Investing Rules of Thumb

If you have been reading investing blogs then you have come across some investment rules of thumb. It is a general guideline that you can approximate a value quickly.

Rules of Thumb

The number one rule of thumb is ‘Pay Yourself First’. You need to set aside your money for savings every month before using it for other purposes, including investment and etc.

The question of how much do you need to invest depends on:
• When you started investing
• When you plan to retire
• Whether or not you plan to continue working part-time,
• Whether or not you expect passive income to pay out at the rate which is currently promising you,
• Whether or not you’ll have any pension income or EPF savings

Besides that, you must always remember that there’s no ‘Low Risk High Return’ in this world. So, you need to invest not more than 10% of your total savings in high risk investment vehicles. It’ll be risky if you had huge amount of investment with the same company as you have all of your eggs in one basket. Thus, you need to do diversification.

All financial rules of thumb is the rule of 72, so in order to determine how long it will take to double your investment value , then divide 72 by the annual return. If you’re earning a 10% return, then your money will double in approximately 7-8 years. But if you’re getting 20%, then it might just take a little over 4 years to double up your investment.

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