Tuesday, November 9, 2010

How to Invest n Not Lose Money

(Sumber : http://kclau.com/investment/how-do-i-invest/)

I often receive emails from reader asking opinion about the market. They often ask if it is good to invest in properties, or gold, or a specific fund, or a stock counter. This is a common trait that normal people always think that investment is about putting in your money and see it grow.

Investing is not about money alone

The fact is that if you think in terms of money alone, you are missing another important part of investment. Besides investing money, you should also invest another important resource which is not renewable. It is known as time. You should invest both time and money to get the best return.

Take the time to study the investment before putting your money down. Since time is not renewable, it is much more valuable than your money. Initially, you may need to put in more time in an investment to learn the inside out. Later, when you get more knowledgeable and more experience, you will make less mistake. Hence, you will make more money from your money invested.

When making an investment, you should also know the type of return you are looking for. Some people invest without knowing the outcome. Are you investing to get regular return? Are you investing to get more happiness? Or are you investing just to make more money?

Never lose money

A very important rule of investment is not to lose money, as Warren Buffett had preached. The first rule of investing is not to lose money. The second rule is not to forget the first rule. So it is in fact only one rule.

But how do you ensure not to lose money? Isn’t investment always comes with risk. The higher the return possible, the higher the perceived risk involved. The secret lies within the buying process.

Successful investors ensure that they make money at the time of buying, not at the time of selling. For example, you can buy a property at a discounted price, which is lower than the market value. You have already made the profit at the time you buy. This links to another very important investing style.

These types of successful investors normally invest for cashflow. The capital gain is like a bonus. You see, when you buy a property at a lower price, the rental yield will also be higher compared to properties bought at market price. So you must differentiate your investment style from those who only know capital gain. If you are aiming merely for capital gain, you are buying now and wish that the market value will go up so that you can make the profit later when you sell the property. The safer way to invest is to aim for cash flow rather than aiming for capital gain only.

In investment activity, you must know what you are doing. Buy now and hope to sell something at higher price later is quite na├»ve, unless you know what you are doing. Are you sure that the asset you buy now is “low” price? Are you sure that the market value is going to rise later? If you don’t know what you are doing, you certainly aren’t able to answer this.

Know your Best Investment

Since investment can be found anywhere, there are a lot of money can be made in every investment asset class. The richest man on earth invests in his own business. The second richest man invests in other people’s business by buying their shares. Many rich people acquire real estates as a major portion of their wealth. Many entrepreneurs become rich in just a few years by investing their time and effort into making their ideas work.

In a nutshell, every investment classes can be the best investment for you. The question is how do you know which is the most suitable one for you. How do you know which investment you should focus on and generate the highest return for yourself?

I’ve written a new chapter in the updated version of Top Money Tips for Malaysians. The bonus tip is about identifying the best investment. You need to identify what you are passionate about. So that you can leverage and have total control which will ensure that you won’t lose money in the process.

How to invest

How to Invest

The above are the principles I hold on to whenever I make investment decisions. How about you? How do you invest?

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