Next generation millionaires to emerge from US economic ground zero

From the ruins of this "Great Recession" will emerge the next generation of millionaires and billionaires, so goes the general belief.

In this Internet age, Malaysians are presented with what is said to be a "once-in-a-lifetime" opportunity to accumulate beaten-down stocks, be it financials in the United States or commodities in Australia.

Never has accessibility been better for Malaysians to do so, in what was once a specialised field and the exclusive domain of fund managers and private equity firms.

With effect from April 1, 2007, resident individuals with domestic ringgit borrowings can invest up to RM1 million equivalent in aggregate per calendar year in foreign currency assets, versus the threshold of RM100,000 previously.

The choices and opportunities have never been wider, given that ordinary working people can now trade and buy stocks halfway across the globe via laptops in their bedrooms.

Citigroup's plummeting to below US$1 (RM3.70) per share last week has stirred the imagination of many people seeking the riches down the road of economic recovery.

Many appear to have grabbed the message of opportunity in a crisis.

Their numbers are not known but apparently, an increasing number of Malaysians are already invested or are waiting for the right time to pounce on down-trodden shares overseas, either via online trading or local stockbrokers.

Retirees and those near retirement age, market players say, should stay away and not indulge in online trade of stock markets abroad on their own, without proper financial advice.

This economic downturn presents a very good opportunity for young professionals to channel a portion of their income towards building their nest egg.

But it cannot be stressed often enough that stock markets, be it Bursa Malaysia or bourses abroad, are risky business, however enticing they may be.

Just last week, even investment guru Warren Buffett's Berkshire Hathaway had its triple A issuer default rating downgraded one notch to AA+ by Fitch.

The wannabes, particularly those whose fingers were spared the burns in market crashes past, are advised to exercise caution.

First and foremost, do not even think about borrowing to buy into stocks, say financial planners. While key interest rates are at historic lows, personal loan rates are still very high.

Invest only if there is cash to spare, more so if buying into riskier stocks that may now appear dirt cheap, such as Citigroup, said a fund manager.

With global deposit rates at the bottom, it is understandable that people are looking at investing their money in stocks.

Financial planners and fund managers will tell you that whatever the economic situations, keeping a substantial portion of your money in the bank is always a good idea, in line with "not putting all the eggs in one basket".

A good piece of advice from them has always been to invest in stable, defensive stocks or at least to start off the accumulation of wealth in them, before considering other options.

While the buy-and-hold strategy may not work anymore, it does not mean one cannot ride on the recovery story and stay invested within the next five to 10 years, fund managers say. Just keep track of news and economic cycles.

For the recovery story, analysts have said financials and commodities will lead the way.

Other than the usual unit trust offerings, many brokerage houses, driven by the potential of the new income stream, have promoted their services to allow individuals to invest directly in specific shares overseas.

People are looking at where best to put their hard-earned money. This is perhaps a good time for these brokers to show that they can properly guide their clients and that their services and sound financial advice are needed, thereby building trust and loyalty.

Retails investors themselves must understand that apart from the general pitfalls of stock-investing in overseas markets, the overall risks have greatly heightened. The global economy may yet slip into depression.

Commentators have said the global economy has never been in such a dire strait, complicated by unhindered and borderless capital flows.

The world has just had a glimpse of the face of globalisation. Much more complications and pitfalls lie ahead.

However unlikely it may be, systemic-risk finance institutions in the US, for instance, may yet be allowed to collapse. Investors could also end up with illiquid nationalised or delisted entities.

Meanwhile, the opening up of world markets will present new challenges to the country's policymakers towards making the local bourse more attractive, even for Malaysian capital.

Ineffectual policies will have to go as globalisation catches up in all aspects of Malaysian life, lest the country slips from global relevance.

In the meantime, to the potential next generation of millionaires to emerge from the US' economic ground zero, caveat emptor (let the buyer beware) stands — Warren Buffett will tell you that. A few, no doubt, will succeed.
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