Here’s a list of 10 major mistakes in managing your money. It is compiled by our Church Pastor. And even if our Pastor is not an expert in finance & investment, I must say it’s a pretty good guide:

1. Too Much Debt – no elaboration needed

2. Get Rich Quick – no elaboration needed

3. Don’t Save – no elaboration needed

4. Being Lazy – no elaboration needed

5. Co-sign or guarantee a Loan – no elaboration needed

6. Being Stingy (or Greedy)
There’s a saying some people live by:
Get all you can.. Can all you get.. Sit on the can!

If you are one who always let someone else foot the bill, if you are one who’s always counting the cost, then sooner or later you will feel very empty indeed.

7. No Budget – no elaboration needed

8. Buy-Buy-Buy! – Sale Sale Sale! The more you buy, the more you save…. sound familiar?

9. Choosing Wrong Career – no elaboration needed

10. Not getting God’s direction – no elaboration needed

Our pastor was speaking from the book of Ecclesiastes, which is widely believed to be written by the richest man who ever lived.

Nope, that man is not Bill Gates or Warren Buffet but a guy called King Solomon. When God appeared to Solomon in a dream, Solomon could have asked for anything he wanted including all the money in the world.. but he asked for wisdom. God was pleased with his request, and Solomon got a big bonus from God:

And I will also give you wealth, riches and honour, such as no king who was before you ever had and none after you will have.
2 Chronicles 1:12 (NIV version)

In Ecclesiastes 11, Solomon in all his wisom and riches said:
He who observes the wind will not sow,
And he who regards the clouds will not reap.
(NKJV version)

As investors, it is important that we stay invested and grow our wealth over time.  There will be ups and downs, I’m cultivating myself to invest regularly in this up-cycle but my choice of stocks is increasingly defensive. The large caps are trading well over 15x PE ratio, while earnings growth is generally sluggish. Just as we had extreme Fear this time last year, we will move towards extreme Greed.

Selectively picking smaller caps with good dividends and REITs is what I’m doing for now.

Most people I know prefer to invest in Property as compared to Shares.

But if you have seen a Unit Trust presentation before, you will know that Fund Managers have all sorts of charts showing how shares are a superior investment compared to everything else. So who do we believe?

OK let’s take this scenario…

1. You are in your mid 20s
2. You have been working for 5 years
3. You have saved up RM50,000 in Fixed D
4. You have a degree and a decent job

With this new-found financial freedom, you are ready to make an investment. You hear of friends making money on the stockmarket and are keen to get in on the action.

If you’ve never invested in shares before and don’t own your own home, you should seriously consider buying a house first.

A house is a no-brainer way of making money in the long term. There might be some exceptions, for example if you happen to buy a house built on sinking sand or a condo in a fancy neighbourhood that takes a dive when all the speculators dry out, but in 99 out of 100 cases, a house will be a money maker.

How many times have you heard your friends say “I am a louzy property investor”? The fact is that even the most amateur of investors have invested brilliantly in real estate. Compare this with amateur stock investors, and it’s no accident that people who are geniuses in their houses are hopeless in their stocks.

Figures will show that shares outperform other asset classes in the long run. However when it comes to houses, the system is rigged totally in favour of homeowners. Banks in Malaysia let you buy a home for 10% down, giving you tremendous leverage over a little amount of equity.

So if you bought a RM450k house with a RM45k deposit and your house went up to RM650k, your humble RM45 has made you RM200k!

Do that on the stockmarket long enough and you’d be worth more than Uncle Lim’s family.

Leverage aside, there are other reasons to go for your dream home.

Houses (like good shares) are usually profitable if held for some time. When you get your dream home, you’re not likely to flip it the very next month. Most probably you sweat and toil over the renovation process, visited IKEA no less than five times, and along the way battled with huge weekend crowds all over the place. When you finally move in, you are satisfied!

Even if next day the headlines read “Home Prices Take a Dive” (which in all my years of investing has never happened once), you wouldn’t be loosing sleep… you’re there to stay! Unlike the stockmarket, you won’t see your house price running on the Bloomberg or CNBC ticker. There’s no conspiracy to make you panic.

Finally, Property is better than Shares because you know how to do your research and poke around before buying. Property analysis is really a no-brainer, all it takes is a lot of time and effort to drive round, check out different places and compare prices. You might even hire experts to check for termites, whether the roof is leaking, or whether than crack in the wall will bring the house down and so on.

No wonder people make money buying property and loose money buying shares! They spend months choosing their home and minutes choosing their stocks.

You get recessions, you have stock market declines. If you don’t understand that’s going to happen, then you’re not ready, you won’t do well in the markets.
Peter Lynch