Many people are clueless when it comes to investing. Why?
They do not see the importance of investing and deem investing in the stock markets as ‘risky’. However, little did they know that investing is just as important as saving; if not more. This is because the crux of investing is simply making your money work for you.
The earlier you start learning how to invest, the more your investment grows due to the effect of compounding.
What made me decide to learn how to invest?
I reached a certain point in my life where I felt that no matter how much money my job paid me, I could not seem to be able to grow my money. If I kept my money in a ‘savings account’, the banks interest rate was simply too low to keep up with the current rate of inflation in Malaysia; which is at an all-time high of 2.7% in 2015. It wasn’t until I met a friend who introduced me to a value investing workshop in Kuala Lumpur which showed me the safe and easy way to grow my money using the strategies taught by the world’s greatest value investor – Warren Buffett!
Reason 1: You need to plan for your future (and the future of your loved ones)The average amount that Malaysia’s middle-class segment desires to have for retirement is RM1.9 million, according to a survey conducted by the AIA Group. It also mentions that 53% are worried that they will not be able to save enough for retirement.
Now here’s the truth, it is almost always impossible to achieve that amount through savings alone.
Many respondents indicated that they have implored a variety of investments instruments to achieve their retirement goals with as many as 70% indicated that investing in the stock market is a viable way of achieving this goal.
As mentioned earlier, it is absolutely necessary to make your money work for you!
Value Investing is an excellent way to beat the current inflation rate.
Here’s a simple illustration of the powerful effects of compounding:
If you save just $5 a day, $150 a month or $1800 a year, for 40 years at a compounded interest rate of just 10%. You would have yourself a whopping million dollars!
How hard is setting aside $5 a day to invest? It would probably cost you just one cup of Starbucks coffee a day!
Investing is not rocket science and it is a skill that anybody can learn.
Wouldn’t such a valuable skill help in providing a better future for you and your children?
Reason 2: The falling Ringgit a cause for worryI was in Ho Chi Minh a couple of weeks ago at a local restaurant near my hotel and wanted to pay for a meal costing US$10. I proudly took out a RM50 note from my wallet but was promptly rejected by the cashier. The lady apologized because and proceeded to tell me that she could not accept the ringgit because of the huge fluctuation of the currency. Imagine the embarrassment I had on my face.
With the ringgit sliding pass 4.0 against the US dollar, it is considered the worst currency crash for the first time in 17 years. Here are things you have to consider:
- Cost of imported goods will increase and will be reflected on price tags
- It is more expensive to travel overseas
- Reduced purchasing power
- Your favourite food will become more expensive; we all know this is worrying because Malaysians love to makan!
If you felt the pinch after the implementation of GST, brace yourself because the prices of goods and services are expected to increase further. As a result, there are lesser things you can buy with your money.
The way to hedge against currency risk is to invest in global companies. This is a good way to diversify against the falling ringgit.
Reason 3: Stock market has tumbled since the start of 2016If you have heard from your neighbour or friends that the stock market is crashing and you should stay away, it’s time to re-think again.
In fact, as a value investor, the BEST time to invest in stocks is during the market crash. Remember back in 2008 where the global economic meltdown took place?
Investors were all selling their stocks like hot cakes racing for the exits. World’s top investor Warren Buffett calmly took advantage of this golden opportunity and invested in a few fundamentally strong companies.
Not surprisingly, when the economy recovered, Buffett was laughing all the way to the bank. Profits from the crisis have raked in more than $10 billion reported the Wall Street Journal.
Now the window of opportunity to start investing is right NOW.
Is Value Investing for You?
There are 2 types of people in this world
- People who are able to spot such golden opportunities but do not take action at all. They watch other people grab at the opportunity and regret at the end of the day and they miss opportunity after opportunity.
- The other type seizes the opportunity and gain as much knowledge as they can. They put their new found knowledge to use and reap the rewards.
Learning how to consistently profit from the stock market is based on skill and not a matter of luck. Just like any skill, it can be learnt.