An introduction to the column by Wong Sulong, Editor of Star Business
Given the depressed state of the stock market, it's understandable that many investors are asking whether they should be looking elsewhere to put their money.
There are many who said investing in property is the best bet; the more sophisticated are looking at bonds. And with gold at a five-year high, the legion of gold bugs is growing.
But whatever the disappointments, the stock market still holds many attractions for the patient and disciplined investor. For one, shares are among the most liquid of assets, and second, there is no capital gains tax on profits from share trading in Malaysia – that's a big tax incentive to be in the share market.
Today we begin our series, “A lot since 1990”.
We asked the question: If an investor had invested in 1,000 shares (commonly referred to as “one lot”) in a company in 1990 and had kept the shares up to the end of last year – a period of 13 years – would he/she be better off than, say, buying a house or putting his/her money in a fixed deposit?
For this exercise, we have included all bonus and rights issues declared by the company, plus total dividend payouts (excluding interest from dividends) during the 13-year period.
The results are interesting.
There are some companies that have rewarded their shareholders handsomely and consistently; other companies did very well in the early 1990s only to come to grief when they were taken over by inept or corrupt management or when the Asian financial crisis hit.
More than any other investment, timing is crucial in share investment: when to buy a counter and when to exit and take profit or to cut loss is critical in the stock market.
Our series “A lot since 1990” starts with two well-known companies: Nestle (M) Bhd and KFC Holdings (M) Bhd.
For comparison, a double-storey terraced house in Bangsar, Kuala Lumpur, cost around RM200,000 in 1990. Today, the same house is worth around RM600,000.
A RM1,000 in a fixed deposit in a bank in 1990 would have grown to RM2,092 by the end of 2002.