I’m such a dummy when it comes to managing my finances. Was never the kinda gal who’s smart enough with her money, instead, I am the kinda gal that is never able to maintain a monthly expenses spreadsheet for more than 2 months. However, some “recent developments” has forced me to grow up at a faster pace than I would like to, and I see that as a blessing in disguise. It’s truly time to be an adult anyway. (adulthoods looking a little better day by day). I know this is something I need to do, start looking at how much (or how little) cash I have, and looking at my options of churning them into something more. My money can just go *poof* if I’m not careful, it has happened before, and it could very likely happen again if I don’t do something to stop it. There was probably more than 5 times in this 28 years whereby Ive exclaimed in shock, usually after bonus payout – “Where the fark did my money go to???” *sob* *sob*
I’m reckless enough to splurge it all on a one month backpacking trip around Asia. Last 2 months when I was helping Guinea Pig do some research on travelling around Asia, I stumbled on several voluntourism sites, and the teeny monsters living in my head started their little whispers of “what-if”s. The few impactful ones were “Wouldn’t it be nice to see these unique cultures?” and “What if this money can help you escape reality for a bit, its enough to fund for 2 person!”, and the evilest of em all, said to me “So what if you blew all your money on this self realization trip? You deserve this after all you’ve been through. Money can be earn…” It took some courage and strength to shut these fellas up and get a grip of myself and say – life is not a fairy tale. I need my money for the rainy day.. and most importantly I need to multiply the little I have.
Am thankful that Mr Social Butterfly (JasonC) introduced me to Kristin last CNY, a financial advisor for more than 10 yers, she was kind enough to spare some time with me, a crash course to help me understand what are my options today. We did a “Investing for Dummies” in 2 hours. Then, yesterday, over a very yummy lunch @ Jyu Raku with Guinea Pig, Kum Wai & Cynthia, we’ve spoke on this topic again. There were some pretty interesting insights from everyone, especially from KW who has some investing experience. So I’ve digested those info, but still seemed a little too complicated for my rusty teeny ol brains. So while I was taking a shower last night, was replaying all those conversations in my head (GP:now you know why sometimes I spend on much time in the shower, not counting my bulu’s) Suddenly it strike me – this scenario seems pretty familiar. The need to read and understand the situation, evaluate them according to our risks profiles, making decisions and stick to it… This all too familiar don’t you think? It’s rather similar as how we would choose our MEN. Let me put it this way so it’s easier for me, and you to digest.
Probably its best for me to have a disclaimer before I start.
*This is in no way to be taken seriously as a financial advice, nor as a relationship advice* (Nod 3 times if you have understood this pls)
Now that you have understood the above, feel free to dive into my thoughts.
So Kristin started by asking me what is my risk profile. I replied – I. Don’t. Know. Why don’t you tell me? She rolled her eyes and said let’s start from the very basic, we’ll come back to this question later.
She started with explaining to me about shares, and how they work.
This is my take out.
Blue chip shares: Mid to low risk. The ones that’s usually big reputable names, rather stable, pretty expensive to buy, but it pays out good dividen from time to time. Ppl with money to spare, dumps a substantial amount in a particular counter. Most professional investors agree that blue chips share several important characteristics including:
- An established record of stable earning power
- An equally long record of uninterrupted dividen payments to common stock holders
- Large size in terms of revenue and market capitalization
They are like the eligible bachelors of the city – but goody two shoes version. Pretty stable financially with probably the backup of a well to do family with old money, riches from over the generations, yet they are no playboys, loyal and dependable. Yet, am guessing they are probably not doing too well in the looks department (which explains why they are no “equity funds”) and probably lack of personality as he’s under the pressure of keeping the family’s legacy, so work is all he have in mind. We are merely hanging on to enjoy the occasional dividen pay outs. Read: living expenses. There’s not much fire nor excitement. Just like how most blue chips don’t fluctuate very much, these men could probably be as monotonous in life and be rather boring in bed/life. Probably all they are interested in is (if you are lucky) a quickie before they get back to the drawing board on how to make more money. (prob to the relieve of some gals too). Don’t get me wrong, these guys can be quite a catch, but expectations needs to be managed. I guess its best to meet and snag them young. Just like the IPO. Initial public offering (a corporation’s first offer to sell stock to the public) Meet and stand by them through Uni days, when they are still labeled as the nerds, society rejects. Stand by them. Reap the benefits later.
Non blue chips: High Risk. Stocks that do not have a proven track record of steady pay back or build up. Interesting counters that may fluctuate like crazy. High risk definitely.
Guess this is a no brainer. I see these as the eligible bachelors/playboys of the city. There are plenty out there. But the million dollar question is how do you spot the right one? Even if you do, how do you know how long is just long enough for you to hang on? These boys are just like their stocks. Unpredictable and no track record of a steady long term relationships. You thought you knew them, thought you read them like a book, and some friends advised you to go for it, yet some others is advising you against it. You will never know until you try. Even when you have tried, you know you would need to manage your expectations, and cut losses if you need to.
Everyone talks about stocks but few people understand them. Just like how we girls talk and white about men or relationships all the time, but really…. does any of us dare claim to be the expert? Hrmph….
And apart from shares, Kristin explained that I have another option – mutual fund
Types of Mutual funds
A) Equity Funds – High Risk. The major portions of equity fund portfolios are shares of listed companies. According to Kristin, these are supposedly the highest risk of all mutual funds. Fast moving and exciting.
I see these as yet again like those non blue chip boys. Hard to tame but there’s never a dull moment around him. Good rewards if you spot the right ones. Probably I can sum this up this way. Once a “non blue chip” boy is tamed, he’s not exactly less risk yet, but is getting there, so he moves into equity category? *have a feeling I’m way off the spot here.. hehehehe”
B) Balance Funds – Mid Risk: Invest in between Equity fund and fixed income investments.
I see these the wannabes. They probably come across as the bad boy character. Deep inside they are good people. Have good believes, good family upbringing and want the simple things in life. But probably due to peer pressure, they went off course for a wee bit. They are probably guys that started womanizing, smoking and drinking just to fit it. There probably are still some risk there. It’s again about the timing. If you date this guy at his right age and stage of life, it’s not that risky after all. He’ll let go of this bad traits and start thinking of settling down, wanting all the simple things in life again. So if I were to date one of these boys when he’s in his early 20s, I’ll let go. But probably as he approaches the big three oh… its a different story entirely.
C) Fixed income Funds – Low Risk: An investment that provides a return in the form of fixed periodic payments and the eventual return of principal at maturity. Kristin says this is the safest of all funds but its interest hovers around 6% only, slow but steady kinda investment.
To me, this translates to the nice goody two shoes boys, mentally and emotionally stable, however not a cash cow (yet) but may provide substantial returns if we are patient enough. Would think of these funds as guys who don’t smoke, rarely drinks, pious, filial.. oh, you get my point. And if times are bad, you can always count on him to be supportive, just like how when the economy is down, thesefixed income fund interest will shoot right up! WOoohoooOOooo!!!~~!~!!
So after 2 hours, she asks again. “What is your risk profile?”
I replied “Very low. I don’t want to get burn. I don’t mind putting all my eggs in one bucket, and I’m willing to invest time, and reap the benefits slowly. I’m not looking for a big windfall, as I’m not willing to risk being burnt”
We concluded that Fixed income it is.. and I silently…. concluded in my heart that I’m on the right track after all – Guinea Pig it is.