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Jim Cramer: 3 Tips Before You Start Investing
Aspire, Thought Leaders | 23 April 2015
By: Raymond Leung
Articles (142) Profile

More often than not, amateur retail investors would find that their profits from investments get wiped out almost instantly if they do not follow a disciplined strategy. Jim Cramer strongly believes that there is three preparatory steps that every investor should take before beginning their journey in investing.

Cramer puts forth these three steps that could help any investor ensure that personal losses will be reduced to the minimum.

Tip 1: Clear All Outstanding Credit Card Debts

The number one rule that Cramer has for investors is to clear your outstanding credit card debts. He emphasised that one should clear the entire sum and not just the bare minimum every month.

Source: Credit Card Charges, DBS

Finance charges are high for credit card bills as outstanding balance will incur a basic $60 late fee for outstanding balance of above $50. The 24.9 percent interest that compounds on a daily basis will ultimately affect your net worth.

If a user pays only the minimum sum every month, the balance amount you owe the credit card company will accumulate and snowball into a massive amount.

Cramer strongly emphasises the importance for investors and everyone to clear their credit card debts as soon as they can. He terms credit card companies as legal “loan sharks.”

Tip 2: Be Health Insured

Cramer believes in the need for insurance simply because one might fall sick or get injured any time under unexpected circumstances. Hospital bills can be very expensive and easily deplete investment gains with one accident.

In Singapore, the CPF board provides us with affordable or even “free” medical insurance. Every Singaporean is automatically enrolled into MediShield when their first Central Provident Fund (CPF) contribution is made. The government launched the program for the purpose of offering affordable medical coverage for its citizens.

Source: MediSave approved integrated insurance plans, MOH

In addition, citizens may opt to enroll in any of the approved integrated insurance plans that are approved by CPF board. These plans by private insurance companies will allow them to get a more comprehensive coverage using their MediSave contributions.

Tip 3: Insure For Life

Last but not least, Cramer advises investors to get a disability insurance. He believes that if an investor is disabled, whatever profits he made through investing will be channeled to support their daily living expenses.

Disability insurance will keep the insured from going bust from supporting themselves when they are unable to work due to disabilities.

CPF automatically enrolls its member into the Dependant’s Protection Scheme (DPS) which is similar to a disability insurance. It will be insured by either Great Eastern or NTUC Income and paid using the funds in the member’s CPF account.

This will provide CPF members and their families with some money to tide them over should the insured member becomes physically or mentally disabled.

To add on, CPF offers the Home Protection Scheme (HPS) that will help to pay off the outstanding housing loan should the insured becomes disabled or passes away.

Trained in fund management, Raymond is familiar with shares and various investment vehicles.

Please click here for more information about this author.


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