A Place Where Your Money Can Grow

John F Kennedy once said: “Change is the law of life…

…. And those who look only to the past or the present are certain to miss the future.”

Change is something that we need to embrace. And it’s not just because Donald Trump has been elected as America’s next President.

But Trump’s victory is a timely reminder that change is the only constant.

Sound-bite politics

We still don’t know for sure the full implications of a Trump administration, but….

…..his bugle call has been to “Make America Great Again.

What exactly does the sound-bite mean?

I doubt if Trump knows for sure, himself.

Does it mean that he wants to reduce America’s 19 trillion dollar debt mountain?

Or could it mean that he wants to borrow even more to drive America’s economic growth rate to 4%?

Perhaps it means that he wants America to export more by punishing importers.

Who knows?

None of us really know.

But that hasn’t stopped experts from offering their two-cent’s worth.

So here is my two-penny’s worth too.

A vote for Trump in the US election was a vote against the establishment

A significant part of society had been left behind since the Great Financial Crisis. Not just in the US but around the globe too.

We may have narrowly sidestepped financial Armageddon through some fancy footwork by central bankers. But for many, it doesn’t feel much like a victory at all.

How low can it go?

So as interest rates around the world were driven to historic lows, many people couldn’t help but feel that they had been marginalised.

Prior to the crisis, many people they did as they were told. I certainly did.

They lived below their means.

They saved for a rainy day.

And they made sacrifices so they could enjoy a comfortable retirement.

The promise – albeit implicit – was that if they acted responsibly today, they would be amply rewarded tomorrow.

So when they retired, they could exchange their hard-earned savings for a stream of income that would let them enjoy their sunset years in relative comfort.

The plan had worked for their parents.

It worked for their grandparents.

It probably even worked for their great grandparents.

But it has not gone according to plan for millions of people around the world. Something has gone badly wrong.

So who is to blame?

Blame game

The finger of blame has been pointed at banks.

It has been pointed at governments.

It has been pointed at multi-national corporations.

It has even been pointed at globalisation.

In fact, anything or anyone that appears to have escaped the financial crisis unscathed has been blamed.

But there is little to be gained by trying to turn back the hands of time.

As the man on Orchard Road, who was once asked for directions to Johore, told the bewildered tourist: “If I was you, I wouldn’t be starting from here.

But we are where we are.

Looking ahead

And from here we need to find a way to get to where we want to be, financially.

That means looking forward, rather than back.

Simply leaving our money in a savings account – as many have done in the past – is not going to be enough.

Thing is, it never was enough.

However, higher interest rates in the past did help to give the impression that our money was growing, when in actual fact, it wasn’t.

Earning interest at 5% when inflation was running at 7% is just as bad as earning interest at 0% when inflation is at 2%.

Our money was growing in nominal terms. But it was losing its value in real terms.

We were always trying to run up a down-escalator that was moving faster than we could ascend.

Think different

We need to think differently. We need to put our money to work where it has a proper chance to grow.

That could mean enduring some short-term volatility, as traders try to figure out where the market is going.

But for investors – real investors – it should be about working out the yield on the investment over the lifetime of the investment.

If you keep that in mind at all times, then you shouldn’t go too far wrong.

It has worked for me. It’s called The Stock Advisor way. It could work for you too.

A version of this article first appeared in Take Stock Singapore. Click here now for your FREE subscription to Take Stock – Singapore, The Motley Fool’s free investing newsletter.

Written by David Kuo, Take Stock - Singapore tells you exactly what's happening in today's markets, and shows how you can GROW your wealth in the years ahead.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore Director David Kuo doesn’t own shares in any companies mentioned.