Wednesday, September 17, 2008

Being Investor

Sharing a thought...

The past couple of days of bad news further aggravate the already cloudy equity market. The old financial wound from the States has reopened to reveal gangrenous state of its financial woes infecting other markets. Furthermore, our current political situation rubs salt to the already bleeding local equity market making it one of the most undervalued market in the world! As people continue to speculate how bad the world's financial market will be in the next couple of months, it dawned on me that people generally prefers to dwell in the current negative news instead of looking forward and finding the glimpse of light that the situation poses them.

Going back to basic, the definition of investment (which I've obtained from Google, Investopedia) is

"An asset or item that is purchased with the hope that it will generate income or appreciate in the future. In an economic sense, an investment is the purchase of goods that are not consumed today but are used in the future to create wealth. In finance, an investment is a monetary asset purchased with the idea that the asset will provide income in the future or appreciate and be sold at a higher price."

Take note of the above words in italic especially "hope" and "future". They refer to the "belief" and "time" that investor have and placed on their chosen investment vehicle to bring them the benefit they desire.

A wise investor looks for potential / growth opportunity in whatever he sow and is willing to wait to see his decision bear fruit. Of course the investment timeframe is dependent on the individual himself which reflect his capacity to wait for the fruit to ripe or financial objective that he has set.

Some investors may harvest their crop upon it being ripe whereas some choose to do so only when they are ready to enjoy the fruit. However, there are some investors who may decide to remove what they have just sown as they have changed their investment strategy or due to their inability to wait for their investment to fruition which causes them to incur losses. Lack of planning could be another reason for this type of investor.

Generally investor would like to see a big crop but not many are willing to do what is necessary to ensure they reap a bounty eg investing regularly and reviewing their investment portfolio to ensure it is in line with their objective. Placing seeds in good soil may help them to grow however regular watering and fertilizing is needed to ensure it reaches its full potential.

At times, bad weather may damage the crop but does it mean the farmers abandon their land or stop planting? Or hold on to their bagful of seeds and what? Would the seeds give them the kind of rewards that the crop gives? Farmers also face uncertainties but they proceed to sow their seeds inspite of the challenges they may face. They continue to plant and take care of whatever they have sown as they believed that bad weather will give way to good weather and await for the sun to bring their crop back to life.

Being a responsible investor, it is time to review our investment objective and relook at our strategy for achieving our financial goals. Understand that for anything to grow, it requires time and constant care especially to withstand bad weather (financial/economy crisis) or even pests (politics/inflation).

Diversification is the word that smart investors hold dearly to their heart as they understand that is the key to protect their investment portfolio and wealth. Take it upon yourself to read and learn more about investment and its various tools. Choose only the tools that you are familiar as you progresses in the wonder of the investment world to achieve your financial goal/s or create greater wealth for yourself and your family.

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