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Friday 7 September 2012

Putting money in the bank

Recenty I've been asked by person A, "How do you earn more money than putting money in the bank?"

My answer: Putting those money in the bank!

Person A: So how does putting money in the bank earn more than putting money in the bank? Aren't they the same thing?

Me: The answer lies in the definition of "putting money in the bank". "Putting money in the bank" to most people means putting the money in fixed deposit or savings/current account with the bank. To me, putting money in the bank means investing in the bank.

Person A: Won't that be risky?

Me: Do you believe that your deposits with the bank will be safe? That's the reason why you put  deposit with the bank isn't it?

Person A (after some thinking to make sure I'm not asking a trick question): Yeah?

Me: So why will investing in the bank make it more risky than your deposit?

Person A: I don't know, I just think investing is risky.

Me: Banks use your money to lend others, they then make money from the interests. If they are not operating safely, whose money will they lose?

Person A (after some thinking again): Mine?

Me: Yes, and Singapore banks have business models that place them in the #1 to #3 safest banks in Asia. I too, believe they are really safe. So you continue to place your trust in the bank keeping your money safe, why don't you invest in the bank to take a cut of the bank's profit from lending your money to others?

Person A: Woah you damn smart!

Me: You did not think out of the box, and I'm not smart.
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Think about it, DBS, OCBC, and UOB are the safest banks in Asia.
Don't believe me?: http://www.gfmag.com/tools/best-banks/11929-worlds-safest-banks-in-asia-2012.html#axzz25hpEpOLA

So instead of placing your trust in the bank, believing that the bank will keep your money safe, why not invest in the bank, so that you own a part of the "most legal loan shark" business and collect a cut of that profit regularly?

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