise, or you were able to increase your monthly earnings through other income streams. You may want to adjust your investment plan to hit your RM100,000 goal sooner. This comes down to assessing your financial health regularly.
Is your investment plan still relevant to your current financial status? How steady is your cash flow? What is your monthly commitment? Evaluating your spending habits could also help you identify where you can cut down on unnecessary expenses. Living below your means and putting any extra income into your investments is a financially intelligent practice you should consider growing your wealth more rapidly.
Understand Your Risk Appetite
How much are you willing to risk for higher returns? This is your risk appetite. It is an individualised preference and must take into consideration all your needs and other financial commitments. Here is where we would advise you to get professional guidance. You may know and understand your risk appetite but applying it to your investments is no stroll in the park.
Engaging with a certified financial consultant will help you get clear on your risk appetite and take the burdens of investments off your shoulders. Getting help from an expert is also one way to lower your risk and stay on track.
Review Your Investment Plan
You need to ensure that you’re choosing the best investment plan that caters to your short-term or long-term goals. Things may change along the way.
When you first planned your investments, you were only taking into consideration factors that were applicable then. These include the market condition based on economic growth, government policies, etc. Changes in these could also affect your interest rates and in turn, your return on investment.
Make sure to connect with your fund manager regularly. This will help you get the latest updates on your investment portfolios and increase your knowledge about the current investment landscape. With all the information you have, you will be able to make better decisions to strategize your investment plans to increase your potential returns.
What to do next?
While it may seem straightforward to start allocating your income as mentioned above because we are, after all, creatures of habit. You may have gotten used to spending your money in a particular way. Right now, your monthly expenses and commitments may even exceed your monthly income, but we can always replace old habits with new ones. Taking the small steps towards your financial goals will pay off in the future, and now is the time to start.
Don’t delay your financial growth. Start making your first RM100,000 through investments with us at Principal. Contact our financial consultants.
Disclaimer
You are advised to read and understand the relevant Prospectus, Information Memorandum and/or Disclosure Document including any supplemental thereof and the Product Highlight Sheet (if any) before Investing. Among others, you should consider the fees and charges involved. The registration of the relevant Prospectus, Information Memorandum and/or Disclosure Document including any supplemental thereof and the Product Highlight Sheet (if any) with the Securities Commission Malaysia (SC) does not amount to nor indicate that the SC recommends or endorses the funds. A copy of the relevant Prospectus, Information Memorandum and/or Disclosure Document including any supplemental thereof and the Product Highlight Sheet (if any) may be obtained at our offices, distributors or our website at www.principal.com.my. The issuance of any units to which the relevant Prospectus, Information Memorandum and/or Disclosure Document relates will only be made on receipt of an application referred to in and accompanying a copy of the relevant Prospectus, Information Memorandum and/or Disclosure Document. Please be advised that investment in the relevant unit trust funds, wholesale funds and/ or private retirement scheme carry risk. An outline of the various risk involved are described in the relevant Prospectus, Information Memorandum and/or Disclosure Document. As an investor you should make your own risk assessment and seek professional advice, where necessary. Securities Commission Malaysia does not review advertisements produced by Principal.