My parents saved a lot for their children, yes, includes me as their eldest son too. Both were educators who dedicated their working lives to their students and a huge chunk of their bank savings to their children. When I started my first job, they asked me to save. They have bought insurance for me, thus my role is just to save more money so that my future is secure. For many years, Fixed Deposit (FD) was my best friend. I calculated what my salary would be when I reach 30 and when I reach 40 as well as what’s the final pay like just before I retire. It’s actually pretty good because I think I work pretty hard and increments as well as promotions to me can be considered above average. One day, I became interested in the stock market. I read more about it and as I read more, I learnt more. Then, share market became my second love, financially. However, everything became clearer to me when I bought my first property. After buying it, I realised that the property price increases EVERY year, even if slowly and when I compared it to my Fixed Deposit, I thought, ‘I better stop so much FD’ and start to buy one more property. More people were moving to cities and it’s called urbanisation and this urbanisation is not stopping anytime soon because Malaysia’s population continue to be YOUNG! Not too young which does not help but young enough to continue the growth.
Today, I read an article online about demographics shifts, especially rapid urbanisation. According to Bank Negara Malaysia (BNM) Governor, Tan Sri Zeti Akhtar Aziz, Asia’s urban population is projected to grow to 56% in 2030 from 43% in 2010 and rise further to 64 per cent in 2050. This will fuel the growth of mega cities with populations exceeding 10 million. Well, Greater KL may be considered one huge one coming soon where 10 million population is concerned. For these economies to continue growing, balanced growth is important and individuals must be equipped to adjust to new economic, financial and social realities that they will be facing. Lacking in awareness of different types of financial products would contribute to low level of confidence and poor knowledge of how products work. In the end, these individuals would be excluded from the complex and technology driven financial systems. Looking at the crisis that has happened, effective consumer protection frameworks would serve to protect the individual from excessive risks and this in turn would protect the financial systems from systemic risks.
What she is saying is that individuals who do not know much about the financial products yesterday may be okay but moving forward, financial knowledge is extremely important especially when these financial systems become ever more complex and technological driven. My father used to buy and sell shares by calling to his remisier. Today, a smartphone is all you need. There used to be just a few funds to select from when you are buying unit trust. It’s either high risk, medium risk or low risk. Today, you better know a bit about the funds before you buy. Property was never thought of as a form of investment. It was more like, if I have a home, I can grow my family and I do not need to rent. Today, when you look at all the rich businessmen, property is one form of investment that they will always have. If you really are afraid of properties, then REIT is available. Basically, how your life would be in the future depends not on what you do today but it depends on what you invest today. I believe career is very important but beyond that we must understand that if we intend to do as what our parents did long time ago, it may no longer be enough. Question is, are we ready for this financial journey?
written on 6 Nov 2014
Next suggested article: 84% of homebuyers have only ONE (1) outstanding home loan. 🙂
Lacking in financial awareness today? Peril awaits.
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[…] What if the Prime Minister of the 6th largest economy in the world tells the world that the next crisis will be coming soon? Yes, we are talking about United Kingdom’s Prime Minister, David Cameron. Would you believe it? He said the eurozone is possibly going into its third recession because of high unemployment, falling growth and the real risk of falling prices too. As for emerging markets which were the drivers of growth, they are slowing down. Emerging markets would of course include the world’s second largest economy, China as well. He also quoted the Ebola epidemic, Middle East conflict as well as Russia’s illegal actions in Ukraine as contributing further to ‘instability’ and ‘uncertainty.’ He also said his own country is doing well currently but may face headwinds when the world goes into recession. Of course, all his political opponents have claimed that he is just trying to divert everyone away from the economic problems at home. His reasons are pretty real and are based on all the current happenings. While he did not say how long this new crisis would be but perhaps he is saying the same thing as an earlier prediction by a US company? Read here: 65% probability – recession by end 2015 or an even earlier prediction? Read here: Arturo Bris – Crisis Looming Surely when everyone is saying the same thing, it should be happening. Let’s assume the crisis really do come, just like the 2008 one which started in America. What should you do now? Well, if you own a property, perhaps you need to call your agent and start to sell your property now. This allows you to transfer your asset from property into cash and get ready for the potential price fall for you to buy back your property as lower prices. Even if you do not believe him, with regards to property investment strategy, this may be the time you become really careful. Stop buying properties which seems to be overpriced. If it’s for own stay, it’s ok. Thus far, crisis do not last forever and many countries have learnt to recover from crisis better these days unless they are the super poor ones. In a discussion the other day with a group of friends, they were also talking about the potential crisis. Thus they were not thinking of buying any property today. I told them, there’s no right and wrong because no such as thing as anyone who is able to predict the crisis no matter how statistically proficient they are. However, if they seriously believe a crisis is coming, then perhaps they can think about buying a new launch by an established developer, especially within 2015. Of course, think about the price per sf for that development and its overall price because after crisis, the price psf and the overall price would recover higher, for those which were on the lower end. Yes, I think RM550psf and below to be on the lower end. The reason is because costs including land, material and labour are still going up, especially during good economic times. As for the usual 3 year completion period, the new property should be ready to handover the keys in 2018. By then, an usual crisis would have been over and as usual, you can make a quick sale to get profits and use it for your next purchase. If you only bought in 2016, you may miss out on the opportunity by one year. 🙂 Not a big issue but this can be a strategy if you really believe 2015 is a crisis year. written on 17 Nov 2014 Next suggested article: Lacking in financial awareness today? Peril awaits. […]
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[…] Putting all our money into property is likely to be extremely risky yeah. An earlier article here: Lacking in financial awareness today? Peril awaits Happy working and investing, at the same time […]
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