So why do people invest in gold?

• To diversify their investment.
• To protect against crises such as economic, political or social crisis (social unrest, wars and others tend to drag the stock market down…but gold tend to be more stable).
• Because it’s simple and straightforward.
• Because the price chart is easily obtainable.

From what I’ve observed, gold investing can be highly speculative but if you are investing for the long term, gold price will definitely go up. And rather than investing in stocks (which you are relying on companies), funds (which are relying on the fund managers and stocks), currencies (which you are relying on the governments for not screwing up) or real estate properties (which sometimes depends on luck since cheap prices are only available for new housing areas), investing in gold does not have so many external factors involved. True, whatever goes down will go up and vice versa. But for a precious metal which will decrease in amount (there’s only that much gold in the world), the price will still go up, albeit slowly.

So my advise to you and myself, is to look at this possible investment option as a way to diversify my portfolio away from funds and stocks. Don’t buy a lot in one go. Just slowly accumulate little by little. And you don’t need to keep all the gold and gold bars at your home. You can let the banks to manage them

There’s a very good article written by KCLau on gold investment in Malaysia. It’s a very good read. For those who are interested to invest gold in Public Bank, you can refer to this link Invest Gold in Malaysia through Public Bank. Maybank also provides such service and the minimum is 1g of gold, as compared to Public Bank’s 10g.

Take a look and who knows maybe gold investing is the one for you (it’s a good learning step for beginners as well).

Good luck

p/s… just checked with Maybank today. The min investment is 1g but there’s no way you can do it online. Meaning, even if you want to buy or sell 1g, you will have to bring your passbook to any of MBB’s branches, and do the transaction there. Kinda troublesome :T

p/s…. you can check MBB’s gold price HERE.

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.

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.

But how much is “enough”? 50k? 200k? 1 million? or just $1 more than the amount you need? Without defining what does “enough” mean to you, it’s very difficult for you to set your financial goals. So the first thing that you need to know before doing any financial planning is your definition of “enough”.

I’m not going to guess what is your answer. So I’ll just assume you are like most people I know, and your definition of “enough” is to be able to retire comfortably, without having to worry too much about money when you’re no longer working.

If that’s your definition of “enough”, then I have a few tips which might be able to help you achieve your goal.

• Go for conservative investing. When choosing a type of investment to put your money into, always go for conservative type of investing. Say NO to short-selling or active trading (be it stocks or funds). Go for those which are safer, but have lower returns. Index fund is a good option while FD (interest rate is too low at the moment), and stocks (too risky) are not.
• Pay attention to the cost of investment. Most investment types need you to pay a certain amount of money for their services – especially stocks and mutual funds. Pay close attention to the amount of money you need to pay for such things. Because most often than not, these fees will greatly reduce the amount of earnings you get from your investments.
• Minimize spending. It’s okay to get your WANTs every now and then but always take into consideration your financial goals. Will buying item A has any negative impact on your financial goals? Will it slow down your overall progress?

I think these 3 simple rules will be able to help you in achieving your “enough” and enable you to live comfortable upon reaching your retirement age. I can’t say that it’s going to work 100%, but I really believe it WILL help you to move closer towards that direction. But bear in mind that, these 3 simple rules are not going to make you rich…. they will only be able to make you achieve “enough”…. just enough for you to live comfortably.

p/s….. conclusion, if you are looking to achieve “enough” (as in enough to live comfortably upon retirement), you should avoid going to risky investment types such as property and stocks, and also avoid spending too much on services such as those incurred by mutual funds.

Why? Well, it’s because it’s more rewarding than our Fixed Deposit and less risky than investing in stocks. For some, it is because they don’t really need to manage their portfolio. They normally just leave it to the fund managers to handle their money for them. The losses will be minimal, and same goes to the rewards.

But lately, things have changed a little on the mutual fund front. There are more and more funds to choose from now. Investors need to read up about the background, the industry, market segment, etc before deciding which to invest in (and choosing a proper mutual fund can be quite a daunting task now). Also, investors can start to trade their mutual fund units ONLINE.

As you can see, the mutual fund we have now is no longer the same as the one we used to know. Instead, it has become something similar to the stock investing that we all know (and some of us fear) - online trading, a lot of options and plenty of research works to be done.

So other than the high service charges, the minimal losses and profits…. there’s really not much difference from stock investing. If that is the case, why are people still interested in mutual fund investing and the same group of people remain fearful of stock investing? Aren’t these 2 becoming incredibly similar? Mmm perhaps most people still don’t know anything about these 2 and the mutual fund…being cheaper, definitely looks to be ‘safer’.

Not really. For your information, my losses in mutual fund in the year 2008 was about 60% while my stock losses was lesser than that. And to make things worse, I can’t simply change/sell the funds because it’ll incur further losses for me – service charges. I can only stop putting money in, cost averaging, or switch to bond (and incur service charges). Who says mutual fund is safer?

That is why I always suggest people to look into stock investing. There’s really not much difference between the 2 and for me, the pros of stock investing far outweighs the pros of mutual fund. Treat mutual fund as a form of saving, and stock investing as…well…a form of investment.

But either way, you should know what you are putting your money in BEFORE you actually do so. Putting money into something you have no idea off is equivalent of gambling….and not investing. So thread carefully.

Well, to be honest with you, saving is not really that difficult. Even if you can only save 5% of your monthly salary, it is still good enough. The ideal case is of course to have 10% or more, but any saving is better than no saving.

So to get you started, here are some simple ways you can do to come out with that 10%.

• Cut down on your WANTs. This is important. The things that you want can be very expensive – fashion goods, gadgets, cars, etc. These things can take away a large sum of your money. Try to cut them down as much as possible. It’s okay to have 1 or 2 WANTs…. but a warning to you, don’t ever fall into the trap of having too many WANTs.
• If you always have no money left due to debts, then clear or reduce them as much as possible. Credit card debts should be the first to clear. Also, try to refinance your loans and see if you can get a better deal. Once your debts are cleared, you should have sufficient amount of money to save up – provided you don’t go get another debt!
• Start to cook at home. Eating out is expensive – the food, the parking and the fuel. Furthermore, it’s healthier too.
• Minimize expensive activities such as movies, clubbing, meals in posh restaurants, etc. For example, if you are a regular Starbucks customer, cutting down 1 cup of coffee per week can save you around RM 50 per month. That is already 1% of RM 5000 (average salary for Malaysians).
• Get some side income such as earning money online, get some part time jobs, freelance, etc. You need to sacrifice some time to earn, but I feel it’s worth it in the long run. But only do this if you are sure you won’t neglect your day job.
• Remove your credit cards. They can be helpful if you know how to use them but if you are the type of people who can get tempted easily, then stop bringing them out. Credit card debts are the type of debts which bring a lot of people down.
• Travel by public transport or car pool. You can really save a lot there, even though you need more time to commute.

Some may argue that the amount of money saved using the above methods will not be much….well, I think it really depends on your lifestyle. Also, I can’t stress enough that any saving, even 1% of your monthly salary, is better than no saving.

Just always remember to control your own WANTs. Know your limits, and your financial condition. Don’t wear a hat that is bigger than your head.

I think one of the main reasons is fear (or uncertainty). After witnessing so many economy crashes (notably the one in 1997-98, early 2000 and the recent 2008 crash), most people are feeling fearful. Well, to be honest, it’s not easy to see thousands of your (or your friends’) hard-earned money burning and feel nothing about it.

But sad to tell these guys….investment is a must whether you like it or not. Saving up is good but if you don’t invest, your savings might end up as waste paper few years down the road due to our inflation rate. So unless you really want to see your money ends up that way…you should really consider investing your money.

So what are the investment types that you can consider?

Fixed deposit - this is the simplest and the one with the lowest risk. But it is also the one with the lowest return. If you keep your money here and here only, fear not, your money will still be waste paper after 10 years or so. My advice is, only keep your emergency fund here.

Mutual fund - this is the most common and popular option for many people especially those that do not dare to venture into stock market. It is relatively safe but with minimal return. But then again, do bear in mind that you are paying the fund managers a substantial amount of money per transaction. That alone will minimize your return. True, it’s safer than stock market but don’t expect too much out of this. My advice is, treat this as your saving account and pump in money every month. Invest in a mixture of equity and bond fund.

Stock market - this is the so-called high risk investment type. I’ve been investing in this for few years now…. a lot of ups and downs really. But one important lesson I’ve learned during the March-8 crash ….. never ever speculate because speculating = gambling and in stock market, gambling is suicidal. My advice to you is to read up more about stock investing and invest only in blue chips. Defensive stocks like Telekom Malaysia is a good option since they give pretty good dividends. And be ready to put there for few years. Remember that short term selling in stock market is equivalent to speculation/gambling.

There are other options such as gold investing, money market fund, etc but I’m not very well-versed in those. That is why I never talk about them. So that’s another lesson for you – don’t invest in things you don’t know.

At the end of the day, I believe stock investing is the best option if you know what you are doing and if you can control your emotions well (the ups and downs of a stock market are not for the faint-hearted). But no matter which option you choose, it is still better than no investment at all. So start taking your first step – invest 10% of your monthly income is always a good start.

All the best.

p/s…. property investing is out of scope because it requires a substantial amount of money as compared with the options above.

There’s not much change to the interest rates of most banks. Most of them have the standard 2.0% for 1-11 months, and 2.50% for 12 months FD. The good thing is major banks like CIMB, Maybank, Public Bank and Ambank are giving pretty good FD rates as compared to the international banks. Most of our accounts are in there anyway. And if you are looking to invest for anything less than a year, I guess the best is Affin even though it is not as accessible as other local banks (not as many branches around).

Hope it helps.

So what do we do when we don’t understand such things? We leave it to the experts!

Unfortunately, experts are being called experts because of few things and one of them is that they don’t come cheaply. So we end up paying some of our $$ in order to have these experts manage the complicated stuff for us.

To be honest, I feel that all these new types of investment only benefit none other than the financial institutions and the people working for them. For an investor, the return has been lowered due to the number of layers which appeared out of nowhere, in between the investor and the money they invest in (the experts are in some of the layers). The more complicated an investment type, the more layers there will be, and the more money they will charge you.

So most investors end up in a dilemma, we are paying people to reduce our return of investment. And then we start to complain about the low rate of return. Yet, most cautious investors do not dare (some are lazy) to venture outside and control their investments themselves.

What’s next then? Well, my advice to you is simple. If the financial system comes out with very complicated things, and if you cannot understand, then don’t go into it. Don’t ever pay someone to manage for you because the return of investment will be so low that, well, it’s better to just pump into Fixed Deposits. If you want better return, then manage those investments yourselves unless you are so rich that you wouldn’t mind those additional charges. But that’s another issue altogether.

Conclusion, manage your own investments if you want better return (higher risk though so you must know what you are doing) but if you prefer to let the experts handle things for you, then be prepared for very minimal returns.

My question to them – after becoming debt free, what’s next?

And I believe that is a very important question one should ask oneself. Why are you working so hard to be debt free? What are you going to do once you have the extra cash after finish paying the housing loan or car loan?

You know what? Some of the people I’ve asked, they told me that the reason they are working so hard to finish their current loan, is so that they can take up another loan for a bigger car or a nicer house.

Hmm…so they want to end the current loan…so that they can re-enter the very same vicious cycle they are trying to get out from? What’s the difference then? The cycle will never end if you plan to do it that way.

That’s why in my humble opinion, being in debt is OK and it’s not that bad provided you can still live comfortably in this world. Why? Because living in this world, it is very hard for someone to be completely 100% debt free. Therefore, depending on what is your end goal, debt free can be good or it can mean nothing at all.

Last but not least, stop cursing your loans and banks and keep praying that you can be debt free….if all you want after that is to get on another debt.

p/s…. i also notice that the older you are, the bigger your debt will be. So the debt you have while you are in your 20s could be significantly lower than the debt you acquire in your 40s (inflation, more commitments, etc). So, getting rid of your lower debt (the one from the 20s) and getting on a larger debt (the one in the 40s) is not an entirely smart move.