Previously, I looked at why people were afraid to invest, fear and greed, simple. But I think if you told people that they shouldn't be afraid, its NOT going to be any help. The better question, DO YOU NEED TO INVEST? And obviously, yes. And another yes, no matter what level of wealth you are at. Warren Buffet still invests his money today, worse still, he's still working. Does he need add more to his $50bil estimated wealth? Probably not, but he still does it.
Money matters, we all agree. But it's the perception of it which makes things go wrong. I am afraid people do not see wealth as something increasing but worse still they look at it as something depleting. Do you have control over money? If you have an overnight windfall of $1mil, what will you do? If there's too much hesitation, you're not in control. If you are thinking how to make the $1mil last you for a certain number of years, financially, it's not really a good sign. Put aside the charity and human side of things for awhile. From a financial perspective, if you are imagining and thinking how to grow it to another million, you're on right on track.
There's many ways you can deal with 1mil, keep it in the bank at 2.5% interest, buy a house, put it in equities, give it to someone, buy many years worth of lottery or anything that you know of. This post won't tell you how to use the imaginary 1mil, but the lines above are just to trigger some thinking of whether you are in control.
Before I continue, this post is by no means showing you how I much I know or how much in control I am but just to create some awareness.
Why do you need to invest? Title says....
Just a brief summary
1)Options
2)Uncertainties
Options
Money gives you options, no doubt, we all know that. Although some people may be well-off, but some are not that fortunate, thats why investing may be even more important for some people. Where do we get money from? Our jobs, salary. Anywhere else? If there's no where else, things aren't going to be easy. Not many people can reach top management but almost everyone needs almost the same amount of money. True? That's why, job security today is paramount for many people. But if they lose their jobs in situations of a recession like now, what are they going to live on. Savings would be a blessing, but for those who depend heavily on their monthly salaries, this is trouble. This is serious, not everyone can keep their job all the time. That's why we need to start supplementing our salary with incomes from a different area such as investing.
Difference between investing generally and investing in a business.
Investing generally means money is working for us and investing in business also means money is working for us but indirectly, actually SYSTEM is working for us. Many people do not opt for a business normally because of lack of capital, talents, risk and giving up their jobs. Both investments' return can vary and no method is technically better.
Investing generally is more accessible and easier to learn. Normally, we look at equities (stock market), commodities, mutual funds, real estate, bonds and foreign exchange. There are many more...
Currently, interest rates and inflation are at the lowest in over a decade. Many would be smiling at the lower interest on their mortgages and loans and the lower costs of living. It's not actually a good sign, because these low numbers can go up really fast, I mean really fast. If crude oil prices can rise from $50 to $70 in a month, you have to anticipate interest rates and inflation will follow very very soon. Take advantage of the lower borrowing costs right now because rates will only have an uptrend after this.The economy may still be contracting but its no longer at free-fall. When commodity prices surge in the near future, inflation picks up, interest rates follows and there is goodbye to low cost financing.
So we should be responsible as people who make things happen (invest!), NOT "see it happen" or worst still, saying "What happened?" (quoted from Rich Dad).
What are you suppose to do? Grow your wealth as much as you can right now, unless you are in a very good position and is very comfortable with paying high interest rates on cars, real estate or any other loans in the future.
Uncertainties
Another issue for Malaysians and Singaporeans, after 2011 , our money placed in banks are no longer guaranteed. What??? My money can disappear?? Yes in the event of liquidation, the central bank only guarantees RM60,000. That is worrying for sure. Even banks , our biggest safety haven is no longer safe. Where to put my money then? Now it's your turn to think, I would suggest you put your money in investments that you really understand and feel confident in. Learn to do your homework and from there you could grow your wealth and this will give you more options in life. Be patient of course.
You still might consider hiding it under your bed or in a safe, but it's not a such a good idea.
It could awhile until the next topic comes in mind, How to Invest is something I probably am not capable of writing yet. But at least, the important thing is people to do things for a reason, and I just gave you a few reasons to INVEST. I hope the things I wrote made sense, tell me if I haven't. Thanks for reading.
Reward for reading...
There is no doubt energy demand will rise very quickly in the near future especially when things start to pick up. Look at the energy sector, my biggest tip.
~deyao~
