So you managed to save RM1000 in your savings account. And you want to put it to good use.
You want to invest it.
Coming from a guy who used to be unable to save anything for 2.5 years due to insufficient pay…
I can tell you upfront how best to think about investing that money for better financial security and ultimate R.O.I down the road.
Now, before you think of investing your money in anything…
Do these 2 things first:
1. Pay off all your monthly payments
If you have credit card debt, kill them off now like the spawn they are.
12% interest per year is no joke.
KILL THEM FAST AND HARD. Not softly like the Fugees.
Never miss a payment.
You know how you never miss that episode of Riverdale? Yeah, be like that with your payments.
If you have PTPTN, just pay the monthly. If you already did, you are a good person 🙂
If you have a mortgage, pay the monthly installments you signed on.
Whatever it is, never be behind on your payments.
All good? Let’s move on the next thing.
2. Save first, then invest
I see this all the time.
Tim Ka Ching see his friend at work making 327% returns on Bitcoin – in 6 months.
And he want to take part. And Tim is greedy.
He thinks: “If I invest this RM1000 which is all I have, I can have RM3270++ in 6 months!”
Well, can you guess what happened? He lost half this money in 3 months.
Sad Tim. And Bad Tim. Bad.
Which is why the 2nd rule exists:
Always have savings before you invest.
If you don’t have savings before you invest, you are shooting yourself in the foot.
Investing usually means you may lose money in the short term so you can make money in the long run.
So what happens if suddenly 3 of your best friends get married in the same month and you gotta give them Ang Paus that signal you are not a horrible and cheap human being?
Will your Bitcoin investment save you? No. You gotta HODL.
So what’s gonna help you? Exactly, your savings will save your a** for things like that (and most things in life, honestly).
So, how much should you save?
For starters, I always recommend employees to have 6 months expenses.
And entrepreneurs to have 12 month expenses saved up.
I know what you are saying:
Why not just 3 months? 6 months is a lot.
It is a lot. That’s why it’s gonna take a while.
I suggest 6 months because in the most cases, you would only be out of a job due to a recession.
And in tough times like those, you want to have as much time as possible to find the right job for you.
So I see it takes 5 months to find and land a job + waiting 1 month for the first month salary to come in.
As you save up that money, you want to park that moolah in a high interest savings account or Fixed Deposit.
For Fixed Deposit, I recommend putting it in 1-3 month periods. It’s long enough to make you abstain from touching it, and short enough to get some interest for your savings.
2.7% is still better than 0%.
If you’ve already done the above 2 things, what should you invest in?
I tend to be quite conservative with my investments. So these are what I did:
1. Low cost index funds
It has lower management fees than mutual funds (which means you could save RM100,000+ in fees over the lifetime of your investment).
Instead of picking individual stocks (which rarely works even for professionals), you get a pool of the top performing stocks in that market (US / Malaysia / wherever) and get returns based on overall market performance.
For the US, their performance for the last 50 years have been 8% per year.
It’s a perfect investment for those who want to be passive with their investing and still get great returns.
Tony Robbins interviewed billionaire investors and they recommend it. Warren Buffett recommends it. And Ramit Sethi recommends it too.
But the bad news is, it’s hard to invest in one directly as a Malaysian.
The closest thing you can get in Malaysia (which I did) is StashAway (disclaimer: referral link).
When you put money into your investment account, they show they invest into the US market mainly as well.
A few friends of mine told me that got a 10% return in 6 months so far.
I was surprised as well. So I signed up.
But remember, investing is not short term. It’s about the long run, until you retire.
You know what’s cooler than 10% in 6 months?
8% average over 40 years.
Now that’s magic.
2. Real estate
Nothing much to share here.
I partially invested in my first house when I was 25.
All I can say is, unless you are willing to commit to a 30 year loan and deal with potentially crappy tenants…
Best to just invest in REITS (Real Estate Investment Trusts) and get the returns from there.
If you are after the tangible asset (the house and land) instead of the returns — then your only avenue is buying the house itself and renting it out.
There is a lot to cover here so I will write about it in a separate blog post.
3. Invest in yourself
You saw that coming didn’t you 😉
If I had to pick the best investment I made since I graduated university that allowed me make 6 figures by the time I was 26…
It wasn’t index funds or property.
It was investing my time, effort and money into learning marketable skills.
Skills such as resume writing, interviewing, negotiating salaries, job hunting, digital marketing, copywriting and so on.
If it wasn’t for those, I wouldn’t have the know how to even set up this blog and write to you today.
With that said, how can you start investing in yourself today?
I’d say it beings with knowing what you are good at, what you enjoy doing, and what does the market / employers pay highly for.
This is a whole other topic. I will be writing a separate post for you later in the future.
Once you find that intersection, you can check out all the free stuff first – podcasts, blog posts, PDFs, YouTube videos, etc before ever investing in a course.
For career driven person, I’d highly recommend learning the skill of job hunting. This skill alone was what allowed to leapfrog the career ladder fast.
I will be sharing more about in later post as well.
So to recap:
Before you invest your RM1000, be sure to
- Pay off your monthly payments first
- Save first.
Once you’ve done that, you can consider investing in
- Low cost index funds / StashAway
- Real Estate / REITS
- Yourself (specially high income skills)
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