Wednesday, May 6, 2009

Baby Step To Financial Freedom - Comments

My mate, Kayage Class 88 commented on the article, Baby Step To Financial Freedom posted on Monday 4 May 2009. He has his points and thought it would be a waste if I did not share his thoughts. Here we go - lock stock barrel...

Whilst knowing how to invest is a good thing, I do not think it is a 'must'. Looking back at our parents' time, were there mutual funds schemes during that time? I dare say 'No' or very limited.. and even if/when there was some kind of funds being set-up, it was flawed with cheating cases where someone ends up absconding with a large portion of the investors' funds (eg. Kojadi at one point of time - my dad was part of the statistics as he invested some of his hard earned cash there)..

So, question - How in the world did our parents made it thru without needing to know how to invest, what more investing during their younger days?

BTW Chee Wee, i think your formulae lacked an important variable. I.e. our kids.. No, I am not saying that we should expect our kids to finance us when we are older. However, knowing our asian mentality, where family bonding is the root of being a family, that is the situation we, highly likely, would be in, in the future (this is provided we are married and have kids, ya?)

Anyway, sorry for the side track, yes, we need not know how to invest. However, if we do know how to invest, it would give us more buffer in our spending in our later days. Chee Wee, another factor that i think you might have missed out is the inflation factor. There is no point of placing one's cash somewhere to generate 3% while the inflation rate is above that. Thus, following your sample, if the current inflation is at 4% and the FD return is at 3%, the investor is actually losing $$$ in a long run. He is better of holding on to the cash or placing it where it can generate a higher returns.

A prudent investor does not place all his eggs in a basket and investment does not only mean FD, Shares and mutual funds alone... Properties, gold, collector's items should be considered too.

Let's take a look at gold, if you study the pricing trend, you would notice that gold is one commodity that had been steadily going up in price thru out the time, thus investment in gold makes a good option too.. Well, next question, where do I store all these gold that I had bought.will be buying? No fret.. These days, golds are sold w/o the need for physical transfer. Instead, the gold can be safeguarded in a bank with the bank issuing you a certificate. Thus, at any point of time you want to liquify your gold, all you need to do is bring along the certificate.

Price for strategically located properties will continue to appreciate. Thus, buying a bungalow for RM100k in PD hoping that the price would appreciate would be a wrong investment idea. Instead, a D-story in BU today might cost RM700k, but in 10 years time, it would probably cost more than RM1mil - Statistics had proven (from trend study), less tahan 5 years ago, the D-story house in BU only costed RM450-RM500k!. So, if you do the maths, RM300k (profit) divide by RM700k (cost of purchase) multiply by 100 gives you a return of about 40-50% for the 10 years investment - So much better than FD, no? and during that 10 years, you could possibly make some income via rental.

Lastly, collectors items (eg. proof coins, stamps, old coins & notes, antique items). These have high resale value as time goes by (provided you are collecting the 'right' set of items). Again, for that investment, you probably would make 5-10 times your cost. Again, this depends on what you foresee in the future as items in demand ;)

If you are not awared, these days there are these thing called. Collectable trading cards.. they come in the category of common, uncommon, rare and super-rare. I.e. you can collect them as a hobby, use them for leisure games or competitive games (yes, they even have world meet and superbly good price for the winners) then later on sell them off for a good price. A super-rate (out of print card) could possibly fetch USD2-3k these days.. So, imagine the opportunity for investment here.

I have a friend who collects comics (Marvel and DC).. and yes, I dare bet you read in the papers not too long ago how much an auction of the 1st ed. for Superman fetched the seller, ya?..

Chee Wee, sorry for being so long winded, and no intention to hijack your posts :P.. Just want to share other possible investment options besides the capital market :P

BTW, do keep away from HYIS (High Yield Investment Scheme). I do advice against this mainly for 2 reasons:

#1. your returns are from fellow family and friends you hoaxed into the scheme. So, this investment scheme are only for those w/o concious as you have to have the stomach to see your friends' losses at ur benefit.

#2. if you really ust enter into a HYIS, do so only if the scheme is less than 6 months old.. entering one which is about 1 year old is shaky. Most HYIS life line is 2 years. i.e. the initiator will chao-low (run-away) before the end of 2 years!!

Happy investing ;)

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