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Some people say that investing in the stock market is risky.
Some people say that leaving money in savings accounts is risky.
So, if we put half of our money in the stock market and leave half of our money in savings accounts, we are doubling our risk exposure.
No? Oh dear.
This is what I have been doing.
I am in trouble, I think.
If you feel that this blog post is beginning to feel somewhat surreal and totally not in AK's style, you are not alone.
I feel the same way too.
From time to time, I receive emails from readers and, from time to time, there would be a reader who says he has $5,000 or less to invest with.
The question is usually what should he invest in?
Personally, I feel that the pertinent question is if he should be investing at all?
Well, if I had only $5,000 or less to invest with, I wouldn't.
I think the money is better left in an emergency fund.
It is too little to really make any big difference to a person's financial well-being even if he were to achieve, say, a 10% return a year.
After 7 years, that $5,000 would become $10,000 perhaps but there is also a chance that he could suffer financial loss in that 7 years.
There is no guarantee that he could get back his money if he should need it.
Of course, now, we have services like those by POSB and OCBC which will allow such investors to gain exposure to the stock market.
Matthew Seah, a guest blogger here, has also blogged about these recently.
Reading the latest issue of The EDGE, I came across this:
"Ultimately, the most important thing for investors to know is whether exposure to stocks, in whatever form, is really what's best for them.
"Banks such as POSB do, of course, inform investors of the risks they would face with any investment products they sell.
"Yet, are stocks really a good investment for someone with only a small amount of savings?
"Is the risk that comes with potentially superior returns really acceptable?
"Can long-term financial goals be achieved through spending less instead of investing more?
"Portraying a portfolio of blue-chip stocks as a packet of crisps isn't helpful to investors who might be searching for answers."
Very pertinent questions, I feel.
This reminds me of a comment by a reader and fellow blogger, hyom hyom:
"I am always attracted to posts that talk about money-saving techniques because successful saving provides a guaranteed return as opposed to investing which is risky by nature."
Although I feel that we should learn about investing as early as possible in life, I agree that investing in stocks, for various reasons, might not be suitable for everybody at one point or another in their lives.
Of course, like Warren Buffett said before, some people should not own stocks at all.
Related posts:
1. POSB Invest-Saver account.
3. Know what is good for us.
4. A common piece of advice on saving.
5. At what age to start investing in stocks?
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