The Golden Rule of Investment

If given the opportunity here in Singapore, investment sounds good but it can be terrifying once we get to know the stakes even more. According to Victor Chng and Rusmin Ang, the founders of a finance blog called The Fifth Person, investing is our way to beat inflation.

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If we only save, our money will only be consumed by inflation but if we invest it, our wealth will grow because inflation allows us to generate more income. The inflation here in Singapore is 3-4% every year. If we consider our deposit accounts, we can only expect 1% interest per annum. This picture tells a lot – our money is just sitting in the bank.

How do we handle inflation? The answer is through investing. According to investors, there is only one golden rule of investment – always understand the things we are buying. This simple rule can make a different at the end of the day.

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We should not invest in something that we do not entirely understand. If we do not understand it because it is too complicated for us to handle, then we should not consider investing in it. If we really want to invest, there are different resources that we can consider. For instance, we can hit the books and even online sources before picking a stock.

If we study, we will know in time what makes businesses successful thereby knowing which stocks to follow and investment in. However, before plunging to invest, it is crucial that we save first. We have to make sure that we have sufficient money for investing and emergency fund.

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The Dangers of Bankruptcy  

We heard about the mishap of 50 Cent recently about him filing bankruptcy. As much as possible, we want to avoid this kind of financial turmoil because we are minutes away from getting kicked from our house and being broke. We do not want to live with nothing and start from scratch again. Filing a bankruptcy will break us and if we are not that strong to get back up again, who knows where we are heading.

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Bankruptcy also happens here in Singapore. Bankruptcy happens when a person owes more money that he/she can pay. To understand it better, bankruptcy is regarded as “reset” button. The reset button will allow us to start from scratch. Bringing with us nothing but lessons, we can still get back up again and at least recover but only a few ever get rich again.

We file for bankruptcy when we owe at least $10,000 and we have no way of repaying it. Once this happens, consequences will roll in. We will not like the consequences and it can quite taint our name. Knowing this, it is important that we should avoid bankruptcy. So, how can we avoid such misfortune? Here are the reasons:

  • Difficulties in looking for jobs: Yes, bankruptcy is not the end of the world but somehow it is the end of our career. When we file bankruptcy, many companies will have doubts and it will be harder to look for jobs.

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The worst thing that could happen is our company terminating our services because of the misfortune. Our bankruptcy reflects how we manage our finances and who would trust us with theirs? If we are given a second chance, we have to make it work and prove that we will not be in an unfortunate position again.

  • Restrictions in travelling: If we filed bankruptcy, we are allowed to travel within the country but not outside. Travelling overseas is restricted. Creditors will interpret going overseas as a means of escape. Creditors wouldn’t want that.
  • Restrictions in obtaining credit: When bankruptcy was out of the picture, our credit rating is as high as it can go. Bankruptcy will only give us heartache because we cannot obtain credit and if we can, it will not be greater than $500.
  • Restrictions in managing business: Bankruptcy is not something that we can just ignore. Even if we already paid our debts, we are restricted to manage any business let alone act as a director of a company here. We will forever bear the taint of bankruptcy.