3 Reasons Why I Would Not Invest in Gold

While many people would tell me to buy gold to invest, I felt that there is no reason why I should have gold as part of my investment portfolio. Thus, after many arguments (with myself in my mind), I have decided to write a post on why I would not buy gold as an investment.

I know that many gold lovers would hate me for this but still, you can read what I got to say and decide later to hate me or not.

1. Gold is not an investment

For me, an investment is something that would provide a certain return of investment for as long as I am holding that investment. For example, if I am holding some shares of Public Bank Berhad (PBBANK), I would be receiving a certain amount of dividends every year. I don't see how that happens when I am holding Gold. The only way I can realize the return of investment is when I sell it.

2. Gold is gambling

That brings me to my second point. When you buy gold, what do you hope for? Obviously, you are hoping for the price of gold to go up and when you sell it, you would get your profit as your return. What if the price goes down? That will be a loss. And when you look at the price, there are only two possibilities, UP or DOWN. Hmm, that sounds familiar. Something like a game of chance (Sic Bo). SO, for me, buying gold as "investment" is actually a form of gambling.

3. What is the worth of gold?

What is the worth of gold? It is only worth what people are willing to pay for it. Still, it has little real value as in 'the things you can actually do with it'.

If you can do this, it will be great but no, you are not Scrooge McDuck.

As Warren Buffett once famously said about gold:

"Gold gets dug out of the ground in Africa, or someplace. Then we melt it down, dig another hole, bury it again and pay people to stand around guarding it. It has no utility. Anyone watching from Mars would be scratching their head."

You can argue that gold is used in your smartphone and some other electrical items, but the quantity used is not really significant. The primary use of gold is actually for jewelry. Jewelry use up 78% of all gold production. And what do you do with jewelry? You either wear it and let others see it or you keep it in a box in your house or bank. Truth be told, even my wedding ring is not made of gold.

16 Ideas to Kickstart Your Finance in 2020

With the start of the new year, there are some actions that you can take to kickstart your finance on the right path. I have prepared 24 ideas that you can take for the year 2020.

1. Declutter your house (or room)

We may have not noticed but over the years, we may have bought many things that we might have forgotten now. So, take a weekend and start cleaning and decluttering your house.

Items that you no longer need can be categorized into the following:

1. Trash to throw.

2. Stuff to donate.

3. Stuff to sell.

The idea is really simple because, once you clean and declutter your house, you will have more living space and for that stuff that you can sell, you will get some cash back. 

More importantly, you will get to see the stuff that you have purchased and not using (making it a waste of your money) and would give you a reminder to think properly before your next purchase.

2. Automate your savings.

As I have written previously, many of us have a mindset where we will save whatever money that we have left at the end of the month. However, the reality sucks and even before the end of the month, most of our money would have been used up, making it not possible for us to save. The reason why this is happening is because of our habit. We can still see the money in our bank accounts, so we subconsciously think that it is still okay to spend.

So, to make savings works, we should set aside our savings at the beginning of the month and that is where automate your savings comes in. Set a certain amount of money to be transfer to another saving accounts (or investment like Wahed Invest) at the beginning of the month and live your life with whatever you have left. Truth be told, you will not miss that amount of money that you have saved, seriously.

3. Try budgeting for a month

If you have not tried budgeting yet, you should try it. The simple way is to track where your money went for the previous month and budget accordingly for the coming months. Again, it makes you more conscious about your spending and lowers the possibility of overspending.

4. Review your Budget

The only thing that is constant in this world is God and changes. So, our lives today may not be the same as last year. You might have changed to a new job or have a new baby in the family. So, your budget should change according to your current life.

5. Eat at home

If you have been tracking/checking your spending/budget, you would soon realize that a big portion of our spending is on eating out. A meal for a family of 3 would cost about RM100 and that is a lot of money. But if we are eating at home (not delivery from restaurants), the cost would be much lower. My family's meals at home usually cost not more than RM 25 per meal. That is a lot of savings and imagine doing that for 20 days, you will be saving about RM 1,500.

6. Cancel memberships/subscriptions

There are many things that we love in our lives and looking at that small cost, we would not think twice to sign up for membership or subscription. Gym membership and Netflix subscription are things that are good to have but do not necessarily need. Instead of the gym, go and run at the local park and instead of Netflix, watch videos on Youtube. It is just as good. 

7. Limit guilty pleasures

Every one of us has a soft spot for certain things that we have much pleasure with, even if we know that it may not be good for us. Items such as cigarettes, beers, chocolates, sweets, etc are such items. We know that it is not good for us but we still fell for the temptations. But instead of stopping it altogether, we can put a limit on it so that the temptation would not be too much to bear. Imagine the money you can save just by limiting your guilty pleasures. My chocolate addiction cost me RM 50 per week but by limiting my chocolate intakes, my cost for chocolates is down to RM 20 per month.

8. Save Your Spare Change

Whenever we use cash, there is a high chance of us getting some spare changes back. Many would take it that these spare changes are not much but over a certain period of time, we can actually save a significant amount of money. It has been my habit to save my spare changes and over a period of a year, I would have accumulated about RM150 just from spare changes. It is an easy thing to do. Every day when you get home, whatever spare changes that you have in your pocket, put it into a piggy bank (or whatever container you like) and leave it. At the end of the year, you will see a significant amount of money that you can use.

9. Use Cash Back Apps

Whenever you purchase something online, it is best to use a cashback app to get some cash back. We have Shopback in Malaysia and over the years, I have managed to get RM300 cashback with another RM 327 still pending. Use my link to sign up and get RM5 cashback bonus.

10. Make Your Home Energy Efficient

New technology means a new way to make our home more efficient. When we moved into our new home last year, we choose to use LED lightings, air conditioners, water heater and even oven that has a 5-stars rating which is more cost-efficient. And when we are more mindful of the usage, we managed to bring down our electricity bills from almost RM 90 per month to slightly more than RM 50 per month.

11. Wait 24 Hours Before Buying

A lot of times, we would have an impulse to buy certain items. That is a reason we would have many items in our home that we hardly use and have to be throw away, donate or sell when we clean and declutter our home. But by waiting for 24 hours before buying, we may have a second thought about buying and high chances, we would choose not to proceed with the purchase. But if we still think we need to buy that item, chances are, we really need it.

12. Consolidate Your Debt

If you have debts all over the places, such as a few credit cards and personal loans, it is hard to keep track of all of it. A good thing to do is to consolidate the debts into one. There are two advantages to doing this. First, you only need to track one instead of many. Second, it is possible for you to get a lower interest rate and save money on your interests.

13. Use Savings To Pay Off A Loan

If you have a loan that is about to clean and you have enough savings to clear it, do it. You will be able to save on interest and for the coming months, you will have additional cash for other things. I would suggest you save or invest the additional cash.

14. Invest

The best time to start investing is yesterday. The next best time to start investing is today. The earlier you start investing, the better it is for your future. That is the magic of compounding interest.

If you were to ask me where to invest, I would gladly inform you that I would much prefer to invest in the US market. There are many ways to do that and the easiest way that I could find right now is to use Wahed Invest (look for the app in Google Play Store and use my referral code (limwei1) and you will get RM40 after you keep your investment (RM 100 minimum) for at least a month). Wahed Invest is a robo-advisor that provides halal investment and you can read more in my review here and here.)

15. Turn Your Hobby Into Cash

Everyone has a hobby and if it is possible for you to turn your hobby into cash, then you would be earning money while enjoying your hobby.

16. Refinance

Refinancing your mortgage is a great way to save thousands in interest and also potentially lower the monthly payment at the same time. For example, if you have a RM 200,000 fixed-rate mortgage at 4.5%, you will be paying RM 1,013 a month. Over a period of 30 years, you will be paying RM 164,813 in interest, and that is assuming you don’t make any extra payments along the way. But if you refinance the same loan into a new 20-year mortgage at 3.5%, you will only need to pay RM 719 a month and save almost $300 a month. Do note that this doesn’t take into account the interest savings you will get as well.

This article was first featured in Radical Ringgit.

4 Ringgit Myths You Need To Know

Myth 1 - You have to be rich to start investing

In the mind of many, one has to be rich to start investing. Many thought that to start investing, one would need to have a sizable amount of Ringgit. But the fact that with new technology, investing has become easier and the minimum amount is lower. Robo-Advisors such as MyTheo, Stashaway, and Wahed Invest make it very easy to start investing with just RM100.

*Bonus: If you invest RM100 in Wahed Invest using my referral code (limwei1), both you and I will get RM40 bonus each after maintaining the RM100 for 1 month. 

Myth 2 - I don't earn enough to save

It is possible for everyone to save no matter how much is the income. The real question is are you willing to save? The easiest way to save is to allocate a small amount for saving when you received your salary and make do with the balance for the rest of the month.

Expenses = Income - Saving

You can start by saving as little as RM50 and slowly increasing the amount as time goes by.

Myth 3 - The safest way to keeping my money in a savings account 

While it may be good to have some money in a savings account, to keep all that you have there is not recommended. Many people do not realize that the bank is paying you interest at an average rate of 1% per annum for the money that you keep it the savings accounts. Also, the average inflation is about 3% per year. So, every year, your purchasing power is actually reducing by 2%. So, unless you need your money in the coming 3 years, do not keep it in your savings account. 

Myth 4 - Credit card is evil

The truth is, a credit card is just a tool, not being good or evil. It is how we use a credit card will determine if the credit card is a friend of a foe. Credit card it good when we need to purchase something of high value but you must be able to pay off the amount at the end of the month. Otherwise, the interest that you need to pay for the outstanding amount will totally kill you.

This article is first published in Radical Ringgit.

Wahed Invest - First Impression Review

The first third robo-advisor in Malaysia was officially launched last week. Wahed Invest, is the first Halal robo-advisor that provide investors a chance to invest with shariah-compliant companies and bonds.

In comparison to MyTheo and Stashaway, I felt that to invest in Wahed Investors my preference as I have always wanted to invest in those largest companies in the USA, such as Apple, Facebook, Microsoft, Google, etc. But to invest directly will be very cost-ineffective. To invest via the only US Dollar-denomination ETF, MyETF Dow Jones US Titans 50, that invest in these same companies, you have to open a US dollar account with one of the local banks and the process is tedious. 

The Simple Path to Wealth by Jim Collins

The author of the book advocates a self-directed approach to investing and money management. In short, it tells you to avoid debts, save half of your income, invest your savings in low-cost index funds and ignore the news about the up and down of the stock market.

In the book, you will learn that the investment industry is interested in making you feel that the whole investment process is complex. For this reason, you would need help to be successful in the stock market and your only solution is to go for those advisers that, without you knowing, will earn money for themselves at your expenses.

The book also offers specific recommendations for self-directed investing, and carefully explains the rationale behind his conclusions. He also translates studies and stats into easy-to-understand English.

The only thing that the author said that an investor needs to do is to invest in the following two funds:

• VTSAX - Vanguard Total Stock Market Fund
• VBTLX - Vanguard Total Bond Market Fund

With these two funds, we are basically covered and the more we invest in it, the better. However, to invest in both of the above funds, big capital is needed. So, the author provided an alternative which is the equivalent ETF:

• VTI - Vanguard Total Stock Market ETF
• BND - Vanguard Total Bond Market ETF

It is possible for us to invest in both ETF but there will be more works that need to be done before we are able to buy it. I have a bit of experience in this and will share what I know in the near future.

Other information given may not be suitable for us, Malaysian. Stuff such as 401K, Roth and Malaysian low-cost index fund does not really exist in Malaysia. But still, it is a very good read to understand that investing can actually be very simple.

Personally, I have learned a lot from reading this book and my investment strategy is mainly based on the author's concepts of investing but with a tweak to suit our Malaysian market. If you are interested to read this book, you can buy it here.

KWSP i-Invest: Review

A few days ago, the Employees Provident Fund (EPF) has launched its i-Invest platform which allows its members to invest in unit trust funds with their EPF savings. The great thing about this platform is that it is almost zero cost.

With this platform, members can invest with a sales charge ranging from 0% to a maximum of 0.5% of the transaction amount. As a comparison, offline and traditional transactions through agents are usually charged at 3%.

The conditions for investing via i-Invest are under the Members Investment Scheme. Members may transfer from their EPF Account 1 up to 30% of the amount in excess of Basic Savings, to be invested in the qualified funds. The platform is very user-friendly and there is a lot of information given regarding each fund. 

For members aged 55 and above, they can also use i-Invest using Akaun 55 or Akaun Emas through i-Akaun as a mode of withdrawal. It is also subject to a minimum balance of RM1,000 in their account.

EPF has strict guidelines for Fund Management Institutions (FMI) to safeguard the integrity of the scheme and the interest of participating members. There is a total of 389 funds from various categories (equity, mixed assets, bond, money market, and property trust) that were approved under the EPF Members Investment Scheme for the period of 2019/2020.

You can get started by logging in to your i-Akaun, then click on the “Investment” tab at the top.

Alexiares' comment on i-Invest:
Do not rush in to invest in this platform. Do your due diligence to make sure that you know what you are getting yourself into. Do note that while it is possible for you to get higher returns from investing at those private funds, it is possible to for you to lose money.

The sales charges range from 0% to 0.5% of the transaction amount. So, if you are investing RM10,000, you will be paying RM50 for the sales charges. And remember that when you sell the investment, you will be charged again. So, if you made RM 1,000 after a certain period of time, you would be paying RM 55 for the sales charges.

Personally, I would not touch my EPF accounts and let it reap the benefit of an average of 6% given by EPF. So, if you are not willing to take the risk, don't try this.

The Market is Crashing!

The market is crashing! The market is crashing!

Truth be told, we are hearing this almost every day. And it really will crash. But the question is when and are you ready for it?

If you look back into historical data, the market will experience either a major or a minor crash every few years. And what happened soon after that? The market bounced back from the crash and moved on to achieve new highs. Don't believe me? Here are some records:

The market crash is not something that you should fear. Rather, you should anticipate it with eagerness. Just like when the shopping mall goes on sales every now and then, market crashes mean prices of stocks in the market are sold at under discount. This will be the best time to buy in and two the benefits in the long run.

What you should and should not do when a market crashes.

No. 1 - Don't do anything.

This is a very hard thing to do. Everyone is selling their shares like crazy because the price is going south. All the experts will be telling you that this is the end of the world. You will be tempted to sell too to reduce your losses. But if you have bought into a good company in the first place, keep faith that everything will be okay.

When the market crashed, as long as you don't sell your shares, you are only experiencing paper loss. It is nothing. Once the share price moves up again, you will recover the paper loss. And it definitely will.

No. 2 - Buy into great companies at a bargain.

Before a market crashed, do your research into companies that you think are good or great companies. Know what is their values and keep watch.

When the market crashed, a lot of companies shares will be sold at a discounted price. Some of these will be companies that you might have researched. So, when the shares prices of these companies are a bargain, buy-in and let it grow.

5 Type of Investors (According to Risk Level)

With so many choices of investment options available for investors today, a new investor would not know where to start.

So, if you are a new investor, know yourself first. That way, you will know what type of investments that are suitable for you. 

While many would just categorise the risk into 3-level, I felt that 5-level risk categories will give a better idea. 

Low-risk 

This is what most people are doing right now. Just keep it there and hope that your money will grow. Example of low-risk investments is Bank Saving Account and Fixed Deposit. Given the current interest rate (current at about 0.25 - 0.45%), saving your money in a savings account is basically killing your money. Fixed deposit perform slightly better than a savings account as the interest rate is around 2.95 - 3.40%. So, if you don't know how to invest, keep some of your money in a fixed deposit. 

Medium-low risk 

Medium-low risk investments are slightly more risking compare to a savings account and FD. For me, government-linked unit trust funds are in this category. There are a total of 12 unit trusts by the government: 

• Amanah Saham Bumiputera 
• Amanah Saham Wawasan 2020 
• Amanah Saham Malaysia 
• Amanah Saham Didik 
• Amanah Saham 1Malaysia 
• Amanah Saham Bumiputera 2 
• Amanah Saham Nasional 
• Amanah Saham Nasional 2 
• Amanah Saham Nasional 3 Imbang 
• ASG - Pendidikan 
• ASG - Kesihatan 
• ASG - Persaraan 

Medium risk 

A more popular investment option is to invest in private unit trusts or buying shares on your own. Younger investors prefer buying the shares on their own and popular shares are such as blue-chip companies. Real Estate Investment Trust (REIT) is just as good but may not be that popular yet. For the older investor or just people who don't have the luxury of doing homework to determine the right shares to buy, they would buy into unit trusts that have good performance. Blue-chip companies, REITs and Unit Trusts are considered as medium risk investment due to the risk that involved (in case of an economic downturn). 

Medium-high risk

The new generation of investors is more likely to take a higher risk with newer investment options. While trading in Fiat currency, cryptocurrencies and commodities are considered medium-high risk, the possible returns are also higher. And for those with money, investing in property involve the similar level of risk. If the property does not perform as projected, there is a high chance the investor may lose the invested money one way or another. P2P lending is also part of this medium-high risk level. By doing P2P lending, there is a risk of the borrower defaulting and the investor would get nothing in return.

High-risk 

If there is an investment opportunity that is screaming at you to tell you that you could double and triple your money in a month or two, most probably it is a scam or something that is out to cheat your money. I would say that 99%, you would lose all your money. For me, investing in MLM is a very high-risk investment. I got fooled twice, I won't go through it again. 

So, what are your investment risk level? I consider myself to be a medium to medium-high risk investor.

Do you have any investment options that you want me to include into this post?