Congratulation ! More than 90% of general population never survive till this stage. Surprising or not, those who can make it to this stage are usually those non high flyers, the old guy next door or the geek who never leave his room etc. And all of them became the millionaires next door that you never know. ( Amazon agrees
)
)Basically what you have accomplished is managing your Cash Flow. You have decided Future is Important and want to reserve some seeds instead of eating up all of them now. Here onward is all about maximizing return of this Saving Account.
The key is Passive or Money Earns Money. A way that the money grows by itself without you watching it, working on it ... if you are eager to talk about earning more money, goes back to the Income stage. Increase all your want and explore all your wild ideas there ... here is about putting your wealth aside and comes back years later to wow yourself.
( The analytical part after Cash Flow is Asset and Liability but I leave this to later. Lets stay on something simple and practical stuff first )
Basically you pile up your wealth pyramid like this ...
1. Bank Saving Account
2. Bank Fix Deposit
3. Bond Fund
4. Mutual Fund ( Balance Fund then followed by Equity Fund )
5. Stock Exchange
This is the part where challenges may come. Different consultants share different approaches based on their own perspectives. Not everyone pile up the pyramid bottoms up. Not everyone draw the pyramid like that.
This is also the part there is no right and wrong answers. Its all about how YOU want YOUR SAVING ACCOUNT to grow IN ANYWAY YOU WANT ...
So what should you do ?
If you are new to this and no other people is confusing you, just take this pyramid now. Subsequent sharing will lead you to building your own pyramid.
If you already disagree with this pyramid or your existing consultants tell you otherwise, then this is a good time you take out a pen and draw your own pyramid now. Whenever you have more than two ideas that cannot co-exist fully, then its time you pick the good from both and build your own. Afterall, this is all about you yourself, not anybody else.
11 comments:
i dont quite agree with the shares+mutual fund+bond+FD part wor... apart from saving, if i want more than jes saving interests in saving, must i get those 4 steps in as my tool ? how about using my method to saving+investment?
and my investment consist of property, currencies, play in FUTURE INDEX. I seldom touch shares and never touch bond and mutual fund. FD is like sth too extra unless u have a portion of money NO NEED to be touched for a long time..?!
good comment ! you don't have to. If you already advance into DERIVATIVE investment, then normally you don't need to LOOK BACK. The only question I have for you is ... do you really know what you are doing now ? Whatever your answer is, you just have to be responsible for it. That is all ... :)
hints: there will be a post about RISK, you may be interested in that then. :)
do you mean those 4 steps are essential to have before we get into this Advance stage now? So no matter how risky it is right now, we still have those 4 as to back up?
the only 'compulsory' steps are to have Income and Save First. All others do not necessary comes in order.
As for the '4' things you mentioned, they may be essential for beginners. But they may not be essential anymore if you have found a better tool for yourself. So it is not essential to have them, but its essential to have had known them at least.
And 4 is not am important number ... as the pyramid can change according to your personal needs.
For backup, cash+insurance alone are enough to do the job, most of the time.
ok settle for my case then. but why are the 4 steps essential for beginners? why FD, why bond, why MF, why shares? shares and bond is very risky gor wor.
Bond is almost as safe as FD with higher return.
Perhaps what you mean is Private Bonds are dangerous, what I mean in the posting is Governmental Bond and Public Bond.
Saving, FD are the simplest finance tools one can use.
Mutual Fund is almost as good as running like a Bank.
Stock Market is the fundamental of a country's economy.
not agree. perhaps the situation is much safer/less level of tranparent in MY but i doubt, as the world economy is much depends on US market which is slump.
globally the switch of market influence from USA to China has already started. The only question is if it will reach a stage of complete transfer.
But in personal finance, it doesn't matter much.
Personal Finance just need one good investment vehicle. It doesn't matter 100 other are losing money, as long as the one you are holding on is earning what you want, its ok.
Could you please share how did you choose to come up with the ingredients of the pyramid? Was it simply anything for the pie or was it what you do in your plan?
I always feel insecure to leave money to others, eg, insurance companies, bond, MF... even savings in bank is risky too nowadays, but thats the least i could do for myself. I wouldnt judge shares maybe i know more about it than those mentioned above, at least i could trust on technical skills if i want to, but i seriously dont understand why should I split my 'income'/'saving' into these sections as suggested in your post? Sorry I dont mean to doubt at you, but Im trying to work out a plan by learning from your sharing.
for you personally, your wealth pyramid should be different. You should only pile up with what you are comfortable with.
As of the one shared on this site, its a carefully consolidated guildline for public reference. The key idea is, EVERYONE and ANYONE can handle 'this' pyramid 'passively' with ease. Anything more or less than this 'will usually' (statistically) be eaten by inflation or taking too much risk.
So you don't HAVE TO split anything. But eventually you HAVE TO make sure the net growth of your total investment is higher than inflation in order to survive ...
side note: doubting everything you read is a good habit, especially stuff from Internet.
:)
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