There are plenty of ways a person can create passive/second income, grow wealth. Every option works for different individual but I am a strong advocate of stock investing.
Publicly Available Track Record
Matured Public Listed Companies offer track record. Track Record is a very important source of information to gauge the character, resilience, of a company. From the track record, we are able to see how a company transformed, responded to challenges, weathered the storm, how prudent and sustainable while they expanded; these provide us a better understanding of them. Furthermore, these past track record are publicly available in their Annual Reports. Although future performance is not guaranteed by the past performance, it is certainly better than investment that can’t provide any track record. If you ever come across any dodgy investment scheme, you would know they have been secretive about sharing their book.
Regulated
Public listed companies are regulated by Authority. Their financial result has to be audited annually. Although being regulated, audited do not provide 100% guarantee that it would be free from fraud, but at least it is another layer of protection that would discourage fraud. It is safe to say that significantly high percentage of the scam are non-regulated scheme.
Control
Stock is the fundamental underlying asset class for Endowment Policies, Investment Link Policies, Unit Trust, and even some highly risky Structured Products. Meaning to say that, their performance is directly linked to the overall performance of Stock Market. I prefer control. Therefore, investing in stocks allows me to control what I am investing. I can choose to invest only in what I know, what I am confident with. I can choose to avoid investing in companies that I am not bullish about. I am able to predict what sort of dividend I am going to receive. I have much better control.
Transparent Market Price
Stock price are quoted 5 days a week. Buyers and sellers submit their bid – ask price to the stock exchange. Willing buyers, willing sellers would exchange the shares at the preferred price indicated in their order without knowing each other. They need not negotiate till the cows come home. Unlike property transaction negotiation which can be a long, dread, painful, energy draining exercise and yet you still don’t know if you are getting the fair market price.
Easy to Sell
When a stock investor wants to sell his share, it is easy. He can just log in to his broker’s online platform and input his target price. If it is good Blue Chip Company which generally there are plenty of buyers and sellers, it would not be difficult to find buyers. On the other hand, when a person wants to sell his dodgy investment, he would have problem to find the next buyer before he can talk about his selling price. When there is no second potential buyer in queue, we know what sort of selling price seller can bargain.
Visible Presence
When we see a product sold in Singapore, we would know the existence of such product and which company is producing them. Illustration purpose, for example, when we see Yeo’s drinks are sold at various Supermarkets, we would find out Yeo Hiap Seng is the manufacturer of Yeo’s Drink. We can visibly see both the product and company physically present. We can be certain that they are in real business.
Therefore next time before you commit any unregulated investment, do spare some time to think it over again.
