UNDERSTANDING HEDGER'S CHOICE: GOLD

source: logammulia.com

Hedgers! 

Let us call you "Hedger" for investing to avoid avoid the loss of the value of money. Our previous post (see https://theallaboutbusiness.blogspot.com/2017/12/whats-your-motivation-investor.html) talked about the type of investors followed by the instruments. Now, we are trying to break down the "Hedger's Choice", in which instrument they invest the money. 

In this post, we'd like to discuss about Gold. Gold is a popular commodity. Gold doesn't corrode, decay, or rust. Gold is easy to store and it just gets easier to obtain gold. That's why gold becomes popular amongst other commodities. People save money in gold to get prepared for a certain spend in the future. Others do this to face economic instability. Gold makes the value of your money more stable. Let's just discover more truths behind the brightness of a gold.

TYPE OF GOLD

- Gold Bar

Gold bar is quite easy to find. The gold stores lie everywhere even in a small town. You can get gold bar in such store and it's just getting easier to buy gold bar since it's available via online shop.

Just make sure you buy pure gold which means 24 karat. It's also known 99.99% pure gold. You don't always have to buy 99.99% pure gold because 22 karat and 18 karat gold are also available. Despite the variety of the gold purity, the 24 karat is the best choice to invest. After you buy it, keep it at house in a safe deposit box or you can store it in a bank or another institution. 

And here you are, the example of gold bar weights: 0.5 gr, 1 gr,  2 gr, 5 gr, 10 gr, 25 gr, 50 gr, 100 gr, so on. Just so you know, the heavier gold you buy, the less the spread is.

It is highly recommended to buy gold with LBMA certification. In Indonesia, ANTAM is the only gold producer with LBMA certification so far. ANTAM also release Gold Dinar (gold coin) with varied fineness.

- Jewelry:

Gold jewelry is also an instrument. You can convert your asset into gold jewelry especially the 24 karat one. It's actually good choice since you can easily liquidate it in times of need. There are some exceptions though.

To sell gold jewelry is not as easy as to sell the gold bar. You need to consider the jewelry trend, special treatment of storing gold jewelry, and the less amount of money you get compared to the amount of money you have to pay when you buy it (this is mainly because when you buy the gold jewelry, you also pay for the cost of casting. Also, note that you have to select a gold store to buy your gold jewelry for the best price.

- Gold Deposit Account:

It's a breakthrough! You don't need to own a gold bar and store it, you will get such a passbook instead. The point is, you don't have to buy the whole bar to possess a gold. You only need to save your money  regularly into a deposit account that you can convert it to a real gold bar when needed. Of course there is a certain rate when you convert the deposit account. Also there's an extra charge 

- Gold Trading Account: 

There are so many ways to invest in gold. Some give you a chance to own gold virtually. Just like a trading account. Some trading platform provide us commodities to trade. Gold is one of them.

Put your money here and you don't really have to hold your gold for the long term. Please note that gold has a large spread that a slight movement of its price will affect nothing to your account balance.

WHY GOLD?

Instead of saving your money in a bank account, I hope you buy gold. It's never too late to buy gold today. The gold is always on the uptrend. In case you ask what gold is used for:

- Tradition That's right! In a certain occasion, gold is used for a traditional celebration or a ceremony. This leads the demand of gold upward.

-  Financing.

- Down payment. In a certain business case, you may use gold for a down payment.

- Collateral of a loan or a mortgage.

- Electricity and many more.

Since gold is widely used for so many purposes, it becomes one of the most popular safe haven. For your information, gold's month-on-month trend is declining. It has since fallen quite far from the highest point. So, it may be our best opportunity to invest in gold. For the latest update, just hit these website: Kitco.co, goldprice.org, logammulia.com.

Let's end this year spectacularly, guys. Just make it as shiny as gold!

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A REFLECTION: LET'S END THIS YEAR SPECTACULARLY

2020 will come to an end as we keep counting down the days. Can't lie that 2020 is considered one of the worst year ever for most people. The uncertainty still lies ahead mainly because of Covid-19 pandemic. It has an impact on several sectors of economy such as the increasing number of poverty, the deeper recession, and the slow down of economic activity.  

I never hope that it will go worse but we have to prepare for it. Even we have to take an advantage of it. There's still a chance despite the condition nowadays. Let's have ourselves a time for reflection on what we have done before the outbreak of Covid-19.

We can see above, a picture taken from my previous post, to buy gold last year and to hold it until today probably the best strategy to take. By Friday September 4th 2020, gold's price reached USD 1,933. That means it's a new all-time highest price record of gold. Let's get it noted that last year gold surprisingly made a record of the year and it keeps going on hitting new record. Imagine how much return you can gain if you had invested your money in gold last year.

 

image source: goldprice.org

And now, since gold hit USD 2,000 an ounce for the first time ever several days ago, it likely declined a little bit. I believe it's just a sort of correction. The price will just move no lower than USD 1,900. You may hold your gold for a while. There's no need to sell your gold too early and once it breaks USD 2,000 again, then it will form another higher level of resistance entry.

image source: finance.yahoo.com

During the outbreak, try to save your money in stock and invest it in consumer goods producer such as UNVR or ULTJ. The demand of consumer goods remains at its best though the outdoor activity is being limited. UNVR and ULTJ are still reasonable to buy especially for long term investment. Let's add UNVR and ULTJ to our watch list for the next one week and we'll discuss it later.

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PUT YOUR MONEY NOW, OR ELSE YOU’LL REGRET EVERYTHING!

Happy Investing, Happy Voting!

Why voting? 2018 and 2019 will be our country’s election year. Get prepared, Indonesia! Hope we can take the advantage of this.

We got two big issues to discuss today; The Fed rate and Election year (Indonesia). From these issues, we’ll give you some consideration to invest your money and rate of return comparison of several investment instruments so that you can “place” your money better.

Before we talk about the issues, let’s compare which haven has the better “treatment” for your money.

INSTRUMENTS

Foreign Exchange (Forex)

It was 2008 when one USD was equal to 8,900 Rupiah (IDR), we converted IDR to USD regularly and let it “sleep”. Yes, we bought USD every month and we did it till one USD/IDR hit 9,500. Just let it sleep, guys.

That’s right! You can see that today, one USD is equal to 13,700-13,800 IDR, what a gain! Especially if you have 100,000 USD right now. So, let’s just say that we had one USD for 9,000 IDR, and now we have one USD for 13,700 IDR. That means we have 52% profit margin.

Before you convert IDR to USD, please consider the sharia law. We can't buy money for money unless you need it for export-import activity. Be very careful.

Gold

We started to buy gold around 5 years ago. Yes, it was 2013, a moment when gold experienced its biggest drop; from more than 600,000 IDR/ gram to 480,000 IDR / gram (1204.5 troy ounce).

It’s not just a decline, more than that, it’s an advantage instead. Yes, that was the right time to buy gold; Gold had never been this cheap before. We bought gold for the first time in 2013 when it cost 490,000 IDR/ gram. We bought it regularly; once in three months or once in a semester. It depended on the budget. Just like forex, of course we let it sleep.

As you can see the gold costs 625,000 - 650,000 IDR/ gram nowadays (it even hit 1,350 USD/ ounce several week ago). Let’s assume that we have 135,000 IDR profit in every single gram of gold (625,000 – 490,000), that means we have 27.55% profit margin.

Business

Such a great experience collaborating with my friends to establish a business. Cellular business exactly. It’s not a coincidence I met great partner to run a business. We knew each other well before we founded it (I actually joined them when the business had established).

The three of us put 900,000 IDR capital into business. It turned out very lucrative. Joining them in 2015, we got break event point in less than two years (I could say that I got capital gain in one year only).

Unlike two kinds of investment above, in business, you can’t let it sleep. You need to make it bigger, expand it, and manage it well of course. And today we have the fourth member to run the online business division.

Property

Putting your money in property is fantastic. It grows more than 16% just in one month. We started to buy a plot of land in February. Our smile has never been this big as we learn that the price already moved up at the beginning of March.  

Find the best payment to own a property from now, because it tends to get more expensive as the time goes by.

Stock

By the end of 2015, The Jakarta Composite Index touched above 4,500 IDR. By the end of 2017, it made a record for itself; hit 6,000 IDR for the first time. Indonesia Composite was closed at 6,304.95 at the closing of last weekend. That means we can achieve more than 30% capital gain. What a gain! 

ISSUES

Raising The Fed Rate

We still remember when The Fed raised rate by the end of 2015 for the first time in a decade, the price of gold was quite affected but then the gold kept raising until today.

Another story, it seemed that USD kept moving up against IDR. It was only 9,000 IDR for one USD in 2008 and today USD/IDR likely to drop to 14,000.

In spite of The Fed’s raise, since it is not the first time they raise rate, we believe that gold won’t sink further. There will be a correction but won’t be big. Just keep in your mind that “history repeats itself”, gold keeps moving up despite facing the raising rate several times.

On the contrary, we predict that IDR will drop deeper. IDR never gets better against USD recently. As Powell succeeded Yellen, the issue got stronger and they planned to raise rate four times this year. We can’t deny that when this happen, foreign investors will bring back the fund to the USA. It is common thing that investors expect higher return when The Fed rate gets higher as well. That’s why IDR will surely fall.

Election Year

Election campaign is inevitable. The campaign uses any means of communication. That means today is the right time to buy stock of telecommunications service. When the election reaches its climax, normally the market reacts. Or you can relate the price movement with candidates’ promises so you can choose which stock is the best to buy.

The price of property usually raises as the countdown to election begins. Who knows that the elected candidate think about a mass infrastructure development in the future. Who knows that the elected one plans to issue a policy to boost up a business’ prospect.

STRATEGY

Some investments have certain treatment. You can make gold, stock, bond, or even forex fall asleep after buying them. You can “wake them up” when you need it or when the time seems to be pretty good to sell. In business you need to always upgrade it, expand it, and manage it well. Any important issue should be watched because there is an affection for sure.

Different instrument, different issue! Some will gain a maximum profit when crisis engulf us, others will gain a profit as well as the economic outlook has a bright future.

You don’t need to be rich to invest, you need to invest to be rich! The key of investing is budgeting. Don’t spend your money, at least save it every month and start to invest. When you can save regularly, you can invest regularly then. Buy any kind of asset once in every three month and it’s much better if you can buy once a month.

Stay rational, not emotional. For beginner, you can follow the mainstream of investors’ habit. Hold your Gold and IDR until they announce the raise. Start investing now regarding the election. Remember, prediction can be wrong and therefore prepare yourself well!

Happy saving, happy investing, happy electing!

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WHY DO WE SHOULD INVEST IN GOLD?

image source: plazadinar.com

Gold! One of the most popular investment instrument and it's zero-inflation! It means, inflation can't "eat" your money if you invest it in gold. As we know, money keeps devaluing in line with the inflation rate's change. As an Indonesian, I still remember when I was in elementary school, I can buy four candies with 100 rupiahs. Now, I think we all know that we can't afford candy at such price.

Some says that gold keeps moving up when the rate of inflation rises as well. Look at the graphic below! We can see that the price of gold keeps rising year on year.

But, the price is always fluctuating actually. And based on the latest data (March 22nd) by AGEA, gold touches UDS 1613 per troy ounce.

There's one certain thing you have to know. "Troy ounce" is a international standard unit to measure the weight of gold. In Indonesia, "gram" is the standard unit to measure it and here is the formula for converting Troy Ounce to Gram: 1 Troy Ounce is equal to (approximately) 31 grams. Let's consider the price of gold is USD 1.600 per troy ounce or USD 1600 for 31 grams. If USD 1 = IDR 9700, then it will be IDR 500645 per gram.

And what are the types of traded gold?

1. Dinar gold. It's the most expensive type in Indonesia.
2. Gold bar

3. Gold medal.

Does Islam let us to trade gold? YES, of course!

Islam definitely forbids us to "touch" interest (it's often called riba). Riba isn't involved in gold and forex trading, but islam will ban us to trade them if we don't receive the object in cash. Sounds simple but it's not that simple. For all moslem in whole world, all kinds of investment always have risk; economic risk and religion one.

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TONY FERNANDES’ PRINCIPLES (Metro TV Oct 27th 2012 with Desi Anwar)

He is a Malaysian and he used to be a musician. But his childhood dream, changed his profession. When he was 6 years old, he was dreaming about having an airline. Now, he is the owner of Air Asia. If you love football, then you must know QPR, a football club sponsored by Air Asia.

His first office was in KL, but now it’s in Jakarta. He founded his office in Jakarta because the growth of Indonesia’s GDP is promising. He loves beer and Blok M is his favorite place to drink. People firstly despised him when they knew that he changed his business from music to airline. But now, you can see that it became the biggest “low-cost” and “no-frills” airline with a big profit. He has a good principle of implementing a business. He makes the cost as low as possible to obtain a reasonable price for everyone.

“Now everyone can fly” is the tagline of Air Asia. It doesn’t lead his company to bankruptcy because with the cheap fare, he can intensify the sales of the ticket that he can make big profit. He said that the bigger the volume of sales, the cheaper price of the ticket people could buy, and  the more profit he would get.

And how can he do that? Apparently, he enhances the efficiency of the flight, such as the efficiency of the pilot, the simplification of the cuisine, the efficiency of the fuel, etc. He said that all Air Asia’s pilots had to consider the shortest way to the destination. To make a low fare, he also eliminated the French cuisine. Yes, he didn’t use a French chef, he just offered the passengers with a traditional food. He created only one class/type of the aircraft, that was economic class. He didn’t create business class or executive class, but only economic class to minimize the overhead expenses.

Talking about the employee, he prefers a young-enthusiastic employee. He prefers an employee who has a good commitment and good loyalty to employee with a high education. For him, education is number two. He has a good sense of problem-solving. He always tell the employees who have a problem, not to hide it. The employees have to tell their own problem and solve the problem straight away. Tony Fernandes doesn’t want his employees to be unhappy. Because for him, employees are the main key to reach success.

Last, Tony Fernandes hoped that he could build a business school in Jakarta. He also wished he could build a hospital which had a total service for the poor people. That’s all what I got by watching the interview between Desi Anwar with Tony Fernandes in Metro TV. Hope it can be a good reference for all readers.

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