"I've been in banking for five years, and I don't have any investments, because..."

You could consider this post a "Part Two" of sorts in my Investment 101 series of posts. I caught up with a few people over the past couple of weeks, and what I heard inspired me to write this, with permission from the story owners, of course.

My previous post here extolled the virtues of investing early and consistently. To recap - as young investors, you have a long horizon, and a bigger margin of error. Yes, you will be taking some measure of risk when you invest - but if something goes belly up, you will have time to recover. Proportion your wealth properly, and you won't be reduced to poverty if something goes wrong.

So let me ask you something - would it surprise you to hear that people who have been working in the banking sector for more than five years have zero dollars devoted to investments? How about lawyers? Or doctors? You'd think they certainly could spare the cash to toss into investments, right?

Some of them are in the same boat as the rest of us. Some don't have the capital to invest (because they've run into debt, or they are overspending), some don't want to take the risk, and some simply don't know how.

"I don't have any spare cash to invest," one of my friends in banking told me over lunch. "I went into debt to get married, and I'm still paying it off."

You might be asking why his wife isn't contributing. Well, he apparently insisted on footing the bill all by himself.

Was it really worth it? [Photo courtesy: Bloomberg]

His salary is nothing to scoff at either, with a decent bonus at the end of the year. His wedding costs, however, were monstrous. A diamond ring from Tiffany's for the proposal, a grand wedding reception, a lavish banquet dinner, and a month-long honeymoon in the US were a few of their whims. Long story short -  his bank account got murdered, and he used his credit card to bear some of the costs.

"You only get married once, bro," he said.

That's a wedding to remember. I know there was a news article some time ago about a Singaporean couple that grossly overspent on their wedding. I never really expected to hear a similar story from someone close to me, whom I considered my senior in finance and related matters.

I could talk about spending within one's means, and the concept of 'face', but instead, I'll just give you the top four reasons I've heard as to why people don't invest.


1) I don't have any money to invest 

"No capital, bro."

I know you have other obligations to pay for, and I'm not going to deny you that new gaming rig or that new handbag or that sweet pair of shoes once in a while. I'm also aware these things cost a ton.

But like I said in my previous post, you don't need a big lump sum to start investing. All you need is to put aside a hundred bucks a month for your investments, and see where that can get you.

To get that hundred bucks, proportion your spending a little more. Make a few cutbacks here and there. As suggested previously, try tracking your expenditure. Once you have all your expenses broken down, it'll be easier to see where these cutbacks can come from.

The power of compounding returns is your friend. The earlier you start investing, the greater your investments will be in time. Just do your homework before you put your money in anything.

2) It's too risky - I don't like what I can't control

Investing, of course, carries risk. With risk, there is a chance, no matter how small, that your investment could go belly-up. One of my friends working in medical research has this fear - he's used to the idea of putting in effort and achieving results. Some people see certain investment instruments - like stocks - as similar to gambling, where you could put in time, effort and money, and walk out with an empty wallet at the end of the day.

"What if my capital suffers? It sucks knowing that something went wrong even after I put in all that time studying these avenues to invest in."

For the more risk-averse, I would not recommend growth investing, or investing into companies looking for capital gain. Instead, how about trying blue-chip stocks, or dividend stocks? The rate of return is 5-6% a year, but they're pretty stable.

If you get these blue chips at a good price, you'd be able to make small capital gains, as well. Then it's up to you to see if you want to cash out and park your money in another stock while waiting for the price of your original stock to fall.

3) I have debt to pay off

I understand this reason. I've always been in favour of clearing debt as soon as possible, especially debts that carry a high interest rate (e.g. credit card debt). I would actually recommend that people clear their credit card debts before investing - letting credit card debt snowball is a very good way to get yourself into so much debt that no amount of investing is going to save you.

My friend up there is learning it the hard way. I know some of you might be saying "You deserve it, wasting all that money". It was his decision (not one that I agree with, though), and he has to bear the consequences. Any amount of big spending will have consequences that we must be prepared to deal with.

After paying off your high-interest debts, if you still have leftover cash, then by all means - proportion it and invest part of it.

4) I don't know how to

"How do I know what to pick? Do you have any hot tips?"

It's never too late to learn. It doesn't matter if you never came from a finance background, and it doesn't matter how old you are. It's never too late to start investing. In fact, as I've said many times before, the early you learn about it and get started, the better it'll be for you in the long run.

Places like Investopedia are good places to start learning about financial terminology. Compound interest, dividends, blue-chip stock, bonds, growth stock, value investing, fixed deposit, pips, P/E ratio, financial statements are just a few terms that newbies to investing might want to familiarize themselves with.

For advice on budgeting your income, or proportioning your income, Google is your friend. There are many other blogs online that cite places with cheaper-than-usual food, or clothes at discount prices. Apart from that, it is up to you how much you want to set aside for investments every month.

The one thing I must stress - please do not invest into something based off hearsay and gossip, and please DO NOT follow things like analyst's stock picks blindly. Please do your own due diligence before you invest. My friend, a newbie growth investor, invested in a company called Eratat on the word of some analysts, and it turned out to be a disaster for him. You can read the story here.


 There you have it. I'd be looking to continue this series on investing soon. Thanks for reading, guys. I hope it helps someone out there.

In other news: I am invested in Sinograndness for growth purposes. I know there is a loan agreement pending shareholders' approval, and the TTA (Thais) have the option to convert oustanding loan into new shares. I believe this signals the Thais' faith in Garden Fresh IPO-ing on the HKSE. A small dilution in share price is a small price to pay for a strategic alliance, I think. I am still vested, and I'm going to see where it takes me.

Until next time.



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