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"Wealth Building 101 Part 3: Investing"

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In the first and second part of this series, we have discussed the first two big steps in building wealth: earning and saving your money.

The third step is arguably the most important step that will bring all your works into fruition: investing your money.

Step 3: Investing

When the first two steps in the previous articles are a bit conservative, you would expect our investing article to also be about conservative investments. However, we will actually encourage to take more risks in investing, to balance it out with your healthy savings we discussed in the previous article.

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Here are a few investing tips to help you begin:

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- Determine Your Risk/Return Goals

Quantify all your financial variables, such as your income, time horizon (the length of time your investment will be held before it can be liquidated), cash flow needs, and tax considerations.

These factors are unique to every individuals and you must consider it carefully before doing any investing.

- Asset Allocation

You should keep in mind that you will need some equity exposure to protect yourself against future inflation.

When needed, you might need the help of a financial advisor to do your asset allocation.

In general, younger individuals can allocate more to equities, with time on their side.

- Think Long Term

Remember that your main focus is to build wealth, not winning short-term in the volatile stock market. It will require a great amount of patience, discipline, and consistency.

It has been proven that investors who invest systematically and held patiently have been generating impressive returns long-term.

Keep the long-term picture in your mind, always.

- Diversify

Invest with a diversification in mind over a range of classes, styles, and exposures.

Never try to time the market, diversification takes the timing element out of the overall investing game. There are many diversification strategies available with great results. If necessary, you might want to talk to an investment advisor.

- Be Realistic

As we mentioned, the game of wealth building is not a get-rich-quick scheme, but rather a game with a long-term goal in mind.

Be realistic in your expectation, even Warren Buffet said earning more than 12 percent in stock is pure luck. Even when we see a lot of stocks with over 50% returns in recent years, it has always been proven to invite trouble in the future.

Slow, steady, and have a realistic assumption.

- Invest Only Surplus Funds after Your Earning and Savings

Remember, that over our previous two parts of this article series; we have discussed the importance of having a sustainable earning and healthy savings plan.

As tempting as any investments are, remember to only put in funds you can afford to lose, and that's not including your emergency funds and long-term saving.

With the risks involved in a volatile investment market, nothing is worse than not being able to feed your family or pay for your children's education because of a bad investment.