No shortcut to wealth
IN the age of social media, self-proclaimed 'investment gurus' are everywhere – often flaunting eye-catching profit screenshots and bold claims of life-changing returns that leave their followers spellbound.
Even more alarming is the use of AI technology to mimic well-known investment influencers, luring followers into so-called 'investment groups'. Unfortunately, some of
these promises have led to significant financial loss.
What appears to be free advice often comes with hidden cost. It is crucial to approach such content with a healthy dose of skepticism.
The goal of many of these so-called gurus is not to teach you how to make money but to profit themselves – often at the expense of their audience.
Countless people, including everyday individuals and professionals, have suffered significant losses. This raises an important question: Why do people fervently believe in these gurus and fall into such traps?
Many mistakenly view investing as a kind of magic – believing that finding the right guru will lead to overnight riches and lasting financial security. Unfortunately, this mindset is not
only misguided but also potentially dangerous.
It is important to remember that the true essence of investing is wealth preservation. While investments will not make you a millionaire overnight, they can help you combat inflation and safeguard the fruits of your labour.
According to the Rule of 72, with an inflation rate of 5%, your wealth would lose half its value in less than 15 years
if left uninvested. While investing is essential for preserving and growing wealth, promises of double returns or 'get-rich-quick' schemes should be treated as red flags.
The true power of investment lies
in compound interest – the ability to earn returns on your previous returns over time.
Warren Buffett became one of the world's most successful investors not through some mysterious skill but by understanding and harnessing the power of compounding.
He started investing at a young age and consistently held high-quality assets for the long term. Even with seemingly modest annual returns, decades of compounding transformed his wealth to staggering levels.
However, Buffett's wealth did not truly take shape until he was 65. His methods are public and straight-forward, yet many refuse to follow them because they cannot accept the idea of steady, long-term growth.
The core of compound interest lies in time, not short-term high returns. Like personal growth or building a career, wealth accumulation is a gradual process. There are no shortcuts, only sound decisions repeated over time.
To avoid falling victim to false promises, the first step is a shift in mindset. Investing is not about chasing big gains; it is about protecting your wealth. The real goal is defence, not offence – shielding your assets against inflation and uncertainty.
Many people mistakenly equate investing with stock trading or speculation. In reality, true investment should prioritise stability, focusing on asset allocation and risk management.
Last year, Malaysia's official inflation rate was expected to average between 2% and 3.5%. To stay conservative, we doubled this figure, setting a target return of 5% to 7%. Achieving or slightly exceeding this target is sufficient as higher returns often come with higher risks. When investment is viewed as a form of self-defence, it becomes possible to navigate the complexities of financial markets successfully.
Investment can become your financial self-defence. Instead of chasing hype or jumping on every trend, focus on deepening your understanding.
Your perspective will shape your actions and your actions will determine your destiny. Some hustle tirelessly yet end up with nothing while others observe calmly and reap the rewards.
May we all choose the latter – investing wisely, thinking critically and protecting the wealth we have worked so hard to earn.
Dr Lee Chee Loong is a member of the Active Ageing Impact Lab and a senior lecturer at Taylor's University. Comments: letters@thesundaily.com
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The Sun
26-05-2025
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No shortcut to wealth
IN the age of social media, self-proclaimed 'investment gurus' are everywhere – often flaunting eye-catching profit screenshots and bold claims of life-changing returns that leave their followers spellbound. Even more alarming is the use of AI technology to mimic well-known investment influencers, luring followers into so-called 'investment groups'. Unfortunately, some of these promises have led to significant financial loss. What appears to be free advice often comes with hidden cost. It is crucial to approach such content with a healthy dose of skepticism. The goal of many of these so-called gurus is not to teach you how to make money but to profit themselves – often at the expense of their audience. Countless people, including everyday individuals and professionals, have suffered significant losses. This raises an important question: Why do people fervently believe in these gurus and fall into such traps? Many mistakenly view investing as a kind of magic – believing that finding the right guru will lead to overnight riches and lasting financial security. Unfortunately, this mindset is not only misguided but also potentially dangerous. It is important to remember that the true essence of investing is wealth preservation. While investments will not make you a millionaire overnight, they can help you combat inflation and safeguard the fruits of your labour. According to the Rule of 72, with an inflation rate of 5%, your wealth would lose half its value in less than 15 years if left uninvested. While investing is essential for preserving and growing wealth, promises of double returns or 'get-rich-quick' schemes should be treated as red flags. The true power of investment lies in compound interest – the ability to earn returns on your previous returns over time. Warren Buffett became one of the world's most successful investors not through some mysterious skill but by understanding and harnessing the power of compounding. He started investing at a young age and consistently held high-quality assets for the long term. Even with seemingly modest annual returns, decades of compounding transformed his wealth to staggering levels. However, Buffett's wealth did not truly take shape until he was 65. His methods are public and straight-forward, yet many refuse to follow them because they cannot accept the idea of steady, long-term growth. The core of compound interest lies in time, not short-term high returns. Like personal growth or building a career, wealth accumulation is a gradual process. There are no shortcuts, only sound decisions repeated over time. To avoid falling victim to false promises, the first step is a shift in mindset. Investing is not about chasing big gains; it is about protecting your wealth. The real goal is defence, not offence – shielding your assets against inflation and uncertainty. Many people mistakenly equate investing with stock trading or speculation. In reality, true investment should prioritise stability, focusing on asset allocation and risk management. Last year, Malaysia's official inflation rate was expected to average between 2% and 3.5%. To stay conservative, we doubled this figure, setting a target return of 5% to 7%. Achieving or slightly exceeding this target is sufficient as higher returns often come with higher risks. When investment is viewed as a form of self-defence, it becomes possible to navigate the complexities of financial markets successfully. Investment can become your financial self-defence. Instead of chasing hype or jumping on every trend, focus on deepening your understanding. Your perspective will shape your actions and your actions will determine your destiny. Some hustle tirelessly yet end up with nothing while others observe calmly and reap the rewards. May we all choose the latter – investing wisely, thinking critically and protecting the wealth we have worked so hard to earn. Dr Lee Chee Loong is a member of the Active Ageing Impact Lab and a senior lecturer at Taylor's University. Comments: letters@
New Straits Times
22-05-2025
- New Straits Times
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Time in the market more important than timing the market INVESTING in the stock market is often seen as a game of strategy and timing. Many investors dream of buying low and selling high, aiming to beat the market by jumping in and out at the moments. However, decades of market data and investor experiences tell a different story: the key to long-term investment success is not in trying to time the market, but in spending time in the market. This concept, championed by investment legends like Warren Buffett and Jack Bogle, emphasises patience, consistency, and long-term thinking. The Myth of Market Timing Market timing involves making buy or sell decisions based on predictions about future market movements. While it sounds appealing in theory, it is extremely difficult to execute consistently in practice. Even professional investors and hedge fund managers, with access to sophisticated tools and research, often struggle to time the market successfully. The reason is simple: markets are inherently unpredictable. They are influenced by a wide array of factors - economic indicators, geopolitical events, investor sentiment, and unexpected news - that can cause sudden and sharp changes. Predicting these events with accuracy and consistency is nearly impossible. Moreover, successful market timing requires two correct decisions: knowing when to get out of the market and when to get back in. Getting one of these decisions wrong can significantly reduce returns. Even missing a few of the best-performing days can drastically impact long-term gains. The Cost of Missing the Best Days Historical data clearly illustrates the danger of missing just a few of the market's best days. For example, research shows that if an investor remained fully invested in the 500 from 2003 to 2022, they would have earned an average annual return of around 9.8 per cent. However, if they missed just the 10 best days during that 20-year period, the return drops to 5.6 per cent. Missing the 20 best days cuts it to just 2.9 per cent. These best-performing days often occur close to market bottoms - exactly when investors, driven by fear, are most likely to exit the market. If you're out of the market during these critical moments, you miss the rebound and the compounding growth that follows. Compound Growth Rewards Patience Time in the market leverages the power of compounding - the process where gains generate more gains over time. Albert Einstein famously referred to compound interest as the eighth wonder of the world because of its exponential potential. But compound growth only works if investments are allowed to grow uninterrupted over time. The longer you stay invested, the more time your money has to grow. Market fluctuations, while inevitable, tend to even out over long periods. Historically, the stock market has always recovered from crashes and downturns, eventually reaching new highs. Investors who stayed invested through events like the 2008 financial crisis or the 2020 Covid-19 crash were ultimately rewarded, while those who panicked and sold often locked in losses and missed the rebound. Emotional Investing is Risky Investing One of the biggest challenges in timing the market is managing emotions. Fear and greed often drive investment decisions, leading to buying during market highs (due to FOMO - fear of missing out) and selling during lows (due to panic). This behaviour is counterproductive and can result in buying high and selling low - the exact opposite of a successful strategy. By focusing on time in the market, investors can reduce the emotional volatility of investing. A long-term perspective encourages a disciplined approach, helping investors stay focused on their goals rather than reacting to short-term noise. Dollar-Cost Averaging and Consistency One practical benefit of time in the market is that it aligns well with consistent investing strategies like dollar-cost averaging. This involves investing a fixed amount of money at regular intervals, regardless of market conditions. Over time, this strategy reduces the risk of investing a large sum at an inopportune moment and can help smooth out the effects of market volatility. Dollar-cost averaging also removes the need to "guess" when is the best time to invest. Instead of trying to time the market, investors commit to a consistent plan that keeps them invested and disciplined. Real-World Lessons from Legendary Investors Warren Buffett, one of the most successful investors in history, has famously said, "Our favourite holding period is forever". He advises against trying to time the market and instead recommends buying shares in fundamentally sound businesses and holding them over the long term. Jack Bogle, founder of Vanguard and pioneer of index investing, advocated for staying the course with low-cost index funds and emphasised the importance of long-term investing over short-term speculation. Their advice is grounded in decades of experience and supported by strong empirical evidence: over long periods, the market tends to reward patience and discipline. Conclusion In the world of investing, trying to time the market may sound like a strategy for maximizing returns, but in reality, it's a high-risk gamble that few can execute well. The unpredictable nature of markets, the high cost of missing the best days, and the emotional toll of frequent buying and selling all make market timing an unreliable strategy. On the other hand, time in the market - staying invested consistently over the long term - harnesses the power of compounding, smooths out volatility, and promotes a disciplined, goal-focused approach. It may not be flashy, but it is a proven, effective strategy that rewards patience and perseverance. For most investors, the path to long-term success is not in chasing market highs and lows but in trusting the process and staying invested for the journey.
