Sunday, June 15, 2008

Invest or Not to Invest

Sharing a thought...You Don't Have to Believe a Word that I Say

"Is it the right time to invest with the current volatile and uncertain market condition?" A very frequent question whenever I meet a new prospect. Worries clearly reflected in their eyes.

Being an investor myself, I knew the feelings......."Oh my God, market down again! Die lah, I am making losses now! When will the market improve? Ahhhhh!!!"

It is normal to feel as you do, as we are humans, an emotional one too. Therefore, your decisions to invest or not is also emotionally influenced. Agree? So, isn't it better to leave your investment matter to a third party ie fund manager to manage your investment instead? The investment vehicle that I am referring to is unit trust.

So back to the earlier question, should we invest in the current market?

I am of the opinion that it depends on the individual itself. If the investor has intention to invest for a period less than 3 years, then no. This is because no one knows how long it would take for the market to bounce back. Moreover, investing with such a short frame of time disallow any fund managers to do their work effectively thus posing higher risks to the investors themselves. On the other hand, investors that are coming in for long term is however encouraged to pick up the funds that are currently at huge discount. The current market situation is considered an extended MEGA SALES period for long term investors. Pick them up before the sales is over!

Another word of advice, do regular savings instead of a one time off investment. It is one of the ways to mitigate the risks of uncertainties and volatilities. The benefit is that when the fund's price is high, the units purchased would be lesser, however, when the price is low, at the same investment amount, the number of units purchased would be more. In the long term, the average cost per unit of the investment would be lesser than its current market price thus the investor would have made some profits already.

Another factor every individual should be aware in deciding whether they should start investing their hard earned money is whether they are willing to face the risks of inflation which is undermining the purchasing power of their cash.

A research was done by The Star newspaper last year stating that our money's purchasing power diminishes amidst rising inflation. It gave an illustration that the cost of 3 meals NOW costs us about $20-00 (minimally) and in 20 years time, with the assumption that the inflation rate is only 6% , the same meal would costs us a whopping $64! It goes further to illustrate that those who have $500,000 NOW has a purchasing value of only $145,000 in 20 years' time!

So tell me, could you afford not to invest or you would prefer to procrasinate? And miss the discount?!

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