Is it necessary to accumulate a large sum of money before investing?

Experts emphasize the importance of early investment because the financial market doesn't require a lot of capital but rather skills and experience.

I am 26 years old and currently working for a company with a salary of around 10 million VND per month. I want to learn about financial investing but don't know where to start or how to begin. Do I need to save up some spare money beforehand before learning and participating in investing? I would appreciate expert advice for young people like me who know nothing about finance.

Hien111

Investors are trading stocks at an office in District 1 (Ho Chi Minh City), January 2020. Photo: Quynh Tran — Investors are trading stocks at an office in District 1 (Ho Chi Minh City), January 2020. Photo: *Quynh Tran*

Consultant:

The Chinese have an old proverb that says, "The best time to plant a tree was twenty years ago. The second best time is today." This saying can actually be applied to many different aspects of life, including investing and accumulating wealth.

Starting to accumulate and invest as early as possible can yield many long-term benefits. Consider the following example. Suppose someone starts investing with 100 million VND and is able to generate an average return of 10% per year for many years. After 10 years, the total value of this investment will reach 259.3 million VND. And after 30 years, this figure will be over 1.7 billion VND. Similarly, after 40 years, it will be over 4.5 billion VND, which is 45 times the initial capital. This demonstrates the importance of investing early.

In your case, I'd like to share the following advice.

First, you should improve your knowledge and skills at work to increase your income in the long term. Increasing your income in the long term, combined with good spending control, will give you more capital to invest. This is the most important prerequisite in the process of accumulating wealth for young people.

Next, equip yourself with thorough financial knowledge. The financial market is inherently complex. Start by doing your own research and participating in training courses on investing and financial products. Currently, there are many online resources, books, and courses that can help you gain a basic understanding of investing. Always remember that any investment product has two fundamental elements: expected return and risk. High returns come with high risks, and vice versa.

You should set clear financial goals. Define your financial goals by answering the question, "What is your purpose for investing?". This could be for retirement, buying a house, a car, or simply saving money for travel . Understanding your goals will help determine your investment strategy.

You also need to pay attention to budgeting. It's important to understand your current financial situation. Create a budget to track your income, expenses, and savings. This will help you determine how much money you can allocate to investments. Try to set aside about 20-30% of your monthly income for savings and investments. Always remember that you should spend what's left over after you've saved, not the other way around.

In addition, before starting to invest, everyone needs to have an emergency fund. This fund should include at least three to six months' worth of living expenses. This will protect you from unexpected financial situations.

You can start with a small amount of capital, not a large sum. Stock investing currently only requires a symbolic amount of capital. Therefore, start learning and practicing investing with a small amount of money, and gradually increase it over time.

When investing, it's crucial to have a clear understanding of what you're investing in. The most important thing is to clearly understand the expected future returns of this asset and the risks involved in the investment process. This may sound simple, but in reality, it requires a great deal of knowledge, skills, and experience.

Diversifying your investment portfolio is crucial for risk management. Consider allocating your budget across a variety of asset classes to minimize the impact of making the wrong investment choices.

You also need to learn patience because investing is a long-term endeavor. Don't expect immediate results and be prepared for market fluctuations. Patience is a valuable quality in investing.

Additionally, you can seek solutions from professional fund management companies. Investing in financial products without sufficient knowledge and experience can easily lead to losses. You can consider the services of professional fund managers. These investment funds will have a team of experienced professionals who have been operating in the Vietnamese financial market for a long time.

Pham Le Duy Nhan
Head of Portfolio Management
Vietcombank Fund Management Company (VCBF)

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