So you’re a first-time investor? Here are six pointers on how to get over your nerves so you can make informed decisions and invest your hard-earned money with confidence.

1. Check for red flags.

The first line of defence when considering every new investment opportunity is making sure it’s not an investment scam.

If you tick any of these boxes, reconsider your investment immediately:

• Multiple hits from Google search when you type “Company name + scam”.

• Any variation of “guaranteed return of investment” or “daily/weekly/monthly profit”. If the company promises this, run.

• The company’s founders and/or management team were involved with some dodgy things in the past.

• Any mention of recruiting investors under you. That’s a sign of an MLM, or worse Ponzi scheme.

2. You’re comfortable with the investment’s risk level.

Some investments are safe – you know you won’t lose your money, like fixed deposits. Some have higher risks and can possibly make you lose (a portion of) your initial investment amount.

• Choose a safe investment first. The learning process will prepare you for the higher-risk investments. Safe investments should be boring; usually just do one time and forget about it i.e. fixed deposits, low-fee unit trusts/mutual funds, blue chip stocks, ASB etc.

• Consider medium or higher risk investments that you have an interest in. Many factors will affect the return on investment – pay attention to news updates and make adjustments to your portfolio when needed.

3. Risky investments = the amount you can afford to lose

If the ratio of your safe investment to risky investment is 10:90, don’t do it. You do not want to potentially lose 90% of your money.

However, as a general rule, the younger you are, the higher your risk tolerance because you can still recoup the lost money by working for it.

If you’re young but not sure which higher-risk investment to go with, it’s okay to start with 100% safe investments and slowly introduce small amounts of higher risk investments to diversify when you’re ready. The point is to start.

4. You know, more or less, when you need the money

Some investments lock in your money; you can’t access it in the near future.

For example:

• Property. Reselling properties in the first five years after purchase is highly taxed.

• Anything retirement-related like EPF and PRS (Private Retirement Scheme) can only be accessed after you retire.

• Anything with time-based contracts like fixed deposits and peer-to-peer lending. You commit to only getting back your money after the contract ends.

“Locking-in” your investment is not necessarily a bad thing. Sure you can’t access it, but you also won’t be tempted to spend it or sell your investments for a loss.

It’s good for people who have a spending problem or tend to make impulse decisions.

However if you plan to migrate soon or have plans for the money before its “unlocked”, don’t put your money in these types of investments.

If accessing the invested money is important to you, pick something that can be easily liquidified, aka converted to ringgit relatively fast.

• Stocks. Mind the fees. See #5

• Non-retirement-earmarked unit trusts and mutual funds. Mind the fees. See #5

• Cryptocurrencies. Mind the scammers.

• Currencies and gold. Mind the spread. See #5

• And more.

5. You note the fees and spread (and choose low-fee, low-spread options where possible)

All private investment platforms have fees. The ones that say they don’t, will have higher spreads aka indirect fees. The only investment platform without fees are some government-linked mutual funds like ASB, etc.

On fees

The rule of thumb is – the lower the fees, the better. PRS’s FundSupermart charges just 1% as management fees. Some unit trust providers charge up to 6%. Even if you get a 10% annual return on investment from them, you only get 4% in profit after the fees.

Stocks and REITs also have fees. These require CDS accounts, but some companies offering these accounts with differing fee structures.

On spreads

Let’s use gold to explain spread. Let’s say a legit company offers you to buy/sell gold in their platform. They sell it for RM150 per gram (example), and buy it back at RM145 per gram (example) the same day.

That RM5 difference translates to a 3.45% spread, or how much profit the company earns when they resell the gold you sold them.

Ideally, you want the spread to be as low as possible. However, it’s okay to pick a gold investment company with reasonable spread (not necessarily the lowest) if they are reputable and can guarantee safekeeping and quality of your gold.

The same applies to other investments that use spread, like currencies. You do NOT want your investment to disappear along with the company one fine day.

6. You accept the responsibilities of a DIY investor

DIY investing is an investment style that doesn’t involve a fund manager. Many people start with this option – they make their own choices on what to invest in, after doing self-research and careful deliberation.

DIY investing means:

• You get to choose your own investments.

• You have to keep track of all your investment accounts, including the security side.

• You decide how often you want to contribute to your investments. You can automate this and set up auto-monthly deductions. You can also take advantage of taxes and stuff – for example, you can contribute at least RM3,000 to PRS every year because you enjoy a tax relief.

• You balance your portfolio yourself. This means checking your investment portfolio at least once a year and making sure you’re still comfortable with the risk level, and move the funds around as needed.

You can use an app and a notebook to list down all your investments, the amounts and the percentages. For example:

• ASB, RMxx, xx% (low risk)

• EPF, RMxx, xx% (low risk)

• PRS, RMxx, xx% (low risk)

• Gold, RMxx, xx% (medium risk)

• Bitcoin, RMxx, xx% (high risk)

• Altcoins, RMxx, xx% (high risk)

In some Western countries, robo-advisors are common. They ask you a bunch of questions, and from there make investment recommendations for you, much like a fund manager would.

This article first appeared in ringgitohringgit.com

Suraya is a corporate writer-for-hire and the blogger behind personal finance website Ringgit Oh Ringgit. She is more of a minimalist, less of a consumerist, a konon DIY enthusiast, a let’s-support-small-businesses-over-big-corporations kinda girl. Prior to her current role, she worked in various capacities within the non-profit industry.