By Jessica Wee
If you are a follower of Warren Buffett’s adage “Be fearful when others are greedy, be greedy when others are fearful”, you might be making a shopping list of investments to venture into as global markets are going through a ‘correction’ in recent weeks.
Some may even ask why investors should be fearful when others are greedy?! Here goes, this idea originates from understanding market psychology. Investors are mostly driven by emotions like fear and greed. If markets are rising, greed can keep people buying and bidding up prices, hoping for ever-larger returns or profits. This, in turn, can lead to asset bubbles, which will eventually pop. Remember the Dotcom bubble?
For those of us whose risk appetite do not involve betting on a single stock name, ETFs and Unit Trust/ Mutual Funds are the next best options. Let’s break down these financial/ investment lingos to gain the full understanding before diving headfirst!
What is Net Asset Value, aka NAV?
The NAV of an investment is the total assets (how much the company owns in terms of cash, property, shares, etc.) of the fund or company, minus its liabilities (how much the company owes others). This amount is usually calculated at the end of each trading day when the funds must report to their respective governing bodies.
You can find the fund price, NAV and reports in your daily financial newspaper or the fund’s website.
After gaining some clarity on ETF and Unit Trust/Mutual Funds, what suits you best? Only you can decide by assessing your investment objectives and availability of funds available to invest.
Whichever one you choose, make sure you start investing no matter the amount instead of procrastinating.
If you have disciplinary issues, try automating your investment every month through DCA ie Dollar Cost Averaging. Read more about it here!