Where & How you park your spare money? With negative or positive growth?

Introduction

The concept of "Money Parking" is interesting in the sense that : a) parking / unpacking spare money at the right time and place can generate more money, or b) parking / unparking spare money at the wrong time and place can cause reduction of the overall value worth.

When the concept is further explained, there is general good agreement to such an idea. For example : if one "parks" the spare money under the pillow in bed, there is loss in interest generation if compared with parking the spare money in the bank over a period of time.

Having understood such basic notion, there are generally three factors that prevent people from realizing higher return, or increase in value of the "parked money".

• Factor A: Mental Models : the perception of money placing & the notion of "Risk".
• Factor B: Knowledge and Skills
• Factor C : Discipline

Mental Models : the perception of money placing & the notion of risk.

"Parked Money" is deliberately used, rather than "Investment" for the following reasons.

"Parked Money" implies spare money or saving, which needs to be placed at some secured place, preferably with extra money generated in the form of interest or appreciation after a period of time. Hence spare money is associated with deposit in bank as saving or fixed deposits, usually without element of risk as general perception by many.

Whereas investment can be a deliberate attempt for placement of money for an expected or speculative return with risk, and the investment fund can be borrowed fund, not necessary spare money.

Although essentially, there should not be much difference between "Parked Spare Money" and "Investment", as both involve risks of different nature, probability and sophistication.

In the case of so called secured placement of money i.e. in the banks, the not long ago economic crisis in Asia demonstrated the point that the deposit in bank shrinks drastically in relation to foreign currency, affecting many parents whose children are studying overseas or businessmen on international trade.

In same countries, the dramatic rise in inflation, wipe off whatever little interest gained from the deposits in bank. Secured placement of money is not secure anymore in the face of diminishing value.

Hence appropriate thinking or mental models of how to manage our spare money becomes important. The prevailing mental models, or perception of spare money is : "park the spare money in the banks is most secure" needs rethinking in the sense that it becomes automatic reflex to put money in banks, not elsewhere. Having such mindset, we will not explore and learn other mechanisms on how to manage the spare money for better return. The basic human nature to be creative and innovative is then not utilized to the fullest.

Consider a new thinking or mental models : "money in hand is to be treated as organism that will grow in value if proper care is taken. The reverse is also true, i.e. shrink in value if not properly taken care of.". This concept may create a less biased attitude towards money, which can conjure a meaning of greed, or evil. What really is important is the principles, integrity and values system of a person on using the money. A Mafia guy will use the money to create more evils, Mother Teresa will use the money to built larger network among the sick and the poor.

An organism placed in one environment will grow to a certain limit, but may grow bigger and better in another environment.

If you are introduced to place your money in another environment with much higher return, you will probably think of whether it involves extra risks. The notion of risks is natural and relevant.

However, degree of risk perception is very much a function of awareness of appropriate knowledge and skills in application of the knowledge. The less knowledgeable and skillful one is on certain subject, the more risks one would anticipate or perceive. An uneducated farmer will think it is risky to place his money in banks after hearing so much news of banks robbery. He places his money in secret hiding place in the garden. We would think it risky to climb Mt. Himalayan mountains, as we do not have the knowledge nor the skills to climb a hill.

Hence what prevents us to apply creativity and innovation on making our spare money grow stems from our mental models or belief systems : the thinking of spare money only in banks, the association of making extra money as something not too noble and the notion of risks due to lack of appropriate knowledge and skills.

Knowledge and Skills

The multitude and diversity of knowledge in investment for money parking is enormous. For average people, the complexity of this knowledge can be overwhelming. The simplest way to park the money parking is in the bank : saving account or fixed deposit. It is simple and even children know how to use such instrument.

Our lack of knowledge on investment, or placing our spare money that can grow faster, is contributed by our upbringing and education we received. We are living in a world of fragmented specialization, whereby we only know a part of the total knowledge. We play our role as teachers, engineers, doctors, nurses, technician etc. The investment knowledge belongs to another group of people.

The diversity of spare money placing or investment is huge : saving, fixed deposit, unit trust fund, bond, stock, future / option, property, precious stones, currency, metals, arts, etc. etc. All these need special knowledge treatment and processing.

What then is the appropriate knowledge and skills that can help us in our personal or organization money? Most of us learn from trial and errors in a hard way, making mistakes on the way, with the hope to be wiser as we gain more experience.

This writer / consultant advocates knowledge in Unit Trust Fund as the next upgrade from spare money in banks like saving or fixed deposit. The return from Unit Trust Fund is more lucrative, although it is does incur some risks, which as discussed, can be overcome by appropriate knowledge and skills. These appropriate knowledge and skills are not that difficult to the educated people, even to schooling children. As they are based on Theory of Patterns and Trends, involving scientific study : data compilation, analysis, statistical application, and understanding of general human behavior. It is made easy with a professional coach, which undersigned is providing the service in QuaSyLaTic Knowledgebase.

Unit Trust fund is further made easier as it is first managed by fund manager, with a group of professionals in managing the fund portfolio after intensive research on sound companies performance or investment opportunities. What we need to study is then the knowledge to monitor fund manager's performance, and to understand the market force to determine our in or out, park or unpark position of our money for maximum return. (QuaSyLaTic Knowledgebase will have increasing number of such case studies and analysis for clients, associates or subscribers).

With the appropriate belief systems in taking care of money as growing organism, and acquiring the relevant knowledge and skills with help from coach / consultant, we still face with another handle that make money generation not realizable.

Discipline and Patience

Mastery of a subject comes with constant practice, thereby sharpening the skills and competency. Constant practice needs discipline and patience. Discipline involves tedious work in data gathering, compilation, analysis, then testing of the Theory of Patterns and Trends of the market. Most of these tedious work could be done by consultant (e.g. as in QuaSyLaTic Knowledgebase), but the clients who are the owners of the spare money still need to make the final decision on when and where to place the spare money and when to unpark. This decision process by clients is important, as eventually the clients should and must gain the insights of the knowledge independently, and not relying entirely on consultant who could at best give guiding principles and advice. The reason of this is as follow.

Besides the issues of determination and commitment to learn the appropriate knowledge on market behavior, it is again our inappropriate mental models or thinking that guide our action and thereby either helps in our investment decision or cause loss in monetary value.

If we view investment with fast return without any patience, which goes contrary to the market force, we are then imposing our subjective demand on the collective market behavior. When we swim against the force of the tide, we cannot make progress, but get swallowed. However, if we study carefully the tidal wave movement and ride alone with it, we make progress without much effort.

Discipline and Patience demand deep understanding of our inner self, our primary motive profile and our own driving force in life. After all, market behavior is made up by extreme collective behavior of people who are either over optimistic of perceived high profit, and at another time, over pessimistic of the market bear.

Framework for Learning Theory

A framework for learning theory is made : a) Mental Model / Belief system, b) Knowledge and Skills, c) Discipline and Patience. A positive reinforcing loop of these three variable generate success. The success involves your own positive philosophy of life, of striving a balanced harmony with the force of nature (market force), and not be influenced by greed, fantasy or personal desires.

As this consultant is also a human being like you, who needs to humbly learn about himself and explore his inner core, and in tune with the nature, I would offer myself to be your Learning Partner, by offering my own close to 20 years of study in this field.

End.