Beware of Money Traps

Do you face scenario like this.  You have your financial targets but have no idea on how to achieve them.  Therefore, you try to seek for clues to get "high" return.  Unfortunately, if you are unsure what you are doing, the chance of falling into traps are high.  Hence, when come to investment, you have to beware of traps around you.

My financial knowledge, years of experience in stock investment and understanding on insurance as well as unit trust has make me become an immune.  For my course students and those who are following my blog will understand that I am doing all my financial plan and investment plan by my own.  To me, this is an only effective way to avoid those traps.  I must admit that not everyone could do this unless he/she willing to learn.  Continual learning will not only open you mind which will tell you what is right or wrong, practice will further enhance your belief.  In short, if you think you can, nothing could stop you.

In this post, I would like to share some common traps that might lead you to no way:

1. "Expert" advice:  We could get all sort of free advises from the internet, radio, TV or any written media.  Do you have similar experience like this?  Whenever you receive a buy recommendation from a so-called "expert" based on certain analysis he conducted, you just can't resist and would like go along with his recommendation.  Be frank, I used to have similar feeling.  However, my rationalism manage to pull me back and demand me to further analyze the counter before any action.  So, what rationalism I am talking about here?  Well, if it is just good to be true, probably it is.  Therefore, instead of follow "expert" recommendation blindly, I would prefer to do my homework.  I believe in solid evidence but not what "expert" say.
2. Speculation:  Since I started my InvestBursa course , I have been receiving questions like when is the right timing to buy which counter.  Why speculation?  The only answer I could get is that people like to make quick bucks, just like betting in Casino.  Is speculation work?  I really doubt about it.  No one knows where will the market head to.  Therefore, it is totally illogical to put in your hard-earned money to gamble for quick money.  Just think about those rich men in the world, how many of them are speculators?  How often do they trade?
3. Use insurance as an investment vehicle:  I used to be an insurance agent.  Whenever I approached a client, he/she tend to ask me how much could they get back at the end of policy year.  To me, insurance should be a protection tool but not an investment tool.  I tried to educate my clients but they refused.  I attempted to tell them they could get better return from other investment than insurance but they gave me many excuses.  They did not even bother to look at the scenario I proposed to them.  Yes, I felt sad for unable to help.  As a matter of fact, all they need to do was just opened their mind, listened and tried to understand.  Their life could be different but they refused.  Anyway, these were their choices and there was nothing much I could do.
4. Real estate investment:  I am not a fan of real estate investment.  I only own my own house so far.  Simply because I don't want to being trapped by real estate bubble and loan.  If I want rental income, I opt for REITs instead.  REITs are managed by professional fund managers and they will take care of everything.  All I need to do is to buy REITs units and wait for my dividend to come.  I do not have problems like loan pressure, tenant runaway, difficulty on rental collection etc.  Isn't it great?

In short, learn before action is the key to protect yourself for being trapped.