Invest in what you know

When it comes to personal finances and investments, it is often heard that you need to diversify your investments, which means you should invest part of your savings in different investment vehicles like the stock market, real estate, gold, and so on. Some professionals say that you should reduce your investment in the stock market as you get older. One formula they suggest is that subtract your age from 100, and the resulting figure is the percentage you should invest in the stock market, i.e. when you are at 80, keep only 20% of your total investment in the equity.

But my observation is that it doesn't matter much. I think one should invest in the area that suits one's knowledge, skills and personality. When considering the stock market and real estate, both require different knowledge and skills. Some personality type can't be successful in real estate. And the stock market for some.

To clarify my point for some, their personality trait may not be appropriate for investing in real estate which requires lots of negotiation, assertiveness and local knowledge, need to meet lots of people and go through lengthy documentation and legal process. However, investing in shares is just opposite. You don't have to meet anyone or do any negotiation. You need some good knowledge of how the sharemarket works, how the company performs and need some analytical skills and attention to details.

Disclaimer: This is not investment advice. Invest only with your own convictions.

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