Thursday, July 21, 2011

INV101 Investing in the stock market

The highest rate of return on savings is to manage the investment on your own. It's no doubt that some people find it tiring and troublesome to do the research and to keep up with the share prices everyday. As investors, we do our own research on the companies that are of interest to us. However, we do no keep up with the share prices everyday. That is what speculators do.

There are many ways to grow our savings.
1. Leave the money in the savings account.
2. Leave the money in fixed deposit account.
3. Leave the money with fund managers.
4. Leave the money in our own hands.

The interest rate of the first two options are way below our intended rate of return. Both choices give only up to 1% per annum interest. This is far from beating the inflation in Singapore (currently at 4.5%). Leaving your money with the fund managers can only beat the inflation by a small percentage margin. Even if the fund managers are able to give you a returns of 7%, it beats the inflation by 2% only. On top of this, the fund managers actually earn part of your returns as management fee.

To maximise the growth, investors should manage their own money. Looking for companies that give returns of 10% and above is not impossible. I have a few companies that has given me more than 10% returns compounded for the past few years. The dividends received were reinvested to buy more shares of the wonderful companies. In this way, then were we able to grow our savings at double digit rates.

Take some time off to think about it. Do you want your savings to grow at least 10% per year compounded for the next 20 years or do you just want to grow your savings at the same rate as inflation? The choice is yours.

Cheers and happy investing.

3 comments:

  1. I am starting to invest in the stock market. Should I get a broker or do it on my own? What is the minimum amount of money I can invest if I open an account on E-Trade or one of those online traders?

    invest in the stock market

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  2. Retail investors need to pay commission when you trade, hence you need a broker, unless you have the liscense. Opening of trading accounts is free but you need to have money inside the account before you start trading.

    ReplyDelete
  3. Money investing in stocks has to be done with a lot of understanding about the share market and you need to follow day to day business and political activities and take appropriate decisions to get better returns on the investment.

    invest in the stock market

    ReplyDelete