Enjoy big returns when you invest your money.

We are in the age where there are many kinds of investment instruments that we can invest. Investment is so common that almost everyone has some kind investment in their life. Investment however is also confused with trading. Some people think that they can lose their initial capital and lose all their money in investments.

This is not true because investment generally have a long time horizon. With longer time horizon, more money can be earned from compound interest. Unlike investing in real estate, investing in any financial institutions gives you compounded interest. The rich do not get richer by investing; they get richer because they invest in a very long time horizon.

When you decide to invest your money, you must be aware that you need to commit to your investment in a long term basis. There are no short term gains in unless if you are trading.

I have a personal friend, Joseph, 38 years of age, who invested his money 8 years ago. He invested in a unit trust that gives a potential return of 5% to 20%. His initial aim was to save his money in an account that can give him more interest than what the bank is offering in a fixed deposit scheme. Just recently he drew an amount totalling up to $160,000 and used the money for his home renovation and bought a holiday for his package for him and his family to Europe. He told me he only saved $800 a month and deposited the money into the unit trust.

I am sure that you will also want that kind of money in the future. Let it be for your child’s education, a dream renovation, your dream vacation, your dream car; it all possible to achieve if you start today.

Protect your wealth!

People are now more aware of how to make more money. They know that they will have to invest their money if they want to have more money. However, the what kind of investment instruments one must invest is still one of the more confusing things.

Some people will have a good experience investing their money but some will have very bad experience. Some can earn double of their initial capital while some lose all their money in their investment.

While many love to invest their money, not many want to protect their current income. Protecting wealth is as important as wealth accumulation. You can be earning $100,000 per annum but one accident can change everything that you earn. Wealth protection is all about risk management and insurance planning.

If you already have an insurance policy, it does not mean that you do not need any more coverage. Insurance planning is very much related to an individual life stage. For young adults who just started working, the main protection need is their income. For a young couple who have a newborn baby, their protection need is their income their baby’s protection, and their mortgages if they have any.

Wealth protection must be taken seriously and it is not something that you can skip. Insurance premiums need not be expensive if you know how to plan. The planning process can be very tedious but it is all worth it. The last thing you want is having an insurance policy that is very expensive and do not meet you needs.

How you can create wealth.

Everything seems to be cheap nowadays. Thanks to the wide variety of credit options, people can buy anything they like even though the item is very expensive. Most people are spending almost half of their income to pay their debts. Even if the pay gets an increment, the liabilities also get an ‘increment’.

In Singapore, you can buy a first hand car with just a dollar down payment. With this kind of offer, people are more tempted to buy a car even if the loan amount increases to almost half. In this country, you can even buy a hand phone on instalment basis. Practically, you can own anything that you see and like.

With liabilities almost half of an individual income, there are bound to problems. The concept of taking a debt is widely mistaken. Debts are actually taken only if one can service their loan. With this statement, of course you can expect a lot of people taking on debts because they know that they can pay. However, they will have troubles servicing their loan as time goes by.

Why?

The answer is very simple; people do not have cash flow management. If only we are taught on how to manage our cash flow in school, I am very sure that we will not have any problem handling our money.

There is no single subject in school that teaches us on wealth creation. What our teachers tell us is that we have to study very hard so that we will have a good future. Our teachers explained to us the consequences of not studying hard enough but never tell exactly how we can create wealth when we study hard.

Wealth creation is something that very complex. There are many factors contributing to an individual’s net worth. One of the golden rules is not to have a debt service ratio that is more than 45%. Personally, I would recommend one to minimise to as low as 20%. No matter how much your income can be, if your debt service ratio is high, you cannot create wealth because you will be spending too much money servicing your debts.

Now, you can also be a millionaire.

Setting a goal that is quantified is very important if you want to be become a millionaire. Most of the time, people cannot become millionaire because they do not plan their goals. Your millionaire planning must be quantified so that you will not be swayed away when you have more money.

I have seen many businessmen who earn $40,000 a month and always dream that they will be a millionaire. However, these people find it hard to achieve their goal not because they do not invest their money or whatsoever, they just fail to plan. Example of plan is as follows;

Miss Frugal wants to be a millionaire. She has an income of $480,000 per annum. Despite being well to do, she managed to save $180,000 per annum because she is frugal and is a single woman.

Inflow: $40,000
Outflow: $25,000
Savings: $15,000

Time to take to be a millionaire;

ROI Amount Years

8% $180k pa 4.78
12% $180k pa 4.51
15% $180k pa 4.33
20% $180k pa 4.09

With this plan, she can roughly invest her money that will give a yield of 8%- 20% and she will be a millionaire in less than 5 years time. If she does not have her millionaire plan, she will have problem guessing when she will be a millionaire. She will also religiously save $180,000 yearly as she will be motivated.

Many people fail to be a millionaire despite having a lot of money is because they do not have a plan that they can follow. They usually plan their make their first million by thinking of how to multiply their income streams and working extremely hard. Everyone can be a millionaire. This may sound stupid but everyone can indeed be a millionaire.

Here is how;

ROI Amount Years

8% $500 a month 34.6
8% $1,000 a month 26.5
8% $1,200 a month 24.4
8% $1,500 a month 22.0

Now, ask this question to yourself, is it impossible to be a millionaire. Well, no!

Financial planning

I had 2 very interesting people that I met today and discussed with them about financial planning. The term financial planning itself is often misunderstood and people usually think that financial planning is a simple task and everyone can plan their own finances. Financial planning is the process of meeting your life goals through proper management of your finances. It is not an easy plan to develop if you do not have the competency and skills.

Back to the conversations that I had earlier, one of them told me that he already had his finances planned and he was very confident that he does not need my help. I knew in that instance that this guy will not know anything about his retirement planning and I asked him how much will he require if he were to retire when he reach 65 years of age.

He laughed loudly as if I was joking and told me that calculating his retirement fund is an impossible task and his plan of retirement is to acquire as much money as possible. He was not sure how much money he will require but he was certain that he was on track. He assured me that I need not worry about his retirement planning.

I admit I was a bit agitated but I told him that I can calculate his retirement fund needed. As I was explaining to him and given him the numbers, he looked flabbergasted and asked me to plan him his retirement planning immediately. I was so happy that he was willing to listen and take actions.

The other conversation that I had was with a 40 year old man. He has 3 children that he has to support and has high hopes on them. When I asked him does he have enough money to pay for his children’s higher education, his face went blank. He then told me that he should have enough and with all the study loans that are available, he has nothing to worry. This time round, my face went blank.

I asked him whether he is ready to pay his child’s educations loans for the rest of his life and his answer was very brief and simple. All he said to me was, he has no choice and if he has to work hard to pay for his children’s education, he will do it even if it means that he has to work even during his retirement years. I was moved by his paternal love and told him that he does have alternatives.

As you can see, financial planning is very important and having a good financial plan will add leverage to your life. Leverages that can even lead you to your financial freedom.

Ignorance and lack of investment knowledge will drain your pocket.

Investors nowadays are exposed to all kinds of investments. Some offer returns that are extremely lucrative, while others offer little or no returns. However, there are no particular kinds of investment that will give you the best returns. You may have heard from other people that are some investment that you must avoid because of the risk involve and some investment that you must invest your money on because of the returns.

Ultimately, these tips that you get or market insights that you get are just some preferences. Believe or not, all kind of investments can give you lucrative returns if you know exactly what you are investing on. You definitely know world renowned investor guru, Mr Warren Buffet, also the 2nd richest man in the world, gets his fortune from investing and trading his money in stocks and shares but this fact also do not say that you too can rich if you invest and trade your money in stocks and shares.

If you have the skills and in depth knowledge like Mr Warren Buffet, you can get ready to mark you name in one of the richest people in the world. To really make money in the stocks and shares, you need to have a due diligence. You can forget about making tons of money if you do not know anything. I suggest that you continue living your normal life because you will not lose as much money if you invest your money.

I am not discouraging you from building your fortune; I am challenging you to put in effort studying the science of investing. I have seen countless investors that do not know what they are investing on and talks as if they are really maximizing their returns. However, I could not be bothered about correcting them because they are just too ignorant. They would rather believe their broker’s tips than doing their own research and study even deeper into the finance industry. And every time they engage their broker’s service, they are paying quite a lot of money on them.

I really hope that you will not be ignorant and think that you know a lot of investment or trading because the fact is this, people take degrees to do this sort of things.