Tuesday, April 7, 2009

Cash is King?

It is not always easy to do what is no popular but that is where you make your money. Buy stocks that look bad to less careful investors and hang on until their real value is recognized.

Successful stocks don’t tell you when to sell. When you feel like bragging, it is probably time to sell. I have never bought a stock unless, in my view, it was on sale - John Neff on Investing.

Are you adopting a wait and see attitude and put on hold your investment decisions? For employees are you having sleepless night thinking about potential financial shock either through loss or reduced income? Therefore it is a must to have some cash reserve at these times. The rule of thumb is to have at least 6 months worth of cash reserve. Budgeting is useful to trim excess fats from monthly expenses.

If you have cash, you might want to consider :

1) Invest in real estate. There are people in need of cash and are desperate to sell. Prices will fall.

2) Buy businesses. Time to indulge in ventures that you enjoy doing and earning money at the same time.

3) Buy undervalued shares. Identify undervalued shares that have strong fundamentals with good prospects. Market operates in cycles. Invest with a long term perspective.

4) Invest in unit trust. Allows professional fund manager to manage your portfolio when you do not have the time or expertise to do your own research.

5) Other investing options like gold, currencies, antique collection etc.

There are many opportunities when the market is down and everyone feels the situation is hopeless. Do your homework well and not afraid of the perceived risk. Change the investment strategy bit not the fundamental principle, which is to search for value and make profit in the future.

In recession cash is king because it allows you to capitalize on these opportunities at attractive prices / bargain. If you are sitting in a pile of cash, strike it when the right opportunity comes along otherwise your wealth is diminished by inflationary pressure.

1 comment:

Razali Razman said...

Well said bro...

I think cash was king...but now it is the perfect time to ask the king to do some work and get the best possible return from a recovery (in long term).