As from April 2013 my Journey in Investing is to create Retirement Income for Life till 85 years old in 2041 for two persons over market cycles of Bull and Bear.

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"The market is not your mother. It consists of tough men and women who look for ways to take money away from you instead of pouring milk into your mouth." - Dr. Alexander Elder

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Saturday, 9 January 2010

The Truth About Retail Investors

Retail investors are profoundly different from institutional investors like mutual, pension, endowment funds or even Warren Buffet.

1. Source Of Investing Capital

Retail investors, where does the source of investing capital come from? Some of you may have rich parents to provide you with big sum of investing capital so it is not a problem; but for most of us, our investing capital come from saving from our hard-earned money. Every dollar saved for investment means a dollar less to spend on other "luxuries".

Someone even goes to the extreme to save on his daily dose of 70 cents coffee by making his own cup of coffee at home so that he can save every cent available for his investment.

The investing capital of these institutional investors are provided by other investors and not from saving from their hard earned money. This is world apart!

Have you finally realize the significance and emotion attached to our investing capital? In other word, for retail investors it represents our blood and sweat, and losing this investing capital may drive some of us into depression and even having the thought of killing ourselves for being so foolish.

We know that we cannot afford to fail; neither can we be overly defensive and manage to achieve meagre return on our investment and fail to build up sufficient wealth for retirement draw down.

2. Investing Horizon

Human life is short; but our working life is even shorter. Most of us who are earning incomes have a finite number of years in which to build our lifetime saving and to invest part of this saving.

How much retirement fund you can accumulate will depend on the Rate of Return on your investment during the wealth accumulation phase; and stop kidding yourself that you have plenty of time at your disposal for investment at low Rate of Return.

As retail investors, we will finally one day liquidate most of our investment to keep up with expenses and the need may come sooner than expected.

Do you think Warren Buffet needs to liquidate most of his investment to meet his retirement fund? Certainly not but most of us need to.

3. Inflation

Over long run, inflation is the most adverse for most retail investors and particularly most dangerous for retired retail investors and must be significantly overcome with more wealth during the wealth accumulation phase.

4. Conclusion.

Understand the truth about retail investors on the limitations and choose investing strategies that are most suitable for retail investors to meet their retirement goals.

The most dollar in the least time. We must.

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