Interest rate globally is at a low level. Central banks have pumped a lot of money into the economy to stimulate its recovery. The hope is that low interest rate will encourage some people to buy to buy houses or cars, or businesses to invest and produce goods.
Low interest rate is bad for savers. They will not earn sufficient interest on their savings. To earn a higher return, they have to take the risk and invest in stocks or other assets.
Eventually, the economy will recover. At that time, the prices of equity, property and other assets will increase. Those who take the risk now will benefit from the recovery.
The alternative is to avoid risk and accept the low rate of interest, which is now less than 1% per annum. This is not sufficient to cover inflation. In my case, I prefer to remain fully invested and wait for the recovery.
Tan Kin Lian
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