Investment

Now we are facing economic recession. What will u do if u have extra cash? Put in the bank or invest them???

Last year, the government has assured that the money in the bank is 100 percent guaranteed. This means that the possibility of the account holders to lose the money in their account is almost 0%. Therefore, the risk is very minimal. However, should u put ur money in the bank? Let’s look at the table below and the value is based on 2008 December data. 

Interest (%)	3.5
Inflation (%)	4.4
Return (%)	-0.9

Interest rate is the rate that the bank offers to the clients. For example, if u put RM1000 in the fixed deposit which offers u 3.5% as the interest rate for one year, then the total amount u will get after 1 year is RM1035. 

Inflation is a rise in the general level of prices. For example, the cost of a machine is RM1000. If the inflation rate is 4.4%, then the cost of a machine is RM1044.

So from the example above, we can see that the RM1000 is the same value one year ago. However, after one year, the value of RM1000 is different. If one saves the RM1000 in the bank in order to buy the machine 1 year later, he/she actually needs to pay RM9 extra to buy the machine.

Therefore, should we juz take out all of money from the bank? According to financial expert, one should have a total of 6 to 12 month of living expenses in the bank. For example, if u spend RM1000 monthly, then u should have at least RM6000 in the bank. This is because if u were terminated from ur work, u can still afford to live for at least 6 monthly while u r trying to get urself another job.

If the extra cash will not be used in 3 years time, we should consider use the money for investment. There are many investment vehicles such as mutual fund and investment-linked insurance which can help u to manage ur wealth. Although there is risk that the investors might lose their money, in the long run, the investors still can earn back their money.

If u do not have any insurance, then u should consider buying investment-linked insurance which comprises of insurance and investment. The aim of insurance is to protect u n ur family when misfortune happens to u. At least there is a sum of money to help although the money might not b enough, it is still better than nothing.

If u do have insurance, u can consider buying the investment-linked insurance o mutual fund. It depends on u. Mutual fund is for investment purpose. There are many types of funds in the market which allow the investors to choose their preference. For example, some investors prefer to invest in China market, some prefer to invest in European market. Then the investors can choose the funds that cater their preference and needs.

Can we really invest during the economic recession?? Warren Buffet, one of the richest guys in the world, says that we should be fearful when others are greedy and be greedy when others are fearful. So wat’s ur decision after u read this post??? Hope tat it will help u to manage ur wealth wisely. =)