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TABLE OF CONTENTS
Challenge accepted! Introducing stocks in 2 minutes
What are stocks, anyway? Well, think of them as tiny pieces of ownership in a company. When you buy a stock, you become a shareholder, and your fortunes are tied to the company’s success or failure. 👩💼
Curious how can you profit from stocks? Well, there’s a couple of ways to do that:
- Dividends
Some companies share their profits with shareholders in the form of dividends. It’s like getting a little bonus just for being part of the team! - Capital appreciation
Fancy term for when the company grows, the value of your stocks increase too, and you get to sell them at a higher price. This is the “buy low, sell high” that everyone’s talking about! You buy undervalue business today, and sell them for a higher price down the road in the future!
But why pick stocks over other assets? 🤔
1. Potential for higher returns
Historically, stocks have outperformed other assets like bonds, real estate, and cash, providing greater potential for long-term wealth creation.
2. Liquidity
Stocks are generally more liquid than other assets, meaning they can be quickly bought or sold. This makes it easier to adjust your investment strategy as needed.
3. Ownership
When you buy stocks, you’re buying a piece of the company, giving you a more direct connection to its success (or failure) than other investments.
But hey, there’s no rules that you can only own stocks! Feel free to be a playboy here and own multiple assets at once! 😚
Put on your investor hat, we are about to spot a good company! Well, you gotta find a company that has:
- Stable or growing revenue
Company that makes money is consistently more likely to reward its shareholders (that includes you!). - Healthy profit margins
A company could be raking in millions in sales, but if their costs are just as high – as consumer, yes; as shareholder, think twice! - Significant market share
Dominant player in its industry is better equipped to weather challenges. It is great to be a big fish in a big pond, even better if it is the only player in its industry ! - Strong customer retention rate
We all know that one mamak stall that we keep going back to. That’s customer loyalty. Companies that keep their customers coming back have a secret sauce for stable revenue 🤑 - Unfair advantage in industry
Do the companies have unique attributes that competitors cannot imitate? It could be a patented technology, a strong brand, proprietary customer data, or exclusive contracts with suppliers – anything that keeps the company ahead of the others! - Future expansion opportunities 😉
Can the company grow beyond its current market? If it’s showing potential to expand into new regions, products, or services, then that’s a thrilling opportunity! After all, if you are not moving forward, you are moving backward.
So, how do you start investing in stocks? It’s simpler than you might think! Just open an account with a reputable stockbroker (important!), deposit some funds, and you’re good to go. Pick the companies you’re interested in, do your research, and buy your first stocks, easy-peasy 🤑
One of the reliable stockbroker I have been using myself is moomoo Singapore, but good news is, moomoo is ready to make an entrance into Malaysia later this year! Finance Flash is collaborating with moomoo to bring you exclusive rewards. Open your account and get free rewards when they arrive here!
Word of the Week: Deflation
Definition: Deflation is a decrease in the overall price level of goods and services in an economy over time, leading to increased purchasing power of money.
A cup of bubble tea that would cost RM 10 in 2020 would cost only RM 8 in 2023 – the price has decreased. If this happens to lots of items (not just bubble tea, but also to foods, clothes, electronics, and so on), across many stores, it is likely that an economy experiences deflation.
It might sound great as a buyer – you get to save money or buy more with the same amount. But it can impact the economy negatively. If consumers expect prices to keep dropping, they may wait to make purchases for the better deals later This causes a drop in demand for goods and services, and the harmful cycle may eventually lead to production cuts, layoffs, and even business closures.
Deflation also increases the value of debt. If you borrow money to buy a house, you will have to pay back more valuable dollars than when you borrowed them. This can discourage borrowing and investment, further slowing economic activity.
Japan experienced prolonged deflation in the 1990s, known as the “Lost Decade.” Initially, falling prices increased consumers’ purchasing power, but deflation persisted, leading to reduced demand. In response, businesses cut prices, production, while workers wages stay stagnant for years. The increased debt burdens also discouraged borrowing and investment, further slowing the economy. Japan’s economy still feels the impacts of this deflationary period today.
Note: Don’t confuse deflation and disinflation.
Deflation means your money buys more than before because the purchasing power of the currency increases.
Disinflation, on the other hand, is a decrease in the rate of inflation. It is when the price level is still rising, but it’s rising at a slower rate than before.
Key Economic Dates:
- 12th July: Core CPI (Jun), CPI (Jun)
- 13th July: PPI (Jun)
- 18th July: Retail Sales (Jun)
What I’ve been reading:
Here are the top stories that caught my eye:
- Wrap up of US Treasury Secretary Yellen in Beijing
- US latest unemployment rate at 3.6%, wages rose 4.4%
- China restricts the export of two metals crucial to semiconductor
- Anwar to meet Elon Musk on investment opportunities
- Twitter potentially suing Meta over Threads
You’re all caught up!
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Cheers,
Ziet
