“I have a certain amount of money. What should I invest in?”

Many people expect answers that refer to a type of investment vehicle, such as a stock, property, unit trust fund, exchange-traded fund or digital currency. Often, these answers are quick fixes that are unlikely to be beneficial in the long run.

Not many people can attain wealth and sustain it through investment tips alone. After all, investing is more than simply about buying, holding or selling; it is about embarking on a financial journey where your decisions are based on where you are financially today, where you want to be tomorrow, and the vehicles that can bring you from here to there safely and efficiently.

In the Malaysian context, there are six levels of wealth, as follows:

Level 0: Commit RM3,000 a month in debts

You might decide to buy a vehicle with a hire-purchase loan, and also get yourself a credit card or two. Some use their cards responsibly to build credit profiles, while others abuse them and rack up consumer debt.

This, obviously, is no good. Level 0 refers to someone who has dropped out from the financial game from the get-go.

Level 1: Earning RM3,000 a month in active income

This could be you if you’ve landed your first real job after university graduation, or from starting a full-time enterprise. In both cases, you are new to the financial game.

Level 2: Saving RM3,000 a month from your active income

Logically, to do this, you need to make more than RM3,000 monthly. So, if you are at Level 1, your focus can be on upskilling to become a more valuable employee, a much better salesperson, or a more productive entrepreneur.

Concurrently, you should keep living expenses and debt commitments from growing in tandem with your active income. The RM3,000 in savings could allow you to build a small portfolio consisting of fundamentally solid stocks, and raise RM50,000 to RM100,000 in capital to invest in a small property within two to three years.

But capital is just one of the key ingredients to successful investment. You also need the right mindset and knowledge, as well as the experience to deal with your emotions when investing.

So, if you are at Level 2, it is practical to focus on learning and building experience rather than chasing quick and fast returns.

Level 3: Paying RM3,000 a month in income tax

At this level, you make at least RM200,000 to RM250,000 a year in active income. Raising money to buy stocks regularly or to buy your second property shouldn’t be an issue.

Consider optimising your wealth by enhancing your current system of earning active income and investing. Spend time reflecting on what has worked well for you in terms of investing, and what has not. Then you can optimise your portfolio accordingly to increase returns.

Level 4: Earn RM3,000 a month in net passive income

Your net passive income could come from stocks, real estate, and sources such as interest, EPF dividends and royalties. At this stage, you are living life according to your own terms. Many could regard this level to be the ultimate financial destination.

There is, however, still one more level that could be achieved.

Level 5: Donate RM3,000 to charity

At this stage, you are so wealthy that you could give to charities from the profits of your investment portfolios and contribute to society at large. This would bring meaning and purpose to your life.

So, which level of abundance are you at today?

This article first appeared in KCLau.com.

Ian Tai is a financial content writer, dividend investor, and author of over 450 articles on finance featured in KCLau.com in Malaysia, and ‘Fifth Person’, ‘Value Invest Asia’ and ‘Small Cap Asia’ in Singapore. He is a regular host and presenter of a weekly financial webinar in KCLau.com.