Oftentimes, people like to know – ‘Which asset class is best as an investment?’.
Is it stocks, properties, EPF, FDs, bonds, unit trusts, ETFs, robo-advisors, cryptos, and so on and so forth? Some may prefer one or two asset classes for they tend to be more familiar with them. Some may diversify capital all across these asset classes as they don’t know which could succeed and which could fail. Also here, there are some who just avoid investing altogether for they view investing to be risky. So, they park their money in FDs.
So, what’s my take on this?
For a start, while I may have my preferences, I don’t think that this question is a helpful one. This is because I tend to view investing like going on a trip. As such, it consists of four components:
1. Where am I currently?
2. Where is my destination?
3. When and how fast would I like to reach my destination safely?
4. Will I get there safely?
I wrote about this some 4 years ago (Article). But here, let’s revisit.
1. Where Am I Currently?
This refers to an understanding of our current financial status. What’s your level of income? How much capital could you raise for investments? Are you learning about investing? How much experiences do you have in investing? So typically, I believe a 25-year old who has $10k in capital would invest very differently, from a 45-year old that has $100k in capital or a 65-year old who has $1 million in his bank accounts. It is hard to generalise – ‘which assets are better investments?’.
2. Where is My Destination?
I live in Shah Alam. So, if I like to go to Sunway Pyramid, I would either drive or I could take Grab. But, if I want to visit KCLau in Taipei, then, I would take a flight. In this instance, would I say that a plane is better than a car as a plane travels at speeds so much faster than a car? Of course nope. Many understand the choice of our vehicles is dependent on where we are going. It’s not about speed all the time. Rather, it is about suitability and practicability.
Stocks, properties, cryptos … etc are merely choices of vehicles, just like planes and cars. So personally, it is not about ROIs all the time. The key question to ask is: ‘Where do I want to be financially at a certain time frame?’. Then, I would be choosing the vehicles that are practical for me to reach my financial destiny.
3. When and How Fast Would I Want to Reach My Destination?
Let’s say, I want to go to Penang. Obviously, I could choose to walk, cycle, take a bus, drive, ride a train, take a boat or fly. The costs are different. The amount of time to reach my destination is different. So, once again, the choices of vehicles will be determined by when I need to be in Penang, who is travelling with me, how do I want to get around Penang and so on and so forth. So, if I intend to be in Penang fast, I could take a flight if I’m travelling alone or drive if I’m travelling with family and friends.
This leads us to our final point:
4. Will I Get There Safely?
You can say a superbike is the best way to travel from Shah Alam to Penang. But the thing is: ‘What if I’m travelling with kids?’. Is superbike the safest way to get the kids and myself safely and comfortably to Penang? So obviously, I might opt to drive a car to Penang rather than to ride a superbike.
Some may opine that cryptos are better than stocks as they could potentially 2x and 3x their capital in no time. This may happen when cryptos skyrocketed. The potential magnitude in gains in a short-time may lure them into cryptos. But, as quick as those gains, they also understand cryptos may tumble as quickly. Some may drop by 50%, 70% or even 99% in prices. Some might turn out to be scams, frauds, and lemons. So, the volatility is huge.
Now, the question is: ‘Would you travel to Penang or Taipei with a rocket?’.
After all, a rocket can travel so much faster than a plane or a car. Logically, most won’t as they are afraid that a rocket might explode along the way. As such, the more practical thing is to take something which is more proven, a car or a plane or any common vehicle that is ‘safe’, in order to get to their destinations.
Conclusion: What is the Best Vehicle to Invest Today?
The answer is: ‘Where are you at financially today and where you want to be?’.
There is no one perfect vehicle / investment. It is a matter of suitability.
For me, I don’t need to ‘double-or-nothing’ my capital to attain success. Instead of aiming for the highest returns, all I need is to pick suitable vehicles which will enable me to progress towards financial success sustainably. Oftentimes, I think even a 5%-6% cash return a year could be ‘good enough’ to propel me towards having a sizable portfolio in the long-term.
That is it for now.
For those who want to learn how to invest better and avoid the mistakes, which I made in the past, like the above, you may check out a free training session: