Invest Made Easy
Indonesia's Inflation Crisis...Malaysians should learn from it!
Shane My
Publish date: Sun, 14 Jul 2013, 11:48 AM
Shane My
0 271
Like many of us, we seek for financial security and ultimately financial freedom. This blog is intended to act as a journal of investment as I journey towards that dream. At the same time, I hope that the articles written here would also benefit many others who share the same vision as me.
In an article from The Star dated 12th of July 2013, our closest neighbor Indonesia is currently facing a mounting inflation crisis largely due to the fuel hike implemented by their government. A snippet from the article as shown below indicates that inflation in Indonesia would rise to about 7.5% on an annual basis due to the fuel hike.
Inflation rate as we all know is a measurement of price increase/decrease of consumer products and services. One of the key item from the list of consumer product is of course fuel. Hence any movement of the fuel price in terms of reduced subsidy or a hike in pricing would have a direct effect towards the inflation rate of a country.
In Indonesia's case, the reduction of fuel subsidy was inevitable in a effort to reduce the country's debt as highlighted in this post from English.news.cn.
Despite strong violent protest by students and workers from the lower income group, the fuel hike had to carried out in order to save guard the country's debt from spiraling further down and to prevent further downgrading of the country's credit rating.
Would Malaysia face the same problem in the near future?
Yes, a definite yes! The question is when would the inevitable arrive?
In an older post entitled "How Does GST, Subsidy Cuts, Credit Rating affects us as Malaysian?", I've clearly stated that our countries debt level is at a worrying level. What we would eventually face is what our neighbor, Indonesia is currently facing. Two key remedial strategy must be implemented by the government:
1. Goods and Service Tax (GST)
2. Subsidy Cut - in other words reducing/removal of subsidy for key items such as:
The implementation of subsidy cut would then increase the price of consumer products and ultimately inflation will rise. A simple flowchart below illustrates the impact Malaysians would eventually face:
Summary
If our neighbor Indonesia is already facing this problem, what reasons can we come up with to say that Malaysia would not face the same problem? Although we can't change the economic outlook, we can still safeguard the value of our money/savings through investing in investment vehicles that can potentially generate returns which are higher then the inflation rate. Taking for example Indonesia's inflation rate of 7.5% as a benchmark, do you think that the money sitting in your Fixed Deposit Account (4%), Savings Account (0.25%) or even your retirement fund (5.5%) would be insufficient to battle inflation?
You can choose to ignore what you've just read by brushing aside the facts, but regret not when the actual scenario befall upon you. Reality bites, so live with it!
Cheers and Happy Investing!
P.s : I've been an ardent supporter of utilizing unit trust (UT) investment my retirement. I believe UT being a passive investment is capable to generate returns that are higher then inflation and at the same time gives me the freedom to pursue my interest as well as career. If you like to know more about UT investing from my point view, feel free to drop me an email at shanesee03@gmail.com
P.p.s : Select the best unit trust to invest in by reading the Equity Malaysia category of this post : Top 10 Best Performing Unit Trust Funds As of 10th July 2013
P.p.s : Select the best unit trust to invest in by reading the Equity Malaysia category of this post : Top 10 Best Performing Unit Trust Funds As of 10th July 2013
If you like reading this post, it would do me a great favor by:
1. Sharing this post on your Facebook!
2. Liking my Facebook Page
3. Subscribing to me. See the "FOLLOW MY ARTICLES VIA EMAIL" section located at the top left? Just key in your email and click "Submit" to receive the latest post from Invest Made Easy via email.
1. Sharing this post on your Facebook!
2. Liking my Facebook Page
3. Subscribing to me. See the "FOLLOW MY ARTICLES VIA EMAIL" section located at the top left? Just key in your email and click "Submit" to receive the latest post from Invest Made Easy via email.
More articles on Invest Made Easy
IME versus Market Analyst - Fun with Predicting UWC's Target Price
Created by Shane My | Dec 06, 2020
Discussions
Be the first to like this. Showing 1 of 1 comments
Post a Comment
Featured Posts
Introducing MY's First IPO Fund for Sophisticated Investors!
New Update. Discover investment communities that resonate with your ideas
M & A Value Partners IPO Equity Fund has been launched - Targeted 13% Return p.a
Latest Videos
Apps
Top Articles
1
Stock Pick Contest Year 2024
2
https://dividendguy67.blogspot.com
3
Koon Yew Yin's Blog
4
5
save malaysia!
6
Mercury Securities Research
7
Good Articles to Share
8
angelinestment
#
Stock
Score
Daily Stocks
Stock Name
Last
Change
Volume
Stock Name
Last
Change
Volume
Stock Name
Last
Change
Volume
MQ Trading Signals
Stock
Time
Signal
Duration
Stock
Time
Signal
Duration
Featured Advertisers / Partners
Ride The Bull Short The Bear
CS Tan
4.9 / 5.0
This book is the result of the author's many years of experience and observation throughout his 26 years in the stockbroking industry. It was written for general public to learn to invest based on facts and not on fantasies or hearsay....
AngChoo Choo Ben
For the last six years our household debt has increased to about 62 percent that is about 12 percent per year and our GDP increased by about 5 percent per year.Think how long this can sustain!
2013-07-14 18:45