Tuesday, June 15, 2010

$ questions these days

One of my dreams when I was a kid is to have a big brother or special someone to guide me when I was lost and gave me the right answer when I had question. Certainly, as I grow older, I have less trivial questions to ask. I wouldn’t ask “why the sky is blue?” anymore. Maybe it is because of the fading (not complete loss) of my innocence. Also, I learned that I can look up the answer in encyclopedia. However, it doesn’t mean that I wouldn’t ask question as I grow older. My questions would be more difficult to answer. Besides the questions at school or at work, I would ask question about life, like “why I couldn’t meet the special someone?” Well, for that question, nobody answered me until I ran into my wife. That’s another story….Anyway, for such ‘life’ related questions which are largely philosophical, I think there won’t be concrete answers. Namely, answers would more hypothetical or Zen-like that I think I don’t have the rush to find them until I get even older. I guess that’s why many old people like to read philosophy or religious books as a way to search for answers of questions that they had when they were young.

Though I know that, with the advancement and booming of Internet these days, it is just few clicks away from getting most questions answered. Nevertheless, it doesn’t mean that I don’t have questions. Cuz, Internet has answer(S). First of all, Internet is a wild wild west that everybody can say whatever they want without an ounce of liability. Telling truth from liar is tough, also many of things on Internet are mere ‘opinions’ which could be both right and wrong depending on interpretation. So, getting no answer is sad, but getting conflicting answers can be so confusing as well as frustrating that, sometimes, you will simply go back to square one as no answer at all.

Currently, I do have questions and did find many answers, just don’t know which one to believe. Also, the key thing is that my questions are relatively practical in nature. So, it is not like I want to know if heaven exists. My latest question is also asked my many people in the world : What should we do with our money in view of the current and upcoming trends of global financial environment.?

Well, I’m not rich, but do have a bit of saving after expenses in the form of both cash and investments. So, what should I do with them? What I heard so far in the media and the net are:

1. Inflation is definitely coming. Don’t know exactly when, but it is coming and will not be a small one. Also, the duration of the inflation cycle is anyone’s guess. So, if I want to borrow money, borrow it now. There is an incentive to really buy something now rather than later, but what to buy now? Real estate is in my consideration in terms of my personal needs. However, it is a such huge commitment that I’m still hesitate in making it and kinda procrastinate in doing thorough and close-to-the-market research.

2. The long term financial well-being of U.S., U.K, E.U. and Japan are ALL bad. Those governments all run high deficit and owe so much money that it would be politically suicide for them to implement any serious remedies like jacking up taxes and chopping deep in social benefits and entitlements. Therefore, holding USD, EUR, GBP, JPY are all bad in the long run. Yes, USD is still the CURRENCY. However, how long should we hold our USD? To hedge the risk of depreciation, where should we diversify? RMB? I’m still hesitate in betting it heavily on RMB in the long run in view of what may happen to the regime….

3. Investing long terms in real estates in those countries above is highly risky, but it is risky as well in China and few booming countries in view of the politics and the housing bubbles there. With the lack of transparency, the heavy handed effect of the PRC government and the social stability there, it is difficult to time when to buy? and what house to buy there? Same thing apply to stocks of real estate companies there.

4. Gold is simply too expensive. Yes, it can still go higher, but the downside risk is not small as well. I’m just not comfortable to buy gold as a form of capital protection. Yes, it used to be really ‘REAL’ to hold gold in your hand rather than paper wealth. But, we are not planning to go exile or something. The storage, liquidity, and the utility of gold are issues for me.

So, what to do protect our hard earned/saved capitals?

I always believe saving and investing are the way to go. However, I’m not a good stock investor, my track record is poor. Investing in funds was recommended, but most records have shown that many funds have performed worse than stock index overtime. Yes, there are some good ones, but we all know that past performance should not be used as a guidance for future. Also, the fund managers really charge hefty fees regardless of the fund performance. So, it sounds like investing in index funds or some ETFs would be relatively safe. But, I think I'm too young to settle. I think I’m a bit more aggressive and demanding than simple capital preservation. Is it too much to ask for some capital growths as well? If that’s the case, perhaps I still need to pick some good stocks. Going back to that, what to buy? When to buy? When to sell? I’ve read many good ideas but I just find that difficult to do for real. It sounds easy to let your stock holdings to rise without selling them, but it is quite hard to stop loss and buy back....anyway, it was a long story... Perhaps that’s why I’m not doing good in stock investments.

Well, questions always have answers, it is just a matter whether you are satisfied with them or not. I guess I won't be able to get out of this Q&A hole anytime soon.


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