Striking a balance between preserving and accumulating wealth can be quite tricky.

As I was discussing with my client moments ago, he was wondering if he should start investing his money into a mutual fund, rather than allocating his yearly bonus and salary increment into upgrading his existing insurance coverage.

For someone in his mid 20s, I suggest that you should always take up a comprehensive insurance coverage, but not an excessive one. At this age, you probably don’t need a RM 500,000 critical illnesses plan, nor a “Super VIP” hospitalization package. Just get moderate coverage with flexibility that allows you to upgrade in the near future.

I recommend that after having a comprehensive (not excessive) coverage, invest about 10% to 15% of monthly income in an aggressive mutual fund, without the intention to withdraw it for the next 5 years at least.

The logic behind such a strategy is that you should always cover any potential leaks by insuring your piggy bank before you start saving coins in it. Imagine what would happen if your piggy bank was accidentally damaged without sufficient coverage. All the investment including the interest that you could have made in your mutual funds might just be used up entirely to salvage the damage. Hence, a proper balance is always a good strategy.

What’s your strategy at this moment?

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