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Feel that stock picking is not for you? But still want to be able to achieve a reasonable return for your savings? Seem unlikely that you can achieved both objectives? There is only two things you need to know.

 

  • Compounding only works in the long term

First and most importantly, we have to be clear of how investing actually works. In order to get a meaningful return from our investment and truly save for our future, we need to understand that compounding our return can only works if we allow it to continue for a long time. This means that we should view our investment as something we hold on to for the next few decades. A mere $1,000 compounded at a rate of 14.4% over 20 years can become $16,000.

Therefore, we need to allow our investment to work its magic by staying investment and not get caught up with quick profit and speculation in the stock market.

 

  • You can create your own low cost fund

Once you understand this concept, there is no need for you to get locked in into mutual funds or insurance saving policy that take a big commission fee and wipe off your investment returns. You can get the diversification and exposure of investing in the market simply through instruments such as Exchange Traded Funds.

 

In fact, the Hong Kong Stock Exchange has one of the most vibrant group of ETFs that offers exposure to almost any market or commodity.

 

Value In Action

So before the next time you get sold into investing in a new mutual fund or buying a new investment-linked insurance policy, ask yourself if you are able to create a similar investment strategy at a much lower cost simply by investing in an ETF.
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The information provided is for general information purposes only and is not intended to be any investment or financial advice. All views and opinions articulated in the article were expressed in Stanley Lim’s personal capacity and do not in any way represent those of his employer and other related entities. Stanley Lim doesn’t own shares in any companies mentioned above.

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