Many readers ask me questions about what to invest in. I always concluded that there are mainly two places you should park your money to let it work harder. These two investment vehicles is nothing special. You and I know them. We all know about them. First is business – either your own business or other people’s business. Second, real estate – property, farms, lands and etc.

Previously I’ve made a video and article talking about why you should invest in real estate. Now, let’s talk about why you should invest in stock, which is an ownership of an existing business that’s listed for daily trading.

#1. Put your money where value is created, not stored

As the paper money value depreciate more each day, I’ve got a lot of inquiries asking my opinion about gold and silver. I agree that you can invest in these precious metals and make handsome profits when its price soars above the roof. This has happened for the past recent years. You should probably convert a portion of your liquid cash into gold and silver, then use the gold coins and silver bars to decorate the interior of your safety box. But would you put 100% of your net worth in gold or silver? Probably not.

The reason is pretty straight forward. These metals do you no good. It has value but it doesn’t produce value. I believe that when you invest money, you want to invest in some assets that produce value or income. Essentially, great companies use investors’ money to create goods, to produce sought-after service. These products and services inject values into other people’s life. It makes customers healthier (nutritional products). It makes your communication easier (smart phones). It lets you move faster (vehicles). It gives knowledge to searchers with a single mouse-click (Google).

That’s why Warren Buffett preaches that stock investment is going to beat gold in the long term. The key point here is that when you are investing in stocks, you are actually buying an asset that is productive and creating value for its customers. The ability to create value makes the assets valuable!

#2. Easier to Own a Piece of Established Business than Building One Yourself

You see, it takes a lot of effort to build a successful business. Most entrepreneurs are workaholic, at least at the beginning they work their ass off. Undeniably, building a successful business can produce the kind of magnificent return you won’t find elsewhere. The message I want you to understand here is that building your own business take a lot of effort, time, energy, and sometimes sacrifice.

Compare the effort of building an enterprise on your own versus buying a piece of an existing established company. Relatively, it is many times easier to buy a share of a great company listed in Bursa Malaysia. Imagine that you don’t have to show up in the company you invest in, on every working day. You don’t need to deal with any issue of the business operation. You don’t even need to attend its annual general meeting! All you need to do is to cash in the dividend cheque you receive regularly. And even this is done for you if you trade using a pledged account.

#3. Flexibility and Liquidity

Stock investment provides the highest flexibility and liquidity. You can sell and buy anytime, anywhere as long as it is the market trading time and you have access to Internet. Even without Internet, you are just one phone call away from your remisier or stock broker.

I would like to compare this again to running your own business. If your business go bad, you might get stuck. It is harder to close down the business because of your sentimental attachment. The process might be lengthy and miserable if a business goes bad. I’m not saying that you shouldn’t start your business. I created the course Founder Method to increase your chances to build a successful business. What I want you to understand is that comparing the hassle you will need to go through, investing in stocks provide you much more flexibility. You can always change your holding of stock portfolio anytime.

When company X you invested in goes bad, or simply that it is overvalued by the market, you can easily sell off the shares and buy another company share that is selling at a bargain price. This provides you the flexibility of shifting your money to different company, different industry or different country almost instantly. There are so many selection of great companies even if you are just referring to Bursa Malaysia alone. Nowadays, most securities firms also provide the flexibility for investor to invest in stock exchange at other countries and regions.

#4. You Can Do It from Home

As I explained in the article Why Should You Invest in Real Estateproperty investment suits extroverts, who love going out to look at properties, meet people, and negotiate the deals. Meanwhile, stock investment suits introverts, who love to stay home to read, research and think!

In other words, you can do it all at the comfort from your home. You can DIY – Do-It-Yourself!
You can do buy and sell transaction at home. You can find reports on the Internet. You can read announcement and get frequent update on the news. All these information is already sufficient to let you conduct analysis and research to find the companies that is worth investing your money.

Compare it to running your own business and investing in properties, there is no employees and tenants to manage. In fact, investing in stocks had no other people to manage other than yourself (managing your own time and money). That’s one of the best advantages of being a stock investor.

#5. Enjoy Long Term Business Growth

If you’ve invested $1000 in Berkshire Hathaway in 1964, it will be worth $8 million today.
If you’ve bought 1000 share of Public Bank back in 1967 during the IPO, it will be worth more than RM1.5 million today.
If you’ve bought 1000 share of Genting back in 1971, it will be worth more than RM2.2 million today.

This shows the other advantage of buying shares of a great company – it keeps growing!!!

#6. Available to Everyone

When a company is publicly listed, it is literally available to everyone to own a share of the business. In Malaysia, you can buy share at 100 unit at a time. Although it is not viable to invest hundreds of ringgit at a time due to the minimum transaction cost involved, it is easy for anyone to own a share. You can buy RM2000 worth of share at a time, or RM10k, or RM20k or whatever amount. The transaction cost is negligible when you are buying a share at a relatively large amount.

Due to the regulation and strict requirement of listing, a public company has to be transparent in the sense that a lot of information is made publicly accessible. You can download their annual report. You can also read analyst reports. You can also make better sense by visiting the business outlet to see it yourself.

In stock investment, you can definitely accumulate “one share at a time” due to the low capital required and the easily accessible public information. So the big guys and the small guys are in fact playing at a level field.

Rich People Have Stock Holdings

Rich people I know have majority of their money invested in these two places – business and real estate. In business, the rich either hold shares of other people’s companies (think of philanthropist Koon Yew Yin), or the shares of their own company (think of Larry Page and Sergey Brin of Google).


    14 replies to "6 Reasons Why You Should Invest in Stock"

    • LAI SENG CHOY

      Well said and fully agreed. To be successful in stock investment is really not difficult at all if you know what you are doing with correct mindset and methods. I am sharing all these in my online stock investment course.

      Am I speculator? No way. Am I a value investor? Well, not fully. I am doing it with the combination of value and investment timing identification. My method has been giving me decent return from stock investment, even during the market downturn.

    • rc

      Hi KC, from your opinion what you think on the difference between investing in short term, mid term & long term. As i seen that many people now is trading almost everyday , every hour or every minutes on commodities, future, stock, option & forex. How frequent should we trade or invest in stock market? short term, mid term or long term?

      • KCLau

        @RC, there are mainly two groups of people who buy stock to make profit.
        First group – mid- long term investor, who buy and will keep the stock for a few years at least. They earn dividends declared and also the capital appreciation.
        Second group – basically trade and speculate – aim to get return as fast as possible.
        There are also winners in both group. But how do you think we should approach an investment. If you keep monitoring the market every day and respond to market news every hour, is it an active job? or an investment that give you peace of mind?
        Stay with the first group – this is how rich people invest.

    • ahmad syukri

      thank you so much for the post. it really help me in my journey of investing in shares.

    • Siva N

      The comments made are sensible in a uptrend market and those well versed in technical anaylsis.
      We have had so many crashes which many could not predict.
      Choosing a well managed company is wise , knowing who runs the company.
      The problem today is complicated by greed of directors and lack of business ethics that hurt the minority shareholder.

      As for silver, although I agree that the value of precious metals like gold and silver rather’ rigid’ and several factors affect their true value, silver appears to be having a brighter future than gold.
      Two reasons are that there are no that many silver mines as gold mines.
      Secondly silver has commercial value as it is need for manufacturing of most electronic gadgets.
      Would you care to tell us more about the long term value of silver.

    • Raj

      Again, another educational and enlightening article.

      I did invest in stocks direct but had to keep tabs on their performance on a regular basis in order to sell or buy them at the right time. However, time being a constraint, my timing was out and I did lose money in direct stock investment during the last downturn. To overcome this and being fainthearted since, I started investing in unit trusts so at least let the professionals manage my investment, although I realise there are fees incurred when investing in unit trusts. I am happy thus far with my unit trust investments for at least my capital remains intact with satisfactory returns, their returns being more than placing my funds in fixed deposits with banks. One must understand that I am 62 years old and at all costs want to preserve my capital. Your input please.

    • Alwin Yau Min Sin

      Hi KC Lau.

      6 Reasons – Why I Should Invest in Shares

      1. It is good to invest in valueable blue chip shares for hedging agains inflation when the initial capital is able to gain dividend income, right issues and capital appreciation overtime.

      2. I can aslo participate as a business shareholder of the public listed companies to do businesses with a small outlay of capital invested will gradually increase the capital and reinvested my dividends each year.

      3. I can used the accumulated dividends received yearly to claim my personal income tax rebate and to payt off other debts as well as to fund my passive income for retirement planning.

      4. I can participate in various types of businesses from many listed companies and flexible to switch my businesses by selling the existing shares with other types of shares in the shortest period without any problems.

      5. I can used my shares to pledge as collateral for bank borrowings in good debts to purchase new investment like properties for rentals and do own business to duplicate additional income from different investments.

      6. I can used valuable shares as my one of the assets parcel in the Will and Trust for my legacy estate planning in my next generation or for charities in future.

      Finally, I should focus to invest at least 30% wealth creation and accumulation into good valued stocks in my entire wealth portfolios for my retirement and legacy planning. Do you agree ?

      Thank you very much

    • Kenny Ng

      Doing investment to grow your wealth via value investing in good company stocks on long term basis certainly grows your money or value of your wealth and investment due to the compounding growth effect year after year interms of the company’s value growth, stock value appreciation, bonus and rights issue and increase in dividend payments to shareholders.

      Unlike establishing or running a business of your own personally which faces stiff competition, product price war, operational and supply chain issues and others which are hard to control in most cases; as an investor investing in good company stocks you do not have direct impact of such issues. Moreover, a self manage company if not properly manage not only will it be in red over certain period will most likely be closed down but the stock markets (example – KLSE, SGX, ASX, NYSE, NASDAQ…etc) will not even though it may go thru the whimsical ups and downs which have weathered many global crisis since their inception.

      • kclau

        @Kenny, thanks for posting this insightful comment. It is certainly much easier to invest in business that’s already making profit, than starting one on our own from ground up.

    • Chris Yeo

      Hi KC, thank you so much for sharing this simple but invaluable info..

      in my view there’s 3 main pillar’s however in your post you’ve mention the 2 pillars of financial freedom.

      I do not have vast experience in stocks and will still look more of it to understand and know how to read the data. I believe this come GE would be one of the opportunity to spot a few good counters to dive in (with proper study of course)

      I do have some investments in REITs only and looking forward to learn more and pick on the high potential stocks. The talk from Lai Seng Choy was also interesting to learn 🙂

      Happy Learning and Investing !

      • kclau

        Dear Chris, what is the 3rd pillar your referring to?

    • Kenny Ng

      Totally agreed and well written. Each country have their own Stock Exchange(s) and this is usual govern by their local authorities and in some countries their securities exchange can be classified as a monopoly business.

    • Steve Lye

      Yes, indeed. Owning stocks of good companies is an Excellent way to accumulate wealth. It is a time proven method that works for anyone, provided they do their due deligence on which stocks to invest in and are patient enough to go through the whimsical ups and downs of the stock market and see their investment through. In the end, if invested long enough, it will reap huge financial rewards due to the compounding effect of dividend returns and value appreciation. I have always mentioned to my friends that the Stock Market will never die. It may go through some major corrections over a period of time but in the end it will always bounce back higher as more value is created.

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