Wednesday, January 13, 2010

Investment principles for 2010 and beyond

Read this article in Market Watch.

Principles
1. The markets are a dangerous place. They are little more than legalised casinos.
2. Fear and greed drives the markets.
3. Technical analysis does not work.
4. Stay liquid and diversify

Advice
a) Never invest with money that you may need in an emergency
b) Money that you may need should be in a saving account, to be used in an emergency
c) Investments are always priced at watch they are worth
d) Actively management funds rarely beat the benchmark

The 4th principle is useful and has to be read many times.
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4 comments:

Tan Kin Lian said...

My advice to young people is to have savings, and to keep them in liquid form, in a savings account. It is all right to invest the money in shares or funds, provided that the transaction cost is low. There is market risk, but the risk can result in a gain or a loss.

The worst form of saving is a life insurance policy that takes away two years of savings. To recover this loss, the savings has to be kept for at least 15 years to break even. This is worse than taking the market risk with shares.

January 13, 2010 7:44 AM
Tan Kin Lian said...

All of these points are explained in my book "Practical Guide to Financial Planning", which will be available in the book stores in March 2010.

January 13, 2010 7:44 AM
Anonymous said...

Technical analysis is like visiting a fortune teller;asking for tips from a medium in the temple; waiting for signs from your pets; getting tips from your dead grandmother at the cemetry etc It is hocus pocus and it is superstitious..
This is a scheme cooked up by your brokers. Sometimes it is also used by your insurance agents to make you buy a fund or UT.

January 13, 2010 9:07 AM
Anonymous said...

Another warning to consumers:

Salesmen cannot invest for you they sell to you a fund that makes commission for them.
Look for an investment adviser with the right qualification. Certainly not certificate in ILPs.
Insurance agents definitely cannot nor salesmen disguised as financial consultant.

January 13, 2010 11:54 AM

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