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How To Win In Investing

Interested in investing but don’t know where to start? Well, put aside some time for yourself (and your loved ones), and declare a “Financial Fitness” day. Are you ready? Here are three things that you need to prepare:

Plan your major expenses

Investing in shares is a long term endeavor — think at least five years out. So, any money which you would need for the next month, next year or even five years from today does not belong in the share market. This also means you should plan ahead for big ticket items such as a new home, or marriage (congrats!). Make sure that you put aside sufficient funds for these key events before you even contemplate putting any money into shares. The worst thing to happen is to invest money which you do need, and have shares to turn south at the wrong time — putting your future life events at risk.

Build an emergency fund

Unexpected expenses can pop up when you least expect it — like a job loss (touch wood!), or a busted kitchen sink. Again, you don’t want to find yourself being forced to sell your shares at the wrong time to cater for these unexpected expenses. Consider building up at least six months of living expenses for your emergency fund. If you have dependents, or work in an unstable industry, consider stretching it to 12 months. If you’re retired, you may want to build up  even more – five years. This emergency fund could help weather unexpected expenses, and keep your investments humming along unfettered for the long term.

Insure Yourself and Your Loved Ones

We do not wish this for anyone, but sometimes life can deal you a tough hand. Be sure to insure yourself and your loved ones in case of any undesirable events – such as critical illnesses, disability, and “the opposite of being alive”. Read here for a quick guide on the options avaiable to insure yourself, and your loved ones.

Foolish take away

These three steps might help you bulk up financially to prepare yourself before setting off in the investing journey to beat the SPDR STI ETF (SGX: ES3) – a proxy for the market barometer,  Straits Times Index (SGX: ^STI).

There is always more that can be done. If you’re hungry for more information, skip over to our 13 steps to Financial Freedom, and find out more suggestions in getting your financial house in order. You can also download a FREE special report here that covers what every new Singapore investor needs to know.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Chin Hui Leong doesn’t own shares in any companies mentioned.