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 cash flow. 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 naïve, 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?


KCLau
KCLau

Personal finance author and trainer

    11 replies to "Who else wants to invest for sure gain?"

    • KnowThyMoney

      @Esky, I agree with your statement. In bull market, dividend yields are not that attractive as compared to hot stocks that shoots up like a rocket. In bear market, usually the stocks will give less dividends due to poor earnings, revenue etc.

      Hence, knowing a companies fundamental information is also important besides looking to its past historical dividend yields.

    • Ryan Lim

      “With the decreased emphasis on dividends since the mid-1990s, the Dow Jones dividend yield has fallen well below its historical low-water mark of 3.2% and reached as low as 1.4% during the stock market peak of 2000.” – qouted from wikipedia.

      From my personal, limited observation, it is very difficult to make money out of dividends nowadays. As company now favours on reinvestment instead of giving out dividends. Giving out dividends could sometimes show that the company is running out of idea to expand and they decide to return some of the cash to the investor. At the same time, the stock price will fall on the dividend declaration date as the net asset of the company decreases (Simply put, the stock price is equal to the total asset of the company divided by the number of shares.). Thus the board of director is much reluctant to approved high dividen pay out.

      “Historically, the Dow Jones dividend yield has fluctuated between 3.2% (during market highs, for example in 1929) and around 8.0% (during typical market lows). The highest ever Dow Jones dividend yield occurred during the stock market collapse of 1932, when it exceeded 15%.” – qouted from wikipedia.

      Correct me if I am wrong, the statement tell us that we get less dividend during good time. I am not familiar with other investment such as real estate. But I think investing for capital gain in stock is important and relevant at the 21st century.

      • KCLau

        There is always good buy in any asset class. Just that during good time, it is harder to find the real bargain.

      • Esky

        “Correct me if I am wrong, the statement tell us that we get less dividend during good time.”

        I believe it means the dividend in PERCENTAGE (not actual amount) is RELATIVELY low in good times, due to the hi stock prices, and vice versa.

        eg. a 1 cent dividend during a good time when the share hits 50 cents, is equivalent to 2% return, but the same 1 cent during a bad time when the share plunges to 5 cents, is equivalent to 20%. Same AMOUNT but different PERCENTAGE in returns. 😉

      • Netmask8

        S & P 500 http://en.wikipedia.org/wiki/S%26P_500
        Year 1987 = 301 pts
        Year 1997 = 801pts
        Year 2007 = 1565 pts
        Year 2017 = ??

        Dow Jones Industrial Averages(DJIA) http://en.wikipedia.org/wiki/Closing_milestones_of_the_Dow_Jones_Industrial_Average
        Year 1987 = 2002 pts
        Year 1997 = 6600 pts
        Year 2007 = 12,416 pts
        Year 2017 = ??

        Will start to monitor to EXIT PLAN + LOCK PROFIT when DJIA started reaches 19,000 pts to go beyond.
        In year 2018 = perhaps cash is king in bad times and is a good properties buy with strong bargain power.

        Up to you to believe the HISTORICAL Data & Facts, right? Will history will repeats again?
        U think what is best for u ..

    • ChampDog

      A lot of people say you need to pay the lesson fees (which means lose money) before you can expert in investing especially in stock? How true is this? 🙂

    • Chong Kong Hui

      Possession of thing can be short-lasting fun but Investment can be a long lasting fun.

    • Woon Lip Fuey

      Ya, that’s a lot to learn for first rule, before you earn money, you have to learn not to lose your money first.. And yet, invest in knowledge is far important before start investing.

      • Benjamin Lee P.H.

        As Warren Buffett said…Rule #1: Never lose money. Rule #2: Never forget rule #1.

    • Ryan Lim

      Thanks KC for another nice article. I would like to know that in Malaysia (also in Singapore if it’s within your knowledge), does one have a tax advantage in capital gains comparing to dividends?

      • KCLau

        capital gain is not taxable, but dividend yields are.

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