Should I wait until I have a large savings account before investing?

Question from reader Hien111:

I am 26 years old and working at a company for a monthly salary of approximately VND10 million (US$400). I am interested in learning about financial investment but am unsure about where to begin or how to start. Should I first save up a lot of idle money before learning about and engaging in investing? I would really appreciate advice from experts for young individuals like myself who are inexperienced in finance.

Advice from Pham Le Duy Nhan, Head of Portfolio Management, Vietcombank Fund Management Company Limited (VCBF):

There's a Chinese proverb: "The best time to plant a tree was twenty years ago. The second best time is now." This applies to various life aspects, including investments and wealth accumulation.

Starting to save and invest as soon as possible brings significant long-term benefits. For instance, if someone starts with an initial investment of VND100 million and achieves an average annual return of 10%, after 10 years, the investment would grow to VND259.3 million. It would exceed VND1.7 billion in 30 years and VND4.5 billion in 40 years, which is 45 times the initial investment, underscoring the importance of early investment.

For you, I recommend the following:

1. Enhance your professional knowledge and skills to increase long-term income. Higher income, coupled with controlled spending, will provide more capital for investment, which is essential for wealth accumulation.
2. Acquire comprehensive financial knowledge. The financial market is complex. Start by researching and taking courses on investment and financial products. There are numerous online resources, books, and courses that can give you a basic understanding of investment. Remember, every investment has two core elements: potential return and risk. Higher returns entail higher risks and vice versa.
3. Set clear financial goals. It could be for retirement, house or car purchase, or simply saving money for traveling. Understanding your goals will help determine your investment strategy.
4. Budget carefully. It is important to understand your current financial situation and plan your income, expenses, and savings. This will help you determine the amount of money you can invest. Try to allocate about 20-30% of your monthly income for savings and investment. Spend what is left after savings, not the other way around.
5. Establish an emergency fund that can cover at least three to six months of living expenses to safeguard against unexpected financial circumstances.
6. Start small. Investing in stocks does not require much capital. So start learning and practicing investment with a small amount of money, and gradually invest more over time.
7. Understand what you are investing in. The most important thing is to know how much profit you expect this asset to generate in the future and what risks you will face in the process. This sounds simple but actually requires a lot of knowledge, skills, and experience.
8. Diversify your investment portfolio to mitigate risk. Spread your investments across various asset types to lessen the impact when you make incorrect investment choices.
9. Be patient as investing is a long-term process. Prepare for market fluctuations and avoid expecting quick results.
10. Consider professional fund management services. Investing without sufficient knowledge and experience can easily lead to losses, so consulting professional fund managers, particularly those with years of experience investing in the Vietnamese financial market, can be beneficial.

*The question and answer were translated into English by AI.