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Original investments for the next 10 years

Wouldn’t you want to know where to put your hard-earned money, so it can work by itself? Don’t you want a secure and profitable investment that will bring money in the long run? Well, who doesn’t? But if it was so easy, why isn’t everybody doing it. Because it isn’t that easy and the markets become increasingly unsteady. However, there are certain areas that come close to what you would want to call a safe investment.

Those are areas that are less dependent on the fluctuations of the market. For example – as the world tries to stir towards renewable energy resources, an increasing number of governments are subsidising this particular industry. Hence, the industry grows and becomes more profitable – no matter whether another financial crisis will hit or not. Although nothing is even 100% secure, certain areas of investment are very likely to create profit. Not all are in Europe and North America though.

Investing in Asian markets is nothing new. However, some markets are booming and won’t stop for another decade at least. Singapore is one these markets. This sovereign city-state has the highest concentration of millionaires in the world and therefore plenty of investment power within the country. The construction industry is already booming for over a decade and there isn’t a sign for a halt. Property agents have turned wealthy, as land is being reclaimed and developed with the speed of light.

But there isn’t only property. The government and the Singapore Economic Development Board have opened up the country for foreign investors. The economy is not limited to construction and property, but excels in trade and shipping as Singapore has the busiest port in Asia. Also other sectors, such as technology, tourism and financial services, are welcoming and prosperous. As Singapore’s government stirs the economy towards further development and growth, there isn’t any end in sight for long-term investments.

Another interesting location for investments is Qatar. With the FIFA World Cup 2022 coming up, the investments from within the country are enormous. Qatar is not only investing stadiums and infrastructure, but aims to create a wonderland for tourists, just like Dubai has done. Stocks are being predicted to rise, if not triple within a decade. Different sources recommend the Qatar investment fund. However, there is a bitter taste to the bite. The Arab country has recently been criticised for the unfavourable treatment of their foreign workers. Furthermore, the FIFA is under pressure, due to accusations of bribery during the bidding process and allegations of slave labour. Although the FIFA says a reallocation of the World Cup 2022 will not happen, one should keep it in mind when investing in the Gulf country.

Properties can be in another sense an interesting investment. As certain cities loose their population, others are becoming increasingly popular. Detroit for example has lost half of its inhabitants in forty years. However, there are other urban centres that are already experiencing a scarcity of housing. Berlin for example has a rising demand for housing for ten years straight. The German capital has once been cheap with plenty of living space. Investors have renovated entire neighbourhoods and created upscale living. As the popularity of Berlin isn’t declining, the rents have not only increased, but property has become the hottest commodity in the city. Those who have invested in property early enough have made significant financial benefits.

Similar developments can be seen in various cities around the world. Brooklyn, London, Paris and Amsterdam are only a few examples. Furthermore, due to the housing crisis and the collapse of the international market in 2008 and 2009, the prices for houses and properties broke down. Five years later the prices are slowing picking up speed with the tendency to rise rather than to fall again. An investment in inner city housing and urban property will in many cases be a profitable one.

Barcelona, Madrid, Austin and other cities are becoming increasingly attractive. As the rents there are down at the moment, these cities provide investors with interesting prospects. The prices on the international housing market were terribly bad for a couple of years. As the crisis is passing and most countries are recovering, the prices will go nowhere but up. While the market in some cities might take some time, other city markets are already starting to boom. Furthermore, the trend of urbanisation is speeding up the process. London, however, is no longer interesting, as the rents have become too expensive which minimises the profit margin dramatically.

Up and rising are also leisure and entertainment. Never before have we consumed such a quantity of entertainment. Hence, the technology sector will not just be interesting, but also offer itself as a profitable investment opportunity. Social Media brands and small start-ups, such as Facebook and Whatsapp have in an extremely short period of time generated a large amount of value and money. Many others are following the example. The technology market has grown tight links to the entertainment and leisure industry. Therefore, it will be interesting to watch what is coming.

Surely there are people that keep reminding us constantly of the bursting dotcom bubble. However, investments in technology are profitable now and in the future. The dotcom bubble was an entity in itself – complex and difficult to understand for investors at the time. Through smart phones, iPads and HD gadgets the world has become more receptive towards this kind of technology. All these devices seem to be irreplaceable already – just imagine where the industry will be in only five years.

Furthermore, it is not only leisure and entertainment, but the finance and business world that aim to catch up with the speed of the technology. Entire industries are upgrading – no matter whether medicine, manufacturing or construction. The technology industry offers a wide range of investing possibilities. Brands like Facebook, Google and Apple are one option. However, there are also special technology funds that offer themselves ideally to long-term investors. These are a perfect alternative for those who don’t want to bother with daily fluctuations.

4 Great Things You Learn Indirectly When Investing

Like you, I was young and fresh to the world of investing. I was 18 and finally eligible to invest! I remember thinking to myself; I can finally put everything that I have learnt into practice! Along the way, I have learnt so much more, directly and indirectly, about investing.

1) Saving

The first obvious thing about investing is that you can’t even start it when you have nothing to start with. My growing interest in investment was a very strong motivation for me to save. I knew I had to have enough to get into the playground of the rich. Diligently, I put aside half my allowance every week and continued that way for months. Eventually, I had enough to make my first investment. From there on, I never stopped the habit of saving at least half my allowance to put into investments. You’ll be surprised how little you actually need once you begin on this journey of budgeting your week. Also, I advocate cash payments instead of credit cards because it is easier to track how much you have left and be less likely to overspend or spend unnecessarily.

2) No more reckless purchases

Having begun investing and seeing the kind of return it can give, I learnt to forsake a lot of luxury purchases just because my friends around me have it. A $1000 investment can make me $100 or it could buy me some stuff that I don’t really need and impede on my investing journey of creating a sizable portfolio. I chose to focus on growing my investment portfolio instead of indulging in luxury purchases. Of course, that’s not to say that it’s wrong to indulge. Indulge when necessary, not all the time!

Eg. If I wanted to buy something $100, I would want to make that $100 off the market before buying it instead of using my capital of $1000, depleting it to just $900. If you choose not to spend, you’ll still be rewarded with the compounded growth! This method of spending teaches you to delay gratification and to give you time to think twice before making a purchase. Also, you will cherish and enjoy your purchase even more, knowing that it comes from the fruit of your investment. You not only get what you want, you learn valuable lessons about investing as well!

3) Investing shows your true self

Investing will show you your true self and what kind of a person you truly are when money is involved. Are you the same person when you make a lot of money or lose a lot of money? When I first started investing, I definitely did not expect that I would be in for an emotional roller coaster ride. One moment I was feeling good about myself for making the right decision to buy a particular stock. The next moment I was feeling angry at myself for being greedy to want more instead of taking my profits. From profits, they turned into losses. Over the years, I have grown to stabilise my emotions and accept that market swings are normal. I was then able to embrace them and learn to see the bigger picture instead of allowing my emotions to get in the way over short-term market noises.

4) How well can you tolerate risk?

When it comes to risk tolerance, it is all about discipline. When the share price hits your target, are you willing to stick to your target and take your profits? Or, will you continue to let it run hoping that it continues to go further up and disregard your primary research on the existing resistance level? Too often, traders in the market lose money due to the lack of discipline to take profit or to cut their losses. We all know that it is best to ‘Buy low and Sell high’. However, when real money is involved, greed and fear often overcome logic. Discipline is what will keep your rationality and nurture emotional stability. This would eventually translate into profits that you put into your pocket!

Singapore: What does deflation means to us?

Singapore experiences its first deflation in 5 years when consumer prices fell 0.3% in November on a year-to-year basis. Deflation, in economics is defined the decrease in average price level of good and services.

While it may be good news to the consumers as their purchasing power increases with more money in their pocket for other things, investors and the government get cautious over a sustained decrease in the price level.

‘Decrease? I am still paying the same for my food, public transport and medical bills.’

Prices of food, healthcare and education amongst other items has in fact, avoided the drop and in fact rise by 2.9%, 1.8% and 2.7% respectively. For the average consumers, there is nothing to cheer about besides a drop of 2.1% in clothing and footwear.

What led to the overall fell in prices is mainly due to the fall in the price of private road transport – a decline of 7% as compared to last year. This is attributed to the decrease in the price of COE premiums from almost $100,000 in January 2013 to around $76,094 for Cat E in the first round of bidding in December 2014. With over 100,000 cars hitting 10 years old next year, these decade old cars is due for de-registration and thus expect an influx of COE supply and prices to fall further.

The fall in Brent crude oil from US$115 a barrel in June to the current price of US$61 a barrel has caused downward pressure to the average price level of good and services. With the advent of better technology such as hydraulic drilling in the US and the use of alternative fuel, coupled with a slow growth in China and OPEC’s price war, it is unlikely that prices will hit the US$100 mark in the near future.

The housing sector is also affected as the property and rental market start to slow down.

What does it means to the consumers?

If there is sustained deflation, there will be a downward deflationary spiral where aggregate demands will fall and companies to cut down on production. Consumers will put off spending knowing that future prices will be cheaper and this hurts the economy and increases unemployment. With lower wage, the problem exacerbates and price declines further – something you witness in Japan over two decades.

Fortunately, Singapore seems poised to be able to resist the deflationary pressure due to a tight labour market and increasing population. The fall in the general price level is unlikely to be passed on to the consumers as companies face high rental cost and sticky wages. So don’t expect the price of your groceries, MRT and Bus fares and other necessities to fall.

What about investors?

Investors should remain cautious if the prices of Brent continues to decline to inflection point. The slide will cause concerns for companies in the offshore and marine industry such as Sembcorp, Keppel and COSCO as profits dwindled with declining global demands.

The roubles crisis may further inject uncertainties to the market and may often lead to spillover effects on countries that are exposed to Russia such as the US, Germany and eastern Europe that relied heavily on Russian economy. For example, Germany’s company Siemens lost 14% of the revenue, Volkswagen has lost 20% in the same period and Adidas has shut down stores in Russia. American companies like McDonalds, FordMotors and ExxonMobil were also hurt by the fallout due to sanctions and decline in sales.

While there are mixed results from the falling prices, there is no cause of concern for Singapore, for now. Core inflation is expected to average between 2 to 3 per cent in 2015.

Investing like Warren Buffett

The ‘Oracle of Omaha’ invests like no other – successfully. He isn’t a fierce and aggressive investor though, rather a calculative and risk-free businessmen. One might question the kind of companies he invests in, but his methods are clean, careful and even somewhat conservative. Warren Buffett ranks with currently 71.6 billion US dollar among the wealthiest individuals in the world. Born to a Congressman in Nebraska, he made his first money selling chewing gum. More than half a century later he is the CEO of Berkshire Hathaway, an American multinational conglomerate holding company.

Many young businessmen continuously seek advice and answers to how he made such a large amount of money. The answers are rather simple and surprising. Unlike the risky investors one has increasingly encountered in the last decades, he hardly ever makes a rush and not-thought-through investment. Furthermore, he isn’t bothered by the market or other investors, which is probably one of his biggest strengths.

Although he reads up to five different newspapers everyday, the daily fluctuations of the stock exchange don’t influence his decisions. His attitude towards investments is different compared to most modern investors. The daily numbers on Wall Street can often cause a frenzy of hasty buying and selling of shares. Warren Buffett considers his investments to be long-term. Romanticising his approach, one could say he is ‘old school’. When Buffet bought his first shares half a century ago, the average time for holding a share was more than a month. Nowadays, this average has dropped to scary 22 seconds. Considering that a share represents a part of company, one could say 22 seconds isn’t really an investment in anything.

He credo is to invest in what he knows. There isn’t a chance he buys shares worth millions of dollars from a company that he doesn’t entirely understand. He does his homework and buys shares as if he was buying the entire business. This investment is not based on the fluctuation of the share, but rather on long-term interests in the company. One could actually argue that Buffett’s categories are extremely conservative. When considering an investment, he questions whether the company is simple and understandable, has a positive operational history and if there is a favourable future for the business.

This strategy isn’t flexible at all, but safe and sound. Warren Buffett is known for not being irritable by the market. His holding company for example owns significant parts of Coca Cola, American Express and IBM – companies that are consistently successful.

Another strength of his is his sense of realism. He knows that it is impossible to predict the day-to-day movements of the market and therefore the direction of the economy. Most investors try to form a package of shares and investments that will be beneficial with their predicted direction of the market. However, this always includes a risk. If the prediction isn’t entirely correct, not all shares will be profitable. Buffett’s investments are outside of these predictions. He understands that he cannot, despite his vast influence and financial power, control and continuously predict the economy. He therefore only invests in businesses that are superior to these fluctuations. There are certain businesses that always will prosper and generate revenue – such as Coca Cola and IBM.

The simple principle behind Buffett’s strategies isn’t to minimise risk, but to eliminate risk in the first place. He was famously quoted saying that the stock market doesn’t really exist for him. It is only there to see if anyone offers anything foolish, he said. This exemplifies his attitude towards the daily swings of the market that most investors are influenced by – he ignores them completely.

It isn’t intelligible for him to invest in a company that he doesn’t understand and whose business isn’t transparent. Modern day trading on the stock market is mainly based on sudden impulses and spontaneous movements of the shares. Investors, buyers and traders, for the most part, no longer look at the company and its values, but rather at their day-to-day performance. As Warren Buffett tends to do long-term investments, he does exactly the opposite.

He is convinced that taking a risk with certain shares is never a good idea, as he equals a risk with not knowing. Why invest in something that you are not sure off? That is exactly his credo. No investment should be made, unless there is certainty. Once the latter is guaranteed, one can even make a heavy investment. Modern day trading is often compared to gambling at the casino. Surely, it often seems that way. False investments cannot only cause a heavy damage, but can create a ripple effect if the investment was made with borrowed money.

Warren Buffett chooses not to gamble, but place his money on the safe side. Why would you bet on black, if you know it is going to be red? Buffett might invest conservatively, but therefore only does so whenever he is sure of profit and convinced of the company itself.

One might ask, how he knows which shares and companies will be prosperous and safe. Buffett does he research. He might not be influenced by the daily fluctuations, but he does his homework concerning financial news and business developments. Once he makes an investment in a company, he usually buys a huge quantity of shares and keeps it. Many investors don’t keep shares, as the cash flow might stagnate. Warren Buffett has a certain funding, which he can easily invest without having to worry about accessibility of funds. However, also he has started small. His earnings on the market did not instantly rocket into the millions.

Warren Buffett might posses 71.7 Billion US Dollar, but also he has started small. He has made his first billion only in 1990. Considering he has then already been trading for over thirty years, one understands that consistency and persistency are part of his success. It is, however, difficult to apply all his tactics. Around 60 Billion US Dollar of cash pool allow him and his company to move quickly like no other investor, if necessary. Hence, his principles and attitude are admirable, but if one aspires to be the next Warren Buffett, one should make some time.

What to learn from the sinking oil price?

The black gold is without question, still one of the most valuable goods in the trading market. Many countries are dependent on the consumption of it, while other economies are entirely based on the selling of oil. When the oil price suddenly falls heavily, some people are getting extremely worried and others buy frenetically. In the last weeks and months, the oil price has been experiencing the biggest plunge since the mid-year drop in 2008. The price has currently reached almost half of what it still was June 2014.

Traders and consumers are not only buying, but also asking themselves how this drop came about and how it might affect the economy. Oil was already to run out in the 1970s and only expected to excel in price, if anything at all. The sudden fall of the oil price is not only unexpected, but also creates a certain anxiety – is it the first sign of a collapsing economy? Looking more closely at the events, one can learn a few things.

Falling demand

Firstly, the world is less dependent on American and Middle-Eastern oil than one might have thought. In September the U.S. Energy Information Administration has reported the highest monthly production rate in 28 years. On the other hand, Europe and China are buying less oil, as the demands shifts to gas and renewable resources. The supply has increased and the demand decreased, hence the price fell.

When the price for oil was high, economists blamed the American government for slowing down the economy as subsequent high gasoline prices damaged shipping, trade and travel. Now that the price is low, the same voices expressed accusations towards the same government for bringing a decline to the oil industry. Areas in Texas and North Dakota, in which the oil industry is a heavyweight, fear job cuts, as the production of oil might need to be reduced to stabilise the oil price.

If both high and low oil prices are bad for the economy, then when is it good for the economy? The truth is that the oil price alone is not responsible neither for a flourishing nor for a stagnating American or international economy. Neither is the president nor the government directly responsible for the fluctuation of the oil price. Morgan Stanley predicts that the price can even further drop in the beginning of the New Year. Fact is though, no matter whether high or low oil price, there will be benefiters either way. The world economy surely is related to the oil price. However, some critics wrongly believe that the falling and rising of the oil price regulates the international economy – it is the other way around.

Government regulation

Related to the problem of the falling and rising of the oil price is the issue of government regulations. The question is whether it is necessary and beneficial to regulate the drilling for oil and the oil market itself. Once again, there are critics arguing both ways. Furthermore, there have been regulations in place both when the oil price was rising and falling as it is now. Every time again the market has regulated itself. ‘How come?’, one might ask. It is due to one of the oldest economic principles – demand and supply.

Oil is a good that can be traded. However, it is often treated just like a currency, which it obviously isn’t. Regulations surely can have an effect on a good being traded, but in the case of oil, the market will regulate itself. The current decrease of the oil price is such a self-regulation. Softer or stronger restrictions on oil drillings would have had only a small impact – considering the entirety of the world market and trade movements. If the government hadn’t restricted drillings, the price would have dropped perhaps faster, but it couldn’t have been prevented.

The black gold isn’t any weapon or tool that can be used to stir the economy into a particular direction. Oil, no matter whether coming from the US or the Middle East, is subject to the market. If the supply is surpassing the demand, the price will simply go down – period. The only question remaining is, whether critics in awe of economic regulations will understand it.

The oil price will mainly remain a victim to demand and supply. However, there is another lesson to be learned. If China and Europe keep cutting down on their need for oil, the self-regulation of the oil market might result in a downward spiral in the long run. If the demand for oil will continuously decrease, the production and drilling will eventually do the same. The industry tends not to react to short-term movements, such as the current one. However, there is a good chance that the demand will not pick up, which will result in cutbacks.

Reduction in oil drilling

What does that does? The American economy is not entirely based on the production of oil. However, it is one of the biggest industries in the country. Although the U.S. consumes plenty of oil by themselves, the cutback in international demand can have a significant effect on the industry. Therefore, it is relatively safe to consider a reduction in oil drilling in the long run. This is not only due to a lack of demand, but also because the benefit margin in the oil industry will become increasingly thinner than it already is, due to high and continuously increasing production cost. Not only are subsidies being given to renewable energies, but also the infrastructure of the oil industry will not survive another renewal.

There is, however, one counterexample, which is the arms industry in the United States. The oil industry in the U.S can be compared to the arms industry. The latter is a major player in the American economy, but for a substantial part kept alive due to the government’s own spending in arms. Therefore, plenty of jobs are being maintained because the United States is at war. Only if a similar scenario will occur within the oil industry, there will be a chance for the long-term security for the industry.

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