First thing to do in your investment journey
Most people want to see their money grow, but most of them do not know how to start. So they look into equity funds, bonds, fixed deposits, properties (most people do this now) and stocks (and most people are fearful of this). But while they are busy doing this or listening to others, there are 2 other things which they should look into before they start looking at all those investment types.
Debts
Some debts can deal a killing blow to your investment plan especially those related to credit cards or those which have very high interest charges. It’s advisable to clear those off FIRST before you put your money elsewhere. For example, if your debt’s interest rate is like 4-5%, but your FD return is only 2%, it means you’re actually losing money than earning money. If you can pump money into both sides, then fine. Just be sure never to neglect the former for the latter. Focus on how to stop losing money, then only to how to earn more money.
Insurance
This is equally important. Life insurance and medical insurance are very very important. I can’t stress this enough. There are people who only focus on how to grow their money that they neglect these 2. And when they’re hit with some issues which don’t allow them to work, their dependents will suffer since there’s no income. Or, when they’re hit with some serious illnesses but do not have the money to pay for their medical bills. In the end, they need to take out all their personal savings in order to pay for the medical bills. Yes, growing your money is important, but thinking about your dependents and the ability to keep you healthy are even more important (especially if your company does not give you a medical card). Look into what kind of life insurance you should buy here – How much insurance do you need?
Once you’ve given thoughts (and actions) to these 2, you can start planning the second step of your investment journey. Always remember that your investment journey will be greatly jeopardized if you are not able to generate income, or something else is draining your income away. So do take note. These 2 should be the FIRST thing you should look into while planning for your investment journey.
Link: How to pay less personal tax
Here’s a very useful article by The Star newspaper on how to pay less personal tax.
Pay attention to the amount you can reduce for medical checkup, parents’ medical, sports equipment, books, computers, travel allowance, etc. Those are some of the things that we normally use but forget to declare when submitting our tax form. You can save quite a lot from there.
The myth of stock investing – it’s not gambling
I know a lot of people who are afraid to put their money into stocks. They’ve seen the ugly side of stock investing. Good for them I must say because to be fearful (and careful) is better than plunging into something you don’t know – especially when it comes to stock investing. Why? Because stock investing can involve a lot of money. And surely, you wouldn’t want to throw your hard-earned money as if you’re throwing them into a rubbish bin.
However, I do realize that sometimes people are becoming too fearful of something they don’t know. Just the other day, a friend of mine told me he’s going to venture into land investing. I asked why don’t he consider stock instead because the entry cost is lower. You don’t need so much money to go into stock investing and you definitely don’t need to get a bank loan for it. His reply was simple – “I don’t like to gamble”.
I think most people have the thinking that stock investing = gambling. Unfortunately, it’s not if you know what you’re doing and if you’re not trying to get rich quick. Based on The Free Dictionary, gambling is “the act of playing for stakes in the hope of winning”. This definition is somewhat similar to the definition of speculation: “Engagement in risky business transactions on the chance of quick or considerable profit.” And I often put these 2 together due to their similarities.
But to say stock investing IS NOT gambling, is kind of an understatement. Because there are a lot of stock investors who do speculate and gamble. These are normally the short-term stock owners. They tend not to keep a particular stock for more than few months. They do short-term buying and selling, and they trade a lot. However, when asked why are they investing in a particular company, most of them will not be able to answer you. Investing with uncertain future is, in a way, speculation. And as long as it’s speculation, it can be considered as gambling.
But this does not apply to stock investing alone. It also applies to other form of investing, be it land, property or stock investing. Truth to be told, this kind of method does help you earn a lot if you’re lucky but it is also very very high risk. I’ve burnt myself in the past due to stock speculation and it wasn’t a pleasant feeling. So easy come, and easy go. Just like how you can go buy lottery and if you’re exceptionally lucky, you will win a large sum of money.
However, if given a choice, I would encourage people not to speculate in stocks and never do all those short-term trading. It is too risky. If you want to invest in stocks, be prepared to spend an awful amount of time understanding the way it works, how the companies operate, the track records of the company’s management team, the prospects, etc. There are tonnes and tonnes of stuff for you to do research on. From there, you can shortlist some of the companies that you’re interested in and wait for them to drop to a price which you think is cheaper than the fair value. Then go in for those undervalued stocks. Invest and keep. But be prepared to keep them for 3-5 years (or even longer than that!). Yes, stock investing is about holding on to a particular stock for long term. If you’re trying to sell within few months, then it’s not really investing. It’s speculating.
So there you go, the myth of stock investing. As you can see, the proper way of stock investing is very different from what most people believe it should be. It’s not gambling at all. There are some uncertainties, but you make the decision based on your research and studies, not based on some unfounded rumors. And by far, it is also the best investing for me. Low entry cost, decent profit.
Just make sure you know what you’re investing in. 
Definition of balance transfer
A bank agent called me few days ago to introduce the bank’s new balance transfer program. I do have a rough understanding of what balance transfer means, but figure that I might as well do a bit of research and post it here.
Definition of balance transfer (source: CreditWeb):
A balance transfer is an option offered by many credit card issuers which enables the card holder to use their available credit from one card to pay off the balances due on one or more other cards. Usually the interest rate on the amount borrowed is lower than the rate of the cards that are being paid off by the balance transfer.
I actually rejected the offer since I don’t have any balance left in my credit card statement and I only have 1 credit card with that bank. So it kinda defeat the purpose of using a balance transfer. Also, it does not make much sense to use it if you know how to control your spending and spend within your limit. No late payment, no interest charges. You can choose to consider balance transfer if the other credit card offers zero annual fee… but in times like this, that’s pretty unlikely since you will most probably cancel off your unused credit cards…. and forced to pay the annual fees for the remaining 1 or 2. I’m sure in 2010, the banks will do their best to attract more credit card applicants and waiving the annual fees can be one of the best attractions
Anyway, I must be honest with you all that when it comes to balance transfer, I’m pretty bad with it since I’ve never used it. So far, I’ve been quite disciplined and managed to pay off my balance every month (not much anyway) so I rarely get hit by the interest rate… thus no point for balance transfer.
Yes, balance transfer has its advantages and disadvantages. But if you know how to control your spending and how to pay off the balance on time EVERY MONTH, then I really don’t see a need to use it. So in the end, it drills down to one thing – controlling your spending.
The state of our local property market
The average price of a property in our country has risen dramatically over the past few years, including during recession period. This is even more obvious in prime locations such as Kuala Lumpur, Selangor and Penang. A property bought 2 years ago in an OK location can easily worth 20-30% more now. And I won’t be surprised if the price of properties continue to rise from here onwards.
The funny thing is, no matter how ridiculously priced these properties are, they still get sold. A semi-d house with an awkward design (toilet next to the car porch), located in Shah Alam and priced at 800-900k….sold out. This shows how desperate the home buyers are…. or rather, how aggressive the property investors are.
I think it’s pretty obvious that our property market is seeing a stiff competition between the desperate local home buyers and the cash-rich property investors (especially foreign investors). The situation is fast becoming a “get a house while you still can afford” thing as local home buyers (or first time home owners) rush to get their hands on ANY affordable properties.
As a result of this, the price shoots up even more, to a state where other local home buyers can no longer afford to get their own houses and yeah….people have to rent a place or risk getting a big big debt on their shoulders.
But seriously, will this situation continue? I’m afraid so. What bout the price of the properties? If the properties are overpriced as they are now…will there ever be a bubble burst for our local property market? I’m afraid not due to the large number of rich foreign property investors coming in, and also due to the smart marketing move by the local property developers.
And on the question of whether the government’s decision to lure foreign property investors is a positive/negative move…. i will leave that to you.
p/s…. property consultant Chris Boyd recently said that now is a good time to buy property due to the affordable interest rate and that the property price has not peaked *shudders*. Check out his article in The Star here – A good time to buy.