Now that you have 600ml of coffee in a jug.
You are required to pour the coffee into the following cups evenly. How would you do it?
You will do the following. Each cup with 200ml of coffee.
Now, I want you to have 300ml in A. How would you do?
You will pour a little from B and/or C to A, right?
The arrangement shown above reflects how things work in life.
In life, if you want more of something (A), you need to give up a little of other things (B/C)
The same applies to investment.
Below are three fundamentals of investment: Capital Guaranteed, Liquidity, Return.
Let’s examine the following examples for further understanding.
From above, we can see that there is NO investment that gives capital guaranteed, high liquidity and high return at the same time. We can’t have the best of 3 fundamentals concurrently.
If anyone approaches you with capital guaranteed, high liquidity and high return investment, you better do the following:
- Cover your ears with both hands and run away!
- Check with related authorities (in this case, Bank Negara in Malaysia)
- Save yourself from fraud and scam.
Be alert on any investments that sound too good to be true. Ask questions.
Understanding basics of investment is important. It’s just like having a light in hand while hiking in the dark, you are better in navigating the jungle in dark with light. You are definitely able to avoid financial scam with solid basic financial knowledge.
Comment if you have encountered any fishy investment before.
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