When to start Investing
When is thegood time to invest?
In what market should I invest?
What kind of investment vehicles should I use?
What is thesize of my investment account should start?
Before we elaborate these questions. I think the best point to start is by throwing some preliminary questions.
{Define theobjectives. Stick with the objectives. Evaluate the objectives.}
This time we would discuss the major thing about objectives -Defining Objectives
What is your genuine investment's objectives?
In theory, at least there are two investments' objectives;Income andCapital Gain.
"Dividends-paying stocks and high-rated bonds are some of the major financial instruments that fulfill the Income objective. While a rapid growth stocks' prices is one of the instruments that satisfied the objective of capital gain."
Here is one example;
In Indonesian capital market, let's say Timah(Persero) Tbk (TINS) will issue dividend Rp.31/share. With a target income for this current month for Rp.5,000,000 (Eq.USD 500), we need to hold at least 323 lots ofTINS stock.
How did I arrive with this 323 lots?
With a target income of Rp.5,000,000 andTINS provides dividend of Rp.31/share. We need (Rp.5,000,000 / Rp.31) = 161,300 shares. Since, 1 lot = 500 shares, then we need 161,300 / 500 = 323 shares (rounded up)
Go back to our example above....
IfTINS stock price is Rp.2,700/share, then we need at least (before stocks' transaction fee) Rp. 435,485,000 (rounded up) Do we have this sum of amount? and willing to put it in risk for 1.15% rate of return (Rp.5,000,000 / Rp.435,485,000)?
Certainly, it's not me.
How about the second objective -capital gain?
Let's take Astra International Tbk (ASII) for an example.
Share:
Still with our Rp.5,000,000 monthly revenue target, ifASII traded for Rp.56,000/share today with average trading range of Rp. 1,500/share and end of month capital gain target of Rp.2,500/share. We need to hold 4 lots ofASII stocks with total purchased of Rp.112,000,000 (rounded up and exclude transaction fee).
Here is the path;
Rp.5,000,000 / Rp.2,500/share = 2,000 shares or equivalent of 4 lots. 4 lots x Rp.56,000 = Rp.112,000,000 Or in other word, we put Rp.112,000,000 in risk to get Rp.5,000,000 in return (eq. 4.46% return)
Well, it's almost close to us, isn't it ?
What I'm trying to say is no matter what is our investment objectives, it depends on what size of our financial muscle.
But, I guess most of us forgot about one crucial objective in investing. This forgotten objective isLearning
To be continue....
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When to start Investing
By: Michael Rumawas