Time for Prosperity and Wealth

First of all, "Gong Xi Fa Cai" to all Chinese readers!

Chinese New Year is a time where greetings of wealth and prosperity is heard all over. And how aptly so, expecially in this Year of the Tiger. Why?

A few weeks back, the stock market has taken a slight tumble on news that banks in China may be tightening its purses. Commodity prices have also fell. (I'm following the gold and silver prices day in, day out.)

Well, seems like the markets may be presenting a good chance for us to enter, right?

Yes, and no.

Yes because it's always good to buy things, especially investments, at a lower price. No because it is not necessary.

First of all, I wish to announce that I am not saying that this is the lowest price and that it is the 'perfect' time to buy in. I do not claim to be a guru of investing or an expert in timing the markets. I go for long term investing and I do not speculate on short term trends.

Last week, during a business appointment, my client asked me a question: "What if I lose all my money if I invest? What is the risk like?" (She was interested in an investment whose underlying assets comprise local and overseas blue-chip equities and sovereign bonds.)

All I did was to ask her a question.

"Do you think that over the next 10 years, the general world economy, especially Singapore's economy, will shrink, remain the same, or grow?" I asked.

"Definitely grow," she answered.

"Then there isn't so much of a risk, isn't it?" I replied and she agreed.

You see, short-term investing may seem exciting and you'll probably get your returns faster (provided you don't lose). However, research have shown that by investing in a diversified portfolio over the long term, the risk of losing your capital is virtually none! Therefore, short term price fluctuations do not matter to me most of the time. This is simply how the market moves, up and down.

Long term investing is all about sense. What makes sense that it will rise over the long term, is a good investment. Things such as a basket of sound blue-chip companies (in Singapore, that will probably comprise SIA, SingTel, DBS, UOB, Keppel, Capitaland and other significant STI components), unit trusts, gold and silver, land, property.

With long term investing in mind (considering stock prices are still not near their previous high before the financial crisis), and that prices have fallen a bit, it may be worth considering hard about investing now. (I did, let's see how it goes. :-)   )

Fund investing (be it unit trust or exchange-traded funds) is a relatively safer way of investing, as it automatically helps you achieve some degree of diversification. The best part of it is you don't have to look at it every day, as there is a fund manager helping you and the other investors to make buying and selling decisions of the holdings. Although there is a fund management charge to be paid annually, it is not really significant, considering you can spend the time and focus better on other things in life such as your family or your work.

In my personal opinion, precious metal prices will skyrocket in the not-so-far future, and it pays to have exposure to physical assets such as gold and silver. They have traditionally been a medium to store value for over thousands of years. Especially so in an inflationary environment, where the value of the money in your wallet and your bank account is diminishing day by day.

I even know of a gold trading company that offers a 2% return per month. Talk about cashflow!

With urbanisation and the economy starting to recover from 2008, land investment is also worth considering as developers need land to build their projects. Can you imagine what kind of returns you'll make by owning the land that these big-money developers want?

I was having lunch alone somewhere in Hougang and I happen to be sharing a table with an elderly man, who seems to be in his early 60s, speaks fluent English, and look fit as a fiddle. We started to chit chat and he commented how expensive things are today. One of the comments he made was that in his younger days, it only cost him 20 cents to have a marvellous breakfast, and 10 extra cents to add in all the frills and extras. Now, it cost his son and his daughter-in-law 10 dollars to buy a breakfast for two. With prices haven risen so high, do you think you can still do anything with 20 cents nowadays? That's inflation, my dear friend. It is like an invisible thief, stealing the value from your money everyday.

So start the Year of the Tiger looking out for the plentiful investment opportunities out there and avoid keeping all your savings in your bank account. For one thing's for sure, I can't guarantee that you'll make money through investment, but I can definitely guarantee you WILL lose money by leaving it in the bank.

Happy Chinese New Year, folks!

(The above comments should not be construed as investment advice, and are solely meant to reflect the author's personal opinions only. Consult a qualified financial consultant to find out how to structure your investment portfolio.)