Finance 101 - Investing is like Cooking

Imagine you were going to have a gathering and you needed to cook for your guests. How would you go about preparing the meal? This is how some people I know will do it.

They will first go to the market and look at for the freshest vegetables to buy, the best cuts of meat to get, and the spices that smell nicest. They bring all these home, dig out a recipe book and then try to figure out what kind of dishes they can cook with the ingredients they bought. You might laugh, but that’s how some people are!

And you know what? While cooking the dish, they may find out that they are actually missing some ingredients, so they will either try to make do without it or quickly run out to the store to get it. Then when they finally finish, and the guests come and eat, they find out that they either didn’t cook enough for everyone or that there are tons of leftovers.

Do you think it was the right way of cooking for a gathering? No! They got it upside down! And that’s what some people do with their investment. They go out looking for the best investment products in the market, but they have no idea what to have in their portfolio until they spend some time looking at what they bought. It’s no wonder such investors never achieve their investment goals; they either don’t know what they are, or spend very little time deciding on them. They’ve got their investment approach upside down!

The right way to prepare a meal is to first find out how many people you’re cooking for, choose the right recipe for the dishes you want to make, then go out and buy the ingredients. Likewise, the right way to investment is to spend a lot of time working out your goals and on your strategy. Only after these are clear then would you search for a portfolio that will help you achieve your goals, and then choose the products to fit into your portfolio.

If this is the first time you’ve heard about this and would like to talk to someone about your investments, get in touch with Tze Meng. He can help you find a trusted financial adviser who can help you decide on your financial goals.

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