Investor can open margin account from the brokerage firm, which allow them to borrow money to invest in the share market. However, certain amount of interest (about 8-9%) will be charged towards the amount borrowed.

As for me, margin account is definitely a big NO.

If you target to a profit of 15% from your investment, you need to pay back the 9% interest, which left you with just 6% profit. With the 6% profit, I would suggest to put that money in Amanah Saham, which will yield interest within the same range (and it is capital guaranteed by the government).

My advise is to start to save money from this moment. Build up your cash reserve before you get into the stock market. Make sure the money that you want to invest is the extra cash that you would not want to keep in the turtle-rate of normal savings account. If you invest with your money, the worst scenario is you will lose all the money you invest. You will still have your house and car. That is the worst scenario.

Smart investor will know how to use internet and the all the available resources to minimize their risk of losing money.

This article is to introduce the type of stocks that is available in the market.

Blue chips
These are companies with strong fundamentals. They have track record of high earnings and good dividends for years. Some even give good dividends (5-8%).

Second liners
These are companies that have performance in between blue chips and third liners.

Third liners
They are companies with poor fundamentals.

Growth stocks
These are companies that give high growth due to their high growth potential. They usually retain their earnings to further expand their businesses and therefore usually give low dividends.

Cyclical stocks
These type of stocks depend much on the economic cycles. They are companies whose earnings track the business cycle.

Income stocks
These type of stocks pay very high and generous dividends, for example, tobacco companies.

Defensive stocks
These stocks are least affected by the economic crisis or in the bearish market. Good exampls include those in the food and consumer businesses.

Recently, the government has announced to subsidise car owner below 2000cc. The amount is RM 625 per year. I received an email from my friend, that show the amount of fuel consumption that the RM 625 can help. See the calculation below:

Basically, if you are using less than RM 128.20 per month, then the rebate is very good for you. I believe most road user will use more than that amount each month.

Note: This calculation is meant for those driving vehicle below 2000cc. Those driving big cars, they don't really care about the petrol price hike.

I was introduced to the Power of Compounding after I read AhYap's blog one year ago. I was marvelled by this word 'power of compounding'. This word has been used by famous people like Warren Buffett, Albert Einstein, etc..

Let the number show you the wonder, see the picture below (click it to zoom):
As you can see, we assume that you have $100,000 in your savings. You can see the effect of growing the money at 5%, 10%, 15%, and 20% annually. By Year 20, those who grow their money at 20% per year accumulate $3.8 millions.

Ah Yap keep on stressing that we must have $100,000 before the age of 30. Why? Because with the $100,000, even if you let it grows in the Amanah Saham 2020 account will yield you $386,968 after 20 years. If you think keeping it in the normal savings account (at about 3% annually), $100000 will yield just about $180000 after 20 years.

There are 2 main points that I want to stress here:

1. Start saving early
2. Compound you money smartly, don't just leave it in the normal savings account

In order to achieve financial freedom, I want to stress on the importance of setting objective (the amount of money you want to accumulate for certain years). Without a pre-determine objective, you will not know the limit.

Basically, there are 3 types of objectives:

• short term
• medium term
• long term

I like to use the term 'discipline saver', meaning that you pay yourself first each month after receiving your salary. Set an amount to be transferred automatically into an untouchable saving account each month. Even a small amount of $100 each month will do the wonder for you.

So, start setting your short term, medium term, and long term objectives right now.

Welcome to http://potatoinvestor.blogspot.com.

I have to admit that I am new to the world of investment. Each day I am learning from other established investors, my friends, and by reading books.

Human have limited brain capacity and memory. That's the reason I create this blog, to share with all my readers the knowledge that I gain on investment.

The focus of this blog is mainly on:

• insurance
• mutual fund
• bond
• stock
• property
  

Do share your opinion by leaving messages so that this blog can be improved in the future. Do check out this blog every now and then. Stay tune for more updates.