I believe when we talk about investments, we engage in a lot of “hear-say”. My friend say hor… I heard from the news hor… The general idea is that many people either blindly follow or just totally stay out from investing. I understand there is a good amount of work going into learning how to invest and it is not always easy to pick up all these knowledge and skills when you are already struggling with work, home and relationships (sometimes weight too). BUT I want to share with you some reasons why despite the seemingly uphill battle, you should learn to invest! We can learn and grow as a collective. *cheers*
Check out Ep.6 of the podcast if you would love to hear the whole thing. Cheers! Continue reading the podcast transcript to help you revisit some of the pointers.
1. The Responsibility of retirement lies with you.
The day when we (as a society) decided that it was okay to not have any form of retirement pension, that was the day when retirement responsibility became ours…40 50 years ago. People had pension schemes, which means all you need to do is to work really, really hard, and stay faithful to a company. When you are no longer productive relative to where you were and you had to retire, you get paid. People appreciate you for your hard work and continue to support you to the end of your journey.
Now there is … CPF, right? Essentially, it is managing the retirement responsibility between yourself and the state… but the CPF system is a very complicated entity and it is getting increasingly complicated because of all the possibilities… we will not dive into them in this episode… I questioned the reliability because it is ever evolving.
Something that is reliable is something that is always the same, but because it keeps changing with times, I question the reliability. Hence I believe the retirement responsibility and reliability fall primarily on us, we need to learn to manage our future. We need to recognize that, while we have good faith with CPF, uncertainty exists and we will one day be less productive.
2. Capitalize on the power of compounding.
In one of our previous, so we talk about how wealth essentially is income surplus compounded over time, right. Which means the rich people became rich because they have a decent amount of excess from their income and then they just keep collecting, collecting over different generations!
…these days you have so many more possibilities. Everything is digital. You can invest in the US or any foreign exchanges easily. Think about it. In the past when you want to invest in the US stock market, they are gonna have to mail you the financial report. *faints*
You start investing at $1,000 every year. You compound 10% 10% 10% 10% every year yeah. You get to like become a millionaire in 30 40 years? The market on average grows at about 10 to 15% (average of 8% factoring inflation), there are definitely times when it comes down, but on average 10% growth is not crazy… Leverage on the power compounding (check out the rule of 72, google please), wealth accumulation is a time game, not a speed game. So invest.
3. I believe that Investing allows you to create an alternative income without much risk.
Every one say investing very risky! Why? I’m going to share with you why it is not. The question to ask is what are the alternatives? Lets say you want to grow an additional income, your main income is your work or the business you’ve already built, which is cool… The main strategies are either you take on an a side job (aka side hustle) or you start a side business, or you invest… The discussion really lies between starting a side business and investing.
So why do I think investing is way less risky than starting a side business? Because whenever you start a business, there is sunk cost, which means the money goes in, you buy a whole host of things and that is it, the money is gone, spent and sunk into the business… and then we hope that it works.
When it comes to investing, there is no sunk cost (other than fees). Your money goes in and you wait and you see how it performs. Which means if let’s say I have $10,000 and I have decided to start a tea business, I spend $5,000 to buy the product, $1,000 on the website, $2,000 on ads etc. That is $10,000 and $10,000 spent. No more. All I’m left with are a bunch of products, a website and some digital ads… Whether will it work, I don’t know.
The alternative is, I could take this $10,000 and invest in a company like Starbucks. I could buy $5,000 worth of shares of Starbucks, spend the rest on cafe-hopping and enjoy, LOL. If you think about it, the risk of your online tea business collapsing is maybe a hundred times larger than Starbucks collapsing. So there’s this misconception and this fear that you need to purge, “What If I lose all my money investing ?!”. Somehow no one realizes that when I start a business, I have already lost all my money.
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I hope you learned something useful today, See ya!
Also, if you are interested to learn about the reasons why people go bankrupt in the stock market, do check out Ep.20 of the podcast. Here you go…
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