Friday, February 4, 2011

The happy problem of excess cash

With not much value left to be found in the stock markets and possible risks including stagflation(inflation coupled with anaemic economic growth in developed countries), increase in oil prices or food prices hurting corporate profitability (thereby reducing general stock market upside due to an already large profit base reported), very possible continued increase in interest rates to stem inflation, the wild card in middle eastern unrest and the general optimistic mood of " uncle and aunties" ...its wise to store up some cash for a possible correction. The stock market could possibly go higher due to ample liquidity, yet it also serves to heighten the danger of a reverse of liquidity back to developed nations.....risks is greater than reward.

Given the above backdrop, i am at my wits end to place this excess cash i have. I did explore Traded Endowment Policies (TEPs) but at 4%-8% per annum returns with a possible 10% loss of capital, having to fork out cash monthly to serve these policies and having to face the volatility of exchange rates as these policies are priced in pounds, i feel i can definitely do better than that in other things. Having said that, i think it is a good place to park your money if you are one who don't know what to do with your money and need some enforced money discipline. Way better than investment-linked insurance policies or certain whole-life plans or endowment policies. Residential property investment is a no go definitely. The risks are higher than the rewards. Any meaningful upside will be capped by the government(election year, remember!) as residential property is still a public good. The above average supply of HDB flats being doled out and TOP-ing in 2013-2015 and also of private residentials, means rental rates will fall. Coupled with higher interest rates, there will be lesser meat. Its more likely to go slightly downhill or stagnate. It is ONLY suitable for those with strong holding power to realize the meat..PERIOD. Other forms of property like commercial and industrial is out of my sphere of knowledge but i would hazard a guess that the recent "popular" mentioning of commercial and industrial as a good investment means that it isn't anymore or at best, not much meat left. Anyway, its best left to experts.

It could be a good time to clear certain debts.Will update. Meantime, Happy Chinese New Year!

1 comment:

  1. If the person has excess cash with him than one should invest in forex market by taking some Forex Signals, as this will make him earn profit easily.

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