Friday 4 May 2018

The cost of investment is much higher than what we thought


Clarification:


I am just trying to flip the coin, to discuss about something what we usually ignored it. This article is full with my personal opinion, so feel free to close this article whenever you feel sicked and wanted to vomit, please bear in mind that I am not pointing you with a gun to force you to finish reading it.



By just looking at the topic,

if you are assuming that I will be talking about brokerage fees.....................
Then you don't understand me~

How would I waste the precious time for some old topics like brokerage fees?

And if I really want to write about brokerage fees,
I might flip the coin and mention the benefits of higher brokerage fees~

Anyway,

let's get back to today's topic.

If want to buy 1 lot of NESTLE,

how much is the actual money that we need to earn?

Now the shares price of NESTLE is around RM135,

1 lot = 100 shares,
so 100 x RM135 = RM13500.

Plus other fees like brokerage fees,

round it up,
should be around RM14000.

So is it that if we earn RM14000,

then we are able to buy 1 lot of NESTLE?

No no no,

we need to earn at least RM17000 to RM18000 so that you can buy 1 lot of NESTLE!
This is because there is another cost that everyone ignored..........

Before revealing what is it,
let me announce where did I get the idea for this article~

Recently I went to bookshop and found that Robert Kiyosaki,
the author of <<Rich dad, Poor dad>> has released a new book,
the title is <<Why the rich are getting richer>>,
of course I started to read it.

The most recent part I read,
the author mentioned that if the down payment for a property is $100,000,
then we need to earn at least $120,000 to $130,000 !

WHY?

Because of T....A......X.........
TAX!

We need to earn $120,000 to $130,000 ,
after submitting the taxes like income tax,
then only left with $100,000 to buy the property.

So same concept,
to buy 1 lot of NESTLE,
we need to earn RM17000 to RM18000,
submitted income tax and other taxes,
then only left with RM14000 to buy 1 lot of NESTLE.

Alright,
the answer is revealed,
how did you feel about it?

Some people might think that it is useless, rubbish and boring,
but some might realized something.

I was actually quite fascinated,
because I realized that my cost of investment is much lower than many investors.

Why did I say like that?
This is because the money I used to buy shares do not need to submit for income tax.
ATTENTION!! I DID SUBMIT INCOME TAX!!
Just that........
the money I used to invest is encouraged, so no tax on it.

For examples like buying 1 lot of NESTLE,
I don't need to work hard to earn RM17000-RM18000,
after submitted for income tax,
only can use the remaining RM14000 to buy NESTLE.

What I needed to do........
is just use the RM14000 from my SMF account to buy NESTLE~
No need any extra money,
just RM14000 is enough already,
since the government will not ask me to pay any tax for that RM15000.

Same 1 lot of NESTLE,
my cost is exactly RM14000,
but for some other people the cost is as high as RM17000-RM18000.

This is the difference of using cash to invest or using debt to invest.

Of course,
I am not totally against everyone to use cash to invest,
I am not encouraging everyone to just simply use debt to invest.

As like what Robert Kiyosaki mentioned in his book,
he wished to help everyone to gain more financial knowledge,
to understand the TAX and not just hating the TAX.

And think..........
Why need to pay tax if we earn money?
Why no need to pay tax if we borrow money?

Investment is about doing own thinking, making own decision.

Thanks for reading.




I don't provide any buying/selling suggestion above,
please make your own investment decision and be responsible with it.


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