Saturday, September 26, 2009

The Story of My Friend Become Rich using Mutual Funds


As mentioned in the previous post "Mutual Funds VS Stock Investment", I mentioned that I have a friend becoming rich using Mutual Funds (Unit trust) investment. Today, I am going to share his story but I will not disclose his name in this post. So, I use a random name instead. Throughout this post I will use Alan as my friend's name.

I learn from him and I found that becoming rich using mutual funds or some like to call it unit trust is really possible. It depends on the strategy you use and how persistent you are in the mutual funds investment.

So, I hope that you can continue to read to know some of the ideas of becoming rich using mutual funds.

My friend, Alan is a normal people just like all of us, having full time job, get paid every month and lead a simple life. Personally, I think that his salary is in the range of RM3000 to RM4000 but I do not know the exact amount because it is confidential.

Just like most of us, Alan does not own any businesses and he does not have large amount of inheritance from his parents. He is like anyone of us, simple life, simple income, like to save his hard earned money and hardworking. He was introduced to mutual funds few years ago and he does consistent investment over the years.

Ok, that is enough for his simplistic life. Now, let us get into the real stuff.

How he become rich using Mutual Funds?

He save quite a lot of money from his 10 to 15 years of working life. And, his investment in mutual funds reaches the peak at the beginning of year 2008. He had reached his investment goal and he sold all his units in the mutual funds he invested in.

That was his first success in the mutual funds investment

He used the money he earned from mutual funds and buy 2 properties (2 houses). The houses he bought are ranging from RM150,000 to RM250,000. Since he has a lot of cash at hand, so it is not a problem for him to pay large amount of down payment and take small amount of loans for the 2 houses.

Later, the stock market crashed in the middle of year 2008. He saw the opportunity and he invested part of his saving into the funds that he like most. At that time, market is getting worse and he kept on buying and he bought a lot of units at cheap price. In other words, he bought unit trust at large discount.

Two months ago,he sold all his units and he made a large profit again. Again, he used the profit he gained to buy another property.

Now, Alan is in the beginning of his 30s and he already owned 3 houses. He is almost reaching his goal to become a millionaire and he is now close to million in his property and saving.

Personally, I think that he really has the courage to buy mutual funds when all people are afraid of buying.

There's a famous saying, 'Buy at the peak of pessimism'. That is the faith Alan has in his investment.

Personal Analysis on His Investment Technique:

1. Is it a good thing to invest in economic downturn?
He did the right move, buy at the economic downturn and sell when economic recover. Economic downturn is the MEGA SALES for investment vehicles such as mutual funds, stocks as well as properties.

2. Is it too ricky?
Not at all, because mutual funds or unit trust is a large pool of money investing in businesses within the country and foreign countries. So, mutual funds will not disappear unless the all businesses the fund invested in gone bankrupt. (That case would hardly happen.)

3. What are the rules and regulations mutual funds companies to sell funds?
In our country, Malaysia, mutual funds companies have to proposed their new funds to a government bodies to get approval. Only after that government bodies approved the funds, then the bank or mutual funds companies can sell the funds to the public. In other words, unit trust funds that are currently available is approved by government bodies and it is considered as safe investment. (I forgot what is the name of that bodies. Will update about it soon.)

So, buy when the economic is bad and buy a lot. Mutual fund will not disappear (it is a rare case to happen) in economic downturn. Economic downturn is the time to buy at discount.

And so, Alan did it. I am sure that he will do it again when the next chance come.

You might want to read about "Dividends of Unit Trust/Mutual Funds" and learn how it can help you make money.

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