In the month of December, a very close friend of mine requested for me to have a session with his childhood friend who have just got into the insurance business.
When I got there, the discussion has already begun and my friend has shared some of my financial strategies with his 'financial planner'.
The financial planner was totally against some of my strategies.
There are many different strategies that were discussed but I'm going to share only 1 today.
That's HIGH RISK HIGH RETURN! You see, I've been investing into a portfolio of direct investments.
My personal portfolio consists of stock and shares, physical precious metals, ETFs, real estate development participation, REITs, and some leftover unit trusts that I still keep.
However, I've sold off a lot of unit trust over time to diversify into all the investments that I've just mentioned.
He drew this chart and explained...
In his exact words, "In order for us to have a balanced portfolio, we must first have a balanced and structured portfolio.
The fact about investments has always been HIGH RISK HIGH RETURN.
Therefore, to begin your investment journey, you should begin with investing in endowment policies and investment linked policies or unit trust before investing into direct investments like shares, precious metals, real estate, etc..
" Guess what? My friend who is totally ignorant about the world of finance said, "Jonathan, what he said totally make sense...
All the financial experts are saying HIGH RISK HIGH RETURN! You are investing mostly into direct investments! Your investment portfolios are way too risky! You should totally listen to this guy...
" I smiled and I started a conversation.
Me: Dear Friend, do you think your business in the area of media is risky? Friend: Not really...
I consider my risk to be rather minimal.
Me: Why? You are generating good returns from your business, aren't you? Friend: Yeah I've been generating good returns because I've total control in my business and I know what I'm doing.
Me: What if I were to pump in the capital and you run my business in the finance industry instead.
Do you think that would be risky for you? Friend: Of course! I've no idea how you run your business at all! Me: Well...
As you mentioned that your business is low risk, what do you think if I were to run your business instead? Will that be risky for me? Friend: Of course! You have no freaking idea on how my business operates! Me: So doesn't that already make any sense to you? We are both into businesses which are considered direct investments which are HIGH RISK HIGH RETURN.
But why is your business giving you high return but you do not consider your business high risk at all? Dear Readers, by now I hope you have learnt something here..
First, it does not take high risk to generate high returns.
In fact, I consider my investments to be high risk when I do not have adequate knowledge when investing.
When you know what you are doing with your money, you have effectively lowered the risk.
Second, I will never put my money into investment linked policies or unit trust ever again.
Why? Most of the 'professional' fund managers can't beat the index over a long run and they charge higher fees than ETF.
By investing into investment linked policies or unit trust, you are not making yourself rich, you are only making the insurance agents or unit trust agents richer.
Third, never listen to investment advice by insurance agents.
Insurance agents are trained to give insurance advice, not investments! The best an insurance agent can do for you is to sell you an endowment policy which is giving return way below inflation rate.
What is the point of tying up your money for 25 years and investing below inflation? The fact is this...
If you listen to the advice of the poor, you are receiving poor advice.
Smart insurance agents work with qualified investment advisers to give quality investment advices.
When I got there, the discussion has already begun and my friend has shared some of my financial strategies with his 'financial planner'.
The financial planner was totally against some of my strategies.
There are many different strategies that were discussed but I'm going to share only 1 today.
That's HIGH RISK HIGH RETURN! You see, I've been investing into a portfolio of direct investments.
My personal portfolio consists of stock and shares, physical precious metals, ETFs, real estate development participation, REITs, and some leftover unit trusts that I still keep.
However, I've sold off a lot of unit trust over time to diversify into all the investments that I've just mentioned.
He drew this chart and explained...
In his exact words, "In order for us to have a balanced portfolio, we must first have a balanced and structured portfolio.
The fact about investments has always been HIGH RISK HIGH RETURN.
Therefore, to begin your investment journey, you should begin with investing in endowment policies and investment linked policies or unit trust before investing into direct investments like shares, precious metals, real estate, etc..
" Guess what? My friend who is totally ignorant about the world of finance said, "Jonathan, what he said totally make sense...
All the financial experts are saying HIGH RISK HIGH RETURN! You are investing mostly into direct investments! Your investment portfolios are way too risky! You should totally listen to this guy...
" I smiled and I started a conversation.
Me: Dear Friend, do you think your business in the area of media is risky? Friend: Not really...
I consider my risk to be rather minimal.
Me: Why? You are generating good returns from your business, aren't you? Friend: Yeah I've been generating good returns because I've total control in my business and I know what I'm doing.
Me: What if I were to pump in the capital and you run my business in the finance industry instead.
Do you think that would be risky for you? Friend: Of course! I've no idea how you run your business at all! Me: Well...
As you mentioned that your business is low risk, what do you think if I were to run your business instead? Will that be risky for me? Friend: Of course! You have no freaking idea on how my business operates! Me: So doesn't that already make any sense to you? We are both into businesses which are considered direct investments which are HIGH RISK HIGH RETURN.
But why is your business giving you high return but you do not consider your business high risk at all? Dear Readers, by now I hope you have learnt something here..
First, it does not take high risk to generate high returns.
In fact, I consider my investments to be high risk when I do not have adequate knowledge when investing.
When you know what you are doing with your money, you have effectively lowered the risk.
Second, I will never put my money into investment linked policies or unit trust ever again.
Why? Most of the 'professional' fund managers can't beat the index over a long run and they charge higher fees than ETF.
By investing into investment linked policies or unit trust, you are not making yourself rich, you are only making the insurance agents or unit trust agents richer.
Third, never listen to investment advice by insurance agents.
Insurance agents are trained to give insurance advice, not investments! The best an insurance agent can do for you is to sell you an endowment policy which is giving return way below inflation rate.
What is the point of tying up your money for 25 years and investing below inflation? The fact is this...
If you listen to the advice of the poor, you are receiving poor advice.
Smart insurance agents work with qualified investment advisers to give quality investment advices.
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