Key Points:
- Investment helps grow your money and protect it from inflation, thereby increasing its value and purchasing power in the future.
- There are various types of investments such as stocks, bonds, mutual funds, property, and commodities, each with different characteristics and potential returns.
- Each investment carries its own risks, including market risk, inflation risk, credit risk, liquidity risk, and currency risk. Diversification and consulting with experts can help minimize these risks.
Keen to start investing with guidance from DBS experts?
Have extra money but don't know where to invest it? Don't worry, you're not alone. Many of us are still hesitant to start investing because we feel we lack knowledge and confidence. Yet, investing is very important for the future.
Imagine your money as a seed. If it's just kept under a pillow, it won't grow. But if planted in fertile soil and well cared for, it can grow into a big tree and bear abundant fruit. Similarly, with your money, by investing it, it can grow and provide future benefits.
Let's understand the basic concepts of investment in a simple and relevant way for our generation!
What Is Investment?
Investment is the process of putting money or assets into something with the hope of gaining profit or value appreciation in the future. Investing is not just about generating additional money, but also about protecting the value of your money from inflation. Currently, there are various types of investments you can choose from, such as:
- Stocks: Buying stocks means you are buying a portion of ownership in a company. If the company grows, the value of your stock will also increase.
- Bonds: These are debt securities issued by companies or the government. You will receive regular interest payments, and your initial capital will be returned when the bond matures.
- Mutual Funds: This is a collection of funds from various investors managed by professional investment managers. Mutual funds allow you to invest in a diversified portfolio without needing a lot of capital.
- Property: Investment in property such as houses or apartments. In addition to gaining profit from property price increases, you can also earn income from renting them out.
- Commodities: Investment in valuable goods such as gold, silver, or oil. The value of commodities usually rises when the value of currency falls.
Why Should You Start Investing Now?
- Combat Inflation: The value of your money will decrease over time if it is just saved. Investment helps fight inflation and maintain the purchasing power of your money.
- Achieve Financial Goals: Want to buy a house, car, or dream vacation? Investment can help you achieve these goals faster.
- Financial Security: By investing, you create an additional source of income that can be a reserve during emergency situations.
Understanding Investment Risks
Investments can indeed provide returns, but they also carry risks. Understanding these risks is important so that you can make the right decisions. Here are some types of risks you need to know:
- Market Risk: The value of investments can decrease due to market changes. For example, stock prices can drop due to poor economic conditions.
- Inflation Risk: The value of your money can decrease due to inflation. This happens when the inflation rate is higher than the investment return rate.
- Credit Risk: Occurs when the debtor (such as bond issuer) cannot pay interest or the principal amount of the debt.
- Liquidity Risk: Occurs when you cannot sell an investment quickly without losing value. This can happen with properties or some types of bonds.
- Currency Risk: If you invest abroad, exchange rate changes can affect the value of the investment.
How to Minimize Risks
To minimize risks, here are some strategies you can implement:
- Diversification: Spread your investments across various types of assets. For example, do not only invest in stocks but also in bonds, mutual funds, or property.
- Learn About Investments: Take time to learn about the investments you want to enter. The more you know, the better decisions you can make.
- Consult with Experts: Do not hesitate to consult with investment experts. They can provide the right advice according to your goals and risk tolerance.
Investing with digibank by DBS
Investing with digibank by DBS is not only easy but also supported by advanced technology and a team of experts ready to guide you in managing your finances and investments, letting you know when to switch from saving to investing, and providing guidance with global expertise and market insights you can rely on.
You can consult directly with our Advisors or choose from over 120+ affordable investment products such as deposits, government bonds, and mutual funds reviewed by independent party Infovesta. Access 24 hours through the digibank app to buy, switch, or sell your investments anytime without having to go to the bank. So, you can keep moving forward and become the best version of yourself today and tomorrow!
