Investor Mano Sabnani, 63 is chairman and chief executive of Rafflesia Holdings, which assists small and medium-sized enterprises with growth strategies and corporate governance.
A seasoned journalist, he also has years of experience of the corporate markets.
He often speaks up for minority investors of listed companies. Here, Mr Sabnani shares his tips for young investors starting out.
Q: What's the first thing any young investor should note?
Young investors need to look at their overall financial situation before venturing into investment activity.
A basic financial plan should be in place. That means priorities should be right. For any young working adult, some cash savings should be put aside for unexpected situations, as when one loses his/her job or there is a need for medical or other emergencies.
As a rule, six months of expenses should be set aside in a savings account or fixed deposit. It is also important to have basic insurance coverage for oneself and dependants, if there are any. The insurance should cover the loss of life as well as catastrophic illnesses.
Young adults should also provide for repayment of housing loans and other debt before venturing into the financial markets, be they stock, bond, commodity or forex markets.
When basic needs such as family expenses, housing and health/welfare are well looked after, one will have a clear mind to venture into investing.
Q: What was one mistake you made when you first started investing?
One common mistake is to over-invest and not have enough holding power or cash to sit through market downturns or cover personal emergencies. I write this from personal experience. I started investing when I was in national service in the mid-twenties.
I developed an interest in the stock market and was reading corporate news. But my knowledge of companies was superficial and I was investing on the basis of simple numbers like net asset value and price-to-earnings ratios. I invested money I thought I could spare. But my cash holdings proved insufficient when the market took a downturn and I needed cash for unforeseen expenses.