Monday, July 31, 2006

Facts about Investing

Lesson 2: Facts About Investing

A lot of people only think of stock market when they are asked about investment. Many of them would tell you that the last place they want to invest their money is in stock market. They still remember the major market crash in US during 1920an. They would tell you that the stock market is too unpredictable and eventually you would 'burn your fingers' if you try to play with fire. Many Asians are still having nightmares when think about the market in 1997-1998 when there was money crisis in Asia. However, you must remember a few facts here,

a) although most people think that the safest way to invest money is through bank deposit,I must tell you that it is the worst investment vehicle in term of return.
b) although you always hear people saying that the higher the return, the riskier the investment. It is not always true!
c) it would save half your energy if you have written plan about investment and consistent in your investing.
d) stock market is not the only vehicle for you to achieve your financial goals, there are other ways as well such as property investment, mutual funds, money market , gold ........etc

You would feel unsecured if you try to put your hard earned money in something that you do not know. Therefore, for you to start your first investment, learn as much information as possible so that you know your risk tolerance and understand your financial needs.
As I mentioned above, although fixed deposit gives you certain return, this return will be eaten away by your inflation. Although a lot of people hate stock market, history shows that the average return in US stock market is around 10% (before transaction costs and all other expenses) and UK is around 10-12% per year .The lesson to be learned here is you need to know how to diversify your investment in order to earn the maximum return.

I always tell my friends that there are 3 types of investors in the world, one group of investors whom I call as "Kamikaze" group, they would invest in almost everything as long as they think it is a good investment no matter how risky is the investment. Although you may think that these people are stupid, you would be surprised to find that a lot of rich people belong to this group.
The second group, I would say that they are " middle average people". They believe in Confucius thinking of 'walking the middle path' . They invest their money in vehicles that give them the average return with average risk. Another group of people whom I call " sweet dreamers" simply because they sleep well at night no matter how bad or how good is the stock market. They put all their money inside the bank or even under thier pillows. However, they usually would lose in long run in term of return as compared to the previous two groups.

I would like to advise you that which group you should belong to depending on your age group and how much you need your money that you plan to invest. If you are young and have extra money to spare , try to become the " Kamikaze" group, if you are approaching retirement age, then better keep your money in the safest place in the world because you may need them tomorrow!

Saturday, July 29, 2006

Introduction about Investment

I am going to talk about investing in a series of lectures/lessons. I think a lot of youngsters are wondering why should they start investing when they are young. I am going to talk about investment and money management in 12 lessons in my blog. If you have any suggestion, kindly email me at

Lesson 1: Why should I invest?

Why should I invest? I am getting a comfortable income every month and I am happy with the way I am spending my money every month, why should I bother to invest? Some people may say that they are having problems meeting both ends at the end of every month, why should they invest when they do not even have extra penny after they pay all their bills.

I think the reason for investment is simple. You WANT to prepare for your future.
Future is not predictable but manageable. You should have long term planning for your future and retirement. Some readers may say that " OK, but I am quite old now, it will be too late for me to invest now!" I must tell you that it would be never too old to invest! However, the earlier you invest, the better and easier for you to build your nest egg.

Some people may argue that I am keeping my money in the bank, they are paying me good interest, why should I bother to find other vehicles for investment? You may not notice that inflation is eating away your money. Inflation rate is always slightly lower that your fixed interest rate. You may be happy because the bank is paying you 4% interest rate per year, but do not forget that inflation rate in your country may as high as 3.5% or even up to 3.99%. So what you get in return is just 0.5%!

You may notice that years back, your ten pounds or dollars can buy you a lot of household things, but now, you spend almost twice as before to get the same stuffs!
Your pocket money is getting smaller and smaller, if you do not do something, you are going to face huge problems 20 years down the road when your children are going to college or when you retire. You must anticipate your future, you can do something now so that you would not get the headache later in life. People are living longer now, you may have another 20 years after your retirement to enjoy or "suffer" merely depending on what you are doing now!

There are a lot of short, intermediate or long term plans for you to keep in mind when you start investing. You must always remind yourself about your aims so that this can keep you focused, disciplined and consistent in your investment.These plan can be as follow,

a) Short tem plans
-renovate your house in 3 months time,
-buy a new plasma TV etc

b) Intermediate plans
- buy a new house
- get a new car etc

c) Long term plans
-children education fund
-retirement plan etc

Always plan you life! I would talk more about investment in my future posts!

Sunday, July 09, 2006

Welcome to my blog!

Dear all,
Welcome to my blog, I would be uploading valuable information about investement for young people in this blog!