Interview about money (Part2)

FR: So, uncle can you tell me how to invest?
KM: Now you asking more specific... why do you want to invest?

FR: Of course to make money.. I mean to get more "real" money
KM: Aiya, why want more money? want to get married another one huh? I tell your wife.

FR: No laa... but with a lot of money I can buy LED TV, can buy BMW, can go vacations, can...
KM: Ok ok I get it but if you talk like that I have sense that you have greedy attitude my young apprentice

FR: Not greedy but I want a better living and with money my kid can get better education
KM: In that case I will tell you but don't blame on me or tell your mom when you lose money..ok?

FR: I wont tell my mom and I know investment have a lot of risk and it is at my own risk
KM: First, you need to buy me nasi lemak (Fat rice).

FR: I thought you on diet?
KM: Hmm... never mind.. cancel the nasi lemak let me have teh tarik (milk tea). To invest you need to know how to control your emotion. You cannot be too greedy nor too afraid.

FR: I can understand greedy but afraid?
KM: Well, you know investing is risky right? so if you afraid to invest don't invest, just work for people, get promoted to corporate level and then get corru..

FR: No illegal advise uncle.. Focus... focus
KM: pte.. sorry... what we talking about?

FR: Investing!!!
KM: yeah right... first rule still apply. Don't put your emotion into investing. There is so many way you can invest.

FR: like?
KM: You can put your money in share, FD (Fixed deposit), real estate, commodity, future, forex, trust fund

FR: What's about ASB (Amanah Saham)?
KM: ASB is like trust fund

FR: No la, how come ASB can give 7% all the time so is like FD
KM:Not all the time what.. it does fluctuate, sometime it give 9% , 6% and so on. So... is like trust fund.

FR: Really?
KM: Yes.. try translate Amanah Saham to English... Amanah is trust while saham is fund. It also have fund manager who is PNB and it buy several stocks for diversification

FR: So why the return not fluctuated so much and not as high as trust fund
KM: Because ASB is guaranteed by government. So, the risk been reduced hence the return also

FR: Lower the risk lower the return?
KM: Yes, when we invest in higher risk you expected to get paid more. In finance it is called risk bearing. Let say I ask you to jump from 4 storey building, will you jump?

FR: Definitely not!!
KM: Now let say if you jump I give you 10,000..

FR: Nope
KM: How about 1,000,000?

FR: Errrr..... maybe
KM: How about if jump from two storey building only?

FR: Sure..
KM: You think that easy to give you money? The same thing about investment, there is no fast money unless you buy KTM

FR: Keretapi Tanah Melayu (Malaysia Train Company) is public listed?
KM: Not Keretapi Tanah Melayu.... Kuda Toto and Magnum...

FR: That's gambling uncle, not halal
KM: I don't ask you to buy.. you have to understand the concept of investing so that you can differentiate between investing and gambling. Kiyosaki said if you buy stock and expected it to get money quickly it is same thing as gambling.

FR: So, what is the best investment?
KM: Its depend on you, whether you risk taker or not. In Finance is called risk aversion.

FR: Risk aversion?
KM: Let's go back to jumping from 4 storey building, If I offer you 1,000,000 you may say that you will jump because I now you are greedy but maybe not to some people.

FR: Why not?
KM: Because people not like you.... you might be risk taker but some people might afraid to die and 1,000,000 is too little compare to human life. That's apply to investing, some people afraid to invest in share or forex because they afraid the losses. Yet they still want to make big money.

FR: So, you said we cannot invest little and gain big?
KM: Can.. you can invest little and gain big, but remember the risk is high. Like forex, you heard people put only 1,000 and gain 1,000,000 in few weeks. People always tell you sweet stories but there is also people who invest 1,000,000 and loose all. In financial market there is always people loose and win.

FR: I confuse la Uncle, you don't tell me about how to invest yet...
KM: Patient my young apprentice. Before investing you need to know what to invest based on your risk aversion.

FR: So can you explain the type of investing?
KM: Go read books la.. so many types of investment how to tell you.

FR: But there is so many books, which one to read and sometime I get confuse reading the books.
KM: Listen, investing is confusing, you can find many books about investing. You read one book said invest in gold, other book said invest in stock other book said invest in properties. All telling you that you should follow their way right?

FR: So what to do?
KM: So, If you want to start investing, go back to the first rule don't act on your emotion. don't be too greedy but don't be too afraid. Second, define your risk aversion and suit the best investment for you. If you think you like to invest in properties, read more book in properties, get big ideas in properties and then act on it. If you read only then don't act, you will only become reader not investor. But there is another way..

FR: What is it?
KM: Give the money to me.

FR: Don't want la.. can I trust you?
KM: You don't trust me? hey I am married to your auntie you know?

FR: When?
KM: Then you keep calling me uncle...

FR: That is just a call only, to show some respect, but I still don't want to give you my money
KM: Why not?

FR:Because I want to be in control.
KM: Good son, you should have total control of your own money. Well, if you don't want any hustle on readings on all the books and doing the analysis, you can invest in Trust fund or ASB.

FR: But I said I want to be in control..
KM: Don't get mad, that is just a suggestion..

FR: Not mad, so If I know what to invest, how much should I start with?
KM: You need to know how much should you earn not how much you should invest?

FR: Huh?
KM: Look, you need to set your target first. Let say you want to earn 15% in a year. Then you should try to look investment that can give that amount of return in a year. If you said you want double your money in 10 years, ASB can do that too.

FR: Really?
KM: Do the math before you invest. The important things is you need to now when to get in and when to get out. Good investor always know how much they will earn in certain period.

FR: So, If I am buying house or stock I need to know when should I sell it?
KM: Yes, you set the period of investing and set the goal how much you need to get. If you think you already achieve the target before the period, get out, don't be greedy. Don't wait and hoping the price will go higher.

FR: But, what if the price going higher after I sell the asset?
KM: You not losing, you already gain. It is better to lock the profit so that you earn profit that you want. You will never know if the price is the highest or the lowest. The only thing you know that you already achieve your goal.

FR: What if when the period almost over, I still don't achieve my target or I cant find any buyer for my asset?
KM: Then you screwed.. hahahaha.. sometimes that is the risk you have to take.. You need to have proper planning so you know what you are doing.

FR: Let say I want to sell my house and had achieved my target, yet can't find any buyer. Should I extend the period?
KM: You have no choice.. you have no buyer.

FR: True. I think I want to invest in share market maybe buy some gold do you think the time is correct?
KM: When talking about time, I finished up my drink already, so I think I need more Teh Tarik.

To be continue Part 3.

Interview About Money

Following is the recent interview with Mr Kouba Molenaar from Abang-abang Leman.

The interview was conducted in Malaysian English


FR (me): Can you tell me how to make money?
KM (Kouba Molenaar): First, you need a piece of paper and a scissor. Then you cut it into wallet size shape and draw good picture of landmark/s. If possible also add picture of well known people. Remember to draw on both side and possible use color. Now, the hardest part is to get Zeti or Ben to sign the money.

FR: Err... I meant how you get the "real" money not to make one...

KM: ooo... you need to ask carefully young man. Well illegally you can ste..

FR: Wait... tell me the legal way please..
KM: ....al, haa... the legal way is only two ways which are someone give it to you or you involve in business.

FR: But, do I have to open my own company?
KM: NO... what I meant by "in business" is whether you help someone in the business or you have your own business.

FR: Helping someone in business? how about getting money from bank or loan?
KM: That's considered helping bank laa... you think you get money from bank is free huh? Does not matter either you investing or borrowing are consider helping the business. But be careful either investing or borrowing, you may get burn out.

FR: How does the bank lending money can help them in business?
KM: Aiya... kawan (friend), look here when you borrow from bank, bank will charge you interest or what they called.. interest fee which they actually interested in your money. You have to remember the bank also created money, finance people called it money creation.

FR: huh? money creation, so bank print their own money?
KM: Yes in some country like Hong Kong you can find money printed by HSBC and Standard Charted. But in Malaysia cannot la.. only Bank Negara can print money.

FR: So, what do you mean by creating the money?
KM: Well let say you deposit the money in the bank, say 10,000 the banks are allowed to lend the money in 80% of the depository money to be loan out which is 8,000

FR: Is ok what... that how bank make money
KM: OK? Let say when the depository want back their money while the loan is not fully paid or the people cannot payback the loans...

FR: Right. Sub prime....
KM: not only sub prime crisis, the Great Depression, the American Latin and so on. When the depository want back their money and the bank cannot afford to provide it to them, the bank go into bankruptcies. Where do you think the word of "bank"ruptcies come from?

FR: Really meh?
KM: I did my project paper in Global Financial Crisis la.... this what they call banks run in Great Depression. Just look at my other brother Lehman, that's what happen to him.

FR: I thought the money is back up by Gold
KM: Aiya.. you don't live in 70's anymore.

FR: What?
KM: After WWI, most of the country tried to backup their currency using gold. So, the system was created by backing up the currency with gold or exchangeable with gold bullion

FR: So the money is still backup by gold?
KM: Not any more, let me finish la......... The gold bullion exchange was under Bretton Woods system where US dollar can be converted into 1/35 once of gold. But the system collapsed in 1970 and the money now only back up by "promise" from the central bank.

FR: How about our reserve?
KM: That is to control the value of the currency

FR: That is why you need "someone" to sign on the money like the cheques
KM: Not someone... people like Zeti or Ben can only sign it. If you put your signature, it don't have any value.

FR: So in other words, it is just piece of paper that have a value which backup by the government
KM: Yes, it is called Fiat Money. So if you have any argument about money, just think that it just piece of paper

FR: So, we do not need money
KM: Long time ago people still live without money, but today you can see many people become slave of money, quarrel about money, yet we do need money since we live in the world that been created around this system

FR: But don't hard up for the money right?
KM: Now you get it son, you just need to know how the game of money work and how it evolve. That's why I start with money created using piece of paper and scissor.

The Interview will continue to Part 2 (about investing)