Straits Times carried an article titled “Investors’ risk appetite slowly returning” on 5 January 2010 about the results of a survey conducted in Oct 2009.
The survey showed that 31% of the respondents “stopped investing during the crisis period but is now open to investing again when the right opportunities come up.” Another 13% said that they “stopped investing during the crisis but have already started investing again.” On the other hand, 21% “stopped investing during the crisis and will continue to hold my savings in cash or near-cash equivalents.” The remaining 36% said “nothing has changed – I stayed invested throughout the global financial crisis.”
The above figure clearly shows that majority of the investors will definitely lose money in investment but in fact lose a lot of money. The best time to invest was during crisis. Investment is all about buying low and selling high. The mathematics is obvious but the practice is always reversed. If the crisis period was not the low period, when will it be? The first group of 31% who indicated being open to investing if the right opportunities come up will lose much of their wealth because these are pure market gamblers. The “right opportunity” strictly speaking was in year 2008. But of course it isn’t possible to identify the right opportunity at that point of time. But apparently this group is still waiting for right opportunity! So when will the right opportunity arise? When the market comes up by another 100%? And then they will throw in their entire kitchen into CFDs and leverage instruments only to lose their entire wealth because they will be buying right at the peak.
Only 36% did nothing by staying invested throughout the global financial crisis. A financial adviser was quoted as saying in the newspaper article that more clients are indicating interests to invest. I too have been getting calls and to invest. I have previously written HERE that approaching financial advisers for help will not help because the initial date of engagement is solely dependent on the client. Thus, the client solely decides the time of entry into the market. From what I see, most people will lose their entire retirement account because of the perception that financial advisers can do magic. In my opinion, financial education is the only way which a person can become financially independent. A financial adviser cannot do magic.
This blog first appeared in CPF Board's IMSavvy / IM$avvy website:http://www.cpf.gov.sg
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