Save now and invest later Page 2 Keep the two ideas separate By Mo2 on March 2nd, 2008

Do what is comfortable
Some people might disagree with me on this but I feel that you should stick to what you are comfortable with. If you push yourself into something you don’t know it will only come back to haunt you. Even if you are to get a 100% return in the next year on a certain stock, if you have no idea how that return was produced you’ll end up giving it back in the near future.

Having said that, because you are uncomfortable with something now it shouldn’t stop you from pushing yourself to learning more about other investments. The more you learn and the more your experience the more comfortable you will be in taking on risks. It’s never too late to start and it’s a lifelong process.

Mo2 Thinks…
You should always be saving your money and putting it away into something that is extremely liquid such as a savings account or treasury bills so that you can invest it when the time comes. Start investing small and diversify your portfolio it doesn’t matter what others say; when you start out you have to diversify. Obviously with a $5,000 portfolio there is only so much you can do and that makes sense and this is the only time mutual funds make sense.

As your portfolio grows that means you have more experience and more capital. When you reach this stage you should be diversifying without using mutual funds make sure you look to see that have different types of stocks looking at different sectors with negative correlation preferably.

In addition, make sure you have liquid cash-like assets along with fixed-income, and equity exposure. This is what we call asset allocation and finding the perfect fit for you will depend on your risk profile. As a general rule, the less risk tolerant you are you should stick to cash and fixed income assets and the opposite for those that are more risk tolerant.

Remember that saving and investing are two different things. Just because you aren’t ready to put money in the stock market just yet, should not refrain you from putting money away into your savings account or RRSP (or whatever tax deduction plan you have in your country). The stock market isn’t the only market that exists, as a matter of fact despite the media exposure it receives; the currency market easily dwarfs the stock market.

Good luck with your saving and investing!

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