[VIDEO] Are investments only for the rich and wealthy?

published 29 JULY 2021

The Covid-19 pandemic has exposed some of our worst fears; inflation, economic crises, and the ever-present risk of poverty. As a result, many Malaysians began looking towards investments as a way to ensure economic stability and survival. However, investing can be terrifying and confusing to so many young adults who often struggle with understanding basic expenditure and personal finance.

RUMIT host Hidayah Hisham speaks to RD WealthCreation CEO Rajen Devadason, Personal Finance Blogger Suraya Zainudin, and Personal Finance Vlogger Suyin Ong to explore the merits of investing and how it can benefit our present and future.

video TRANSCRIPT

HIDAYAH HISHAM | Presenter

For a lot of us, the first financial advice we ever received as a kid was to save money. The old saying ‘sikit-sikit, lama-lama jadi bukit’ felt like it held some truth. The idea that the small pile of coins you have today will eventually become millions tomorrow was motivating to a degree, even empowering for young kids to start on their journey towards wealth accumulation and instilling the importance of planning for your future.

But what if I told you that the pile that you’ve been saving up, isn’t exactly going to be a mountain, let alone enough to call itself a hill?

Inflation! Rising prices! Economic crisis!

These are all factors beyond our control which will eat away at hard-earned savings. So at this rate, the only mountain we’re going to live to see is our own mountain of debt and expenses.

But hey, nasib baik ada investment kan?

And on top of that, you need money to make money, and what if you don’t have enough money in the first place? I mean, I’d have to learn all that fancy jargon – like, what in the world is a ‘bull market’ anyway? And you’re telling me there’s math involved? Which brings me to my conundrum – are investments only for the rich and financially savvy?

[Intro music]

NEWS PRESENTER

“Orang ramai yang ditemui mengakui selepas hampir sepuluh bulan COVID-19 melanda, mereka tiada pilihan kecuali mengeluarkan sedikit simpanan di KWSP untuk meneruskan kehidupan.”

HIDAYAH

In an effort to help Malaysians struggling with the pandemic, the EPF announced the ‘i-Sinar’ programme, which allowed people to withdraw from their retirement savings early. The only catch? Well, they’d have to pay their future selves back somehow – which either means that:

a) they would have to work beyond their retirement age, or

b) work longer hours in order to replenish their retirement funds.

So, the journey to a comfortable retirement means not having a life until you get there? Right.

And it’s actually always been like this. Even in 2017, it was reported that 70% of members who withdrew their funds at 55 found themselves facing the risk of poverty after spending all their EPF funds in less than a decade. Which shows that many of us have always been one crisis away from poverty and a crisis like the pandemic did more than just wipe out an entire mountain of savings, it left many to forgo our future selves just so we can sustain ourselves today.

And can you really blame us? The thought of pursuing an additional retirement fund like a Private Retirement Scheme (PRS) seems so far down the line of priorities when we’re more concerned about whether we have enough money left until the end of the month. So how do we avoid having to choose between stability in the present and stability in the future?

RAJEN DEVADASON | CEO, RD WealthCreation

Now let me just cut to the chase. When we save, we save for safety and stability – ‘save’ starts with ‘S’, ‘safety’ starts with ‘S’, ‘stability’ starts with ‘S’. But when we invest, chances are we do that because we are motivated by an inspiring future. We want to be able to have more tomorrow than we have today.

When it comes to investments, because of longevity risk, it’s better to have more investments than less. So let me tell you why – inflation is going to eat you alive.

HIDAYAH

To understand how inflation affects your money, you need to see your money as superheroes. They have the power to save you during the bad times, they’re there to provide you the good times too, and generally they just make your life a much more convenient and safe place to be in.

But like all superheroes, they also have weaknesses.

[Music]

RAJEN

Are you familiar with something called the Rule of 72? So let’s hypothetically say that if we take 72 and divide is by 3, you get 24. What that means is, if your inflation rate runs at 3%, in 24 years, your buying power would have been halved. In other words, your RM1000 would only buy what RM500 can buy today. And that is why the reason we invest is to grow our money faster than taxes and inflation can erode its buying power.

HIDAYAH

And it’s not to say that inflation is a bad guy – it’s actually a sign that the country is experiencing economic growth. And with economic growth, you’re going to want to enjoy a lifestyle uplift too.

Contohnya, sharing a bed with 20 friends on a holiday before COVID to save money sounds cute, but can you imagine doing that in your 30s with a bad back? Not so cute! And for you to enjoy the benefits of a growing economy, your money needs to grow too. If it doesn’t, its powers won’t be able to withstand ever-increasing prices, meaning it won’t be enough to provide you safety anymore. Which means no more good times, and a lot more of the bad instead.

Which is why we need investment to help buff up our money, just so that they can be on a much more level playing field with inflation.

RAJEN

But what we want to do is not just double our money, but want to double our money, and then we want to double our money again, and then we want to double our money again and double our money again.

Now, all of us obviously want to get maximum returns and minimum risk. Correct? But that unfortunately is not how the world works. You realise that stock markets are kind of wild. Very often it looks like a rollercoaster, [going] up and down. And this sort of zig-zagging is incredibly stressful for people who don’t have a sense of perspective. And so if you are talking about young people who are very, very happy saving, but are too terrified to invest, it’s understandable.

HIDAYAH

And… this is why a lot of people don’t invest. The rule of thumb when it comes to any investment is the bigger the risk, the bigger the returns. The thing is, those big returns are not always guaranteed, and no one can really tell you how much risk you should be willing to take on. Especially with past events such as the 1997 Asian Financial Crisis and the 2008 Global Financial Crisis, the stock market can seem like an unpredictable, scary place. Compounded by the fact that we’re Asians and afraid of failure, the prospect of starting an investment with a 50% chance of failing can be… terrifying.

But is there more going on here than just fear?

SURAYA ZAINUDIN | Personal Finance Blogger, Ringgit Oh Ringgit

The fear of losing money is quite universal and its also psychological. And we think of one negative thing that happens instead of rather than like the ten positive things that happen, and you really zero in on that. The fear of losing even RM1, even knowing the possibility of gaining RM10 is probably like higher – so that’s where the risk ratio aspect comes in.

HIDAYAH

Hey Siri! What’s the definition of Loss Aversion?

“Loss Aversion Definition”

“The tendency of individuals to be more sensitive to the possibility of losing money than they are to the possibility of gaining the same amount of money. Fun fact: loss aversion is determined by cultural, social and environmental factors.”

Thanks Siri!

SURAYA

This is where, I guess, that privilege comes in, right? Because people who are born in positions of, you know, privilege, they have this abundance mentality that for them, it’s not a shameful thing to talk about [money]. It is something that is more empowering for them. If your own family and friends are not the type of people who are comfortable talking about money – surround yourself with a lot of like, negative juju about money, a lot of shame, a lot of fear and reluctance, that’s going to seep into you.

HIDAYAH

So now we come to what experts call the money blueprint – an innate money compass that influences how we think, and what we do with our money. You might have a good one, but you could also be stuck with a not-so-great compass that needs calibrating. And here’s where it gets especially tough, because it isn’t only about not having enough money to invest – a bad money blueprint is a barrier, in and of itself, to investing and planning for your future.

If you’re like me, and you grew up in a lower-middle class family, then you would know that money wasn’t everyone’s favourite topic. It was stress-inducing. And because it was a stressful subject, we kept our money talks limited to savings because it was the only thing we could ever really afford to talk about. But when our idea of money is limited, it can narrow our other world views too.

After all, if money is time, then how do our ideas about money affect they way we view time? Or how we view gaining knowledge? Or the ways we show love? And if this is the mentality that we grew up with, how do we motivate ourselves to move away from that?

SUYIN ONG | Personal Finance Vlogger

I guess there are different things that scare us, and different things that make us move. So for me, what scared me was the question of, “What if I cannot actually afford my lifestyle? Am I going to rely on my parents forever? What if we need to work in this job just to earn the income, and we hate the job?”. I think that is like, one of our worst fears, because we pride ourselves in having impact and doing things that are meaningful.

So for my generation, our generation, I think that is something that also we need to take into account for. Our finances impact what we are able to do in our daily lives. And if we view investing as another component within our lives, you know, just like say working on our health, working on our relationships, it’s all tied in to create the sort of life that we value – it’s quite cute. You get to imagine your future life and then you work backwards from there.

We have to work on it ourselves. I mean, it’s great if we get external support, but we shouldn’t wait for that.

HIDAYAH

Ultimately, the decision to move towards investing in our future really starts with us – and the good news is, it’s actually pretty easy to start now, compared to before. Robo-advisor platforms like Stashaway have done their part to automate much of the process, allowing us to pay and do less, for bigger gains.

But changing our relationship with money isn’t only about investment, and securing our financial future will take knowledge. It can actually be a lot of work to do it right. On the bright side, we all start at the same place – and to do it right, well, we need to do some homework.

RAJEN

Everyone, I think, needs to begin a DIY journey. And I believe the best way to do that, to begin with, is to walk into a big bookstore, go into the economic section, go into the investment section, buying simple books, attending seminars, talking to people who are older than they are, who have actually gone through good times and bad times. And I think if people will do that, then they will actually end up in much better shape.

What is more important the timing the market is time in the market. Your emotions or your circumstances will not allow you to stay in the market for a very long time, unless you lay your foundation. The foundation has two elements – one is saving money, the other elements is education. Now, you have to understand that nobody cares more about your money than you do. So you must educate yourself, the onus is on you.

HIDAYAH

And the best part about this DIY journey you’re on? You have full control to customise how you accumulate your wealth.

SURAYA

Oh my god, there are so many [investment] options out there! [laughs]

It’s the process of discovering what’s right for you. And a lot of people have so many different types of advice. I started realising that people give advice based on what has worked for them. And then you just kind of have to like dig through. The clearest moment of clarity that I’ve had is when I decided like, “Ah, I have no choice but to do a process of elimination. Okay.”

So I have to eliminate the types of investments that I can’t afford to do right now. And there are plenty of those, especially when you’re just starting out. So I couldn’t do property because that needs like a whole lot of like, start-up capital – so cross it out, cross it out. And then stock investments, simply because people say that you need to learn and understand and take courses. So this one [is] postponed for later, so I crossed it out. And then I also started to realise that some of them, “Ah, there’s also the added element of Shariah compliance.” Okay, alright.

HIDAYAH

So yes, investment is for the rich and financially savvy, but that doesn’t mean you can’t become either one, or both. While we can’t change our past experiences with money, we can still write a better future for ourselves. And you can start by making sure you’ve laid out a proper foundation in your present.

To do that, work towards paying off your debts, and coming up with an emergency buffer fund that lasts at least 6 months. After that, start small with your investments, but don’t forget to dream big.

As for me, I’m going to start even smaller – by overcoming my own fear with money and investing. And if you’re going through the same thing too – wanna talk?

[END]

CREDITS