Thursday, July 29, 2010

Invest for the Long Term

I have given some tips on how you can choose suitable shares or funds to invest for the long term, when you decide to handle your own investment, instead of getting a low yield for your savings in an insurance policy.

Go to www.tankinlian.com, click on "Ask Mr. Tan" and search for "Invest for the Long Term".

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Unknown said...

These are some of the best advices that I have heard regarding investing, from Nassim Taleb, Author of "Black Swan" :

"We have this culture of financialization. People think they need to make money with their savings rather with their own business. So you end up with dentists who are more traders than dentists. A dentist should drill teeth and use whatever he does in the stock market for entertainment.

People should have three sources of variation in their income. The first one is their own business that they understand rather well. Focus on that. The second one is their savings. Make sure you preserve them. The third portion is the speculative portion: Whatever you are willing to lose, you can invest in whatever you want.

In the second category—preservation of value—you should have the consciousness that there is something called inflation. You should avoid some classes of investments that are very fragile."

"The problem is that citizens are being led to invest in securities they don't understand by people who themselves don't quite understand the risks involved. The stock market is probably the best thing in the world, but the true risks of the stock market are vastly greater than the representations. And this leads to extremely strange situations in which, say, someone has a bakery, is extremely paranoid about suppliers, very careful about risks, and protects his business with appropriate insurance. Then, at some point, he puts his $122,000 in savings in a fund that he knows nothing about, based on risk measures he knows nothing about, in companies very few people know much about.

People use "risk measures," but you're really not measuring anything like you measure temperature or distance. You are making a speculative assessment of a future event. That's not measuring, that's estimating. And as we saw with BP (BP), with the banking system, and with Toyota (TM), companies themselves are hiding risks from the security analysts. They're cutting corners. Companies have a tendency to hide risks.

So someone extremely careful and prudent in the management of his own affairs will be completely careless with the half of his savings invested in the stock market. I'm saying: Don't use the stock market as a repository of value. It has vastly more risks than you think."

July 29, 2010 9:24 AM

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