Ask your money to work

JAKARTA (JP): Undoubtedly, there are still people consciously and continuously seeking out all business opportunities, even in such an adverse economic situation.

A success story often does not require a born entrepreneur, but is usually the fruit of grim experience, or at least some sort of sacrifice.

But we all believe that one cannot make an omelette without breaking eggs, don't we?

In an interview on Friday with The Jakarta Post, investment observer Elvyn G. Masassya said there were many opportunities available despite the tense political situation, violence in several provinces and the plunge of the rupiah.

The door, he said, is wide open for individuals from all backgrounds, with large or small amounts of money.

"But before you decide where you want to place your money, you first have to know your own personal character. Are you a risk- taker or a risk-avoider?

"From there, you can decide on the proper investment for you under the current circumstances," Elvyn, a member of the Center for the Study of Business Communication and Politics, said.

The next step, he said, is to draw up an investment plan, whether it is a one-year project, for the long term or speculative.

"Based on this, we can now move forward to discuss the types of attractive investments given current macroeconomic developments."

Elvyn personally suggested investing in the financial sector. "In the corridor of my knowledge, the correct investment principle nowadays is not how to work to earn money, but how to let your money earn money."

So, order your money to work for you.

And this, Elvyn said, can only be done at the optimum level in the financial sector.

"The other sectors require you to have adequate technical qualifications. If you want to play in the plantations, for example, you have to know plantations.

"In the financial sector, you can do it based on your personal character," the columnist said.

According to him, investment in the financial sector can be divided into four subsectors: the money market, stock exchange, commodity exchange and conventional banking services.

"In my personal point of view, the money market is the subsector in which you can gain the quickest benefits, but it also carries the highest risk."

Which of the four subsectors is the most attractive in 2001?

"Still the money market, since it is directly linked to the volatility of currency exchange rates," Elvyn said.

He said the money market was not only about the rupiah versus the US dollar. "One should also play with the other currencies, such as the euro."

The next investment option for this year is buying stocks and putting money in savings accounts.

The next question is whether we have to put all our money in one subsector, or should we invest them equally in the four subsectors.

"Given the current situation, I would say that a risk-taker could place 50 percent of his money in the money market, with the remaining half divided equally in the stock exchange and banks," Elvyn suggested.

Why?

A risk-taker, he explained, can achieve optimum gains only by venturing into volatile areas.

"At this time, holding the U.S. currency is a must. But still, one has to play with other currencies, too."

In the stock market, Elvyn suggested investors deal with sectors that, for instance, have been identified by the government as priorities.

One alternative for a long-term investment, he said, is the property sector, such as real estate, which is still not popular with today's investors.

"The other alternative is sectors that have benefited from new government regulations, such as the alcoholic drinks that are now taxed as luxury goods," Elvyn said.

Export-oriented firms are sometimes not as promising as they should be because of the reality that only certain goods receive a warm welcome in overseas markets.

"Consumer goods is a more promising area," he said.

In the capital market, there are several options, like bonds and mutual funds. "It is good to consider a mixed composition."

Elvyn suggested investors buy bonds issued by corporations in US dollars. "They are much attractive than bonds issued in rupiah by the government and corporations."

Why?

"Because there are many such (rupiah-denominated) bonds offered on the black market in order to avoid taxes, which has really discouraged the market," Elvyn said.

In the banking sector, he prefers a blend of savings in the US dollar and the local currency. "Principally, it is half-and- half."

US dollar savings are quite attractive at the moment, while interest rates for rupiah savings should tend to increase gradually until late this year, he added.

Putting money in fixed deposits requires accurate calculations, he said. "One thing many people forget is the duration of the deposits."

"Under the current circumstances, where there is still pressure on currency exchange rates and fluctuating interest rates, relatively safe deposits are medium-term ones, that is three or six months," Elvyn said.

And if you are a risk-avoider, you should opt for the reverse investment distribution: put half of your money in the bank, 25 percent in the stock market and the remaining 25 percent in the money market.

What about next year?

First, evaluate your investments every quarter since the economic cycle moves every three months.

But, as the saying goes, never put all your eggs in one basket. (bsr)