Tuesday, August 01, 2006

Vehicles for Investment

Lesson 3: Vehicles for Investment

As I mentioned in my previous posts, there are a lot of ways for you to invest your money. I would discuss further today about each of them and give you a brief idea what may be the suitable way for you to invest your money.I would start off by talking about bank deposit. Certainly a lot of people think that their capitals would be forever safe if they keep the money in bank. People always think that they would not lose thier money if they deposit their money in bank as fixed deposit or saving. Unfortunately, although banks provide you rather low return for your investment, you still have to bear some risks of losing your money when there is economic crisis. This has had happened before when Asia was hit by econonic crisis in 1997-1998. The worst part about saving your money in bank is you are helping the bank to make more profits from your money while they are just giving you a tiny portion of thier profits. The fact is the money you keep in bank is your hard earned money and the banks have never helped you in any other way to earn these monies!

The second way to invest your money is through stock market. You must learn more about stock market and do your homeworks before putting your money into this vehicle of investment. A lot of people like rumours, and majority of self-claimed 'investors' actually do not bother to read company annual reports and some of them do not even know what the company's core business . Never become speculators, speculators trade stock instead of investing in stocks. You must always prepare to keep your stocks for at least three to five years and see them grow in value. If you are expecting fast cash, never use stock market as your vehicle of investment!

The third way to invest your money is through mutual funds/ unit trusts. How mutual funds and unit trusts work is simple, you give your money to someone ( known as fund manager) who is supposed to be an expert in stock and money market. They would help you to invest your money and in return, they get some commissions ( sometime known as managers' fees) from this. Good thing for the manager is no matter they are helping you to earn or lose money, they are regularly being paid for their services! Besides that, they are charging you transaction fees as well. Sometime, I am wondering whether these mutual funds are created to help us or to help the fund manager to get rich!

You may find disappointing so far after listening to what I said. It seems that there is nothing in this world that worth investing! However, as I always told my friends, for you to rely on people to manage your money, it is better for you to learn yourself how to manage your own money. There are not so many people in the world like Warren Buffet who is consistently helping others to build wealth. You may have to depend on other people for something, but in term of money, it is better for you to manage your own money.

The fourth way to invest your money is through property investment. There are a lot of good property out there for you to invest- houses, land or even intelectual property. I always think that the best property you can have is intelectual property because you may not even have to spend a cent to own it.Just imagine you can write an interesting book like J.K Rowling or create a powerful programme like Bill Gates, you basically do not need to spend money to do this, you only need ideas. It is a very powerful if you can create new thing- books, inventions, computer programme, new ideas etc. However, not many people can do this in real life, therefore we still need to depend on real estate investment. Although one of the drawback for you to invest in property is you need large sum of money and the return is slow, history has told us that it is the best investment in your life.

The fifth way for you to invest is to keep some valuables- gold, expensive watches etc. Howver, I think it is rather difficult for layman like you and me to understand which watch to buy or when is the best timing to buy gold. I would skip this because I myself have no experience to buy these.

The sixth way for you to invest is to invest in your knowledge. Take up a course or learn some thing new in life. You maybe able to get a higher pay job so that you have extra money to invest in other things. I always think that this should be the first investment in your life to make. Only equiped with knowledge and will power, only then you can go further in your journey to become a young and financially free investor.

Good Luck and hope we all can make it to be able retire young and rich!

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