By Trevor Keidan
PHNOM PENH - Cambodia's rising economy
with double-digit economic growth could lull us into thinking we are
insulated from the 'real world' outside. After all, in the 'real world'
there is talk of recession brought on by the now infamous 'credit
In the UK and Europe, analysts, pundits and experts appear to have come
to terms with a recession while in the United States commentators are
still undecided. While some experts think the US economy is slowing,
others think it's growing (albeit marginally) or - at the very least -
it is at a standstill. But while the recession debate rages on, one
thing is for sure: 'Inflation is increasingly a problem' - and that's
according to the IMF.
The World Bank states that "inflation is mounting in both advanced and
emerging economies, despite the global slowdown". The IMF adds that "in
many countries, the driving force behind higher inflation is higher
food and fuel prices". And this is certainly the case in Cambodia,
where the price of a litre of fuel has risen from US$0.92 at the
beginning of the year to $1.34 in August. The price of rice has also
So, it appears that inflation - which is defined as "a continuing rise
in the general price level usually attributed to an increase in the
volume of money and credit relative to available goods and services" -
is inevitable in our current national and global economic climate. And
if inflation really is here to stay, then what can we do?
Tips to stay ahead
To begin with it is important to realise that as inflation rises the
value of our dollar (or riel) reduces. We simply cannot obtain as much
as we could before for our dollar (or riel). This also applies to our
savings. To "hedge" against inflation eroding any money we have saved
away - whether its for children's school fees, a "rainy day"
(emergency) or our retirement - there are a number of actions we can
take. For example:
Tip #1 - Monitor Investments. We must make sure we monitor our
investments to check that the return (interest) we are receiving is
higher than the rate of inflation, which is de-valuing our dollar (or
riel). For example, if the rate of return on a fixed-deposit savings
account is six percent and inflation is at three percent, then we can
be assured we are 'beating' inflation because we are receiving a higher
rate of return than the rate of inflation.
Based upon past experience, it appears gold could be a good investment now.
Tip #2 - Invest in gold. Traditionally gold has been seen as a
"hedge" against crises, and it has become a very popular "safe" bet
against uncertainty. Although there is no crystal ball or surefire way
of knowing that gold will continue to go up in price, based upon past
experience it would appear that gold could be a good investment now.
Gold was trading at about $800 last week while this time last year it
was around the $600 mark. And if we want to invest in gold, there are a
number of options: buying coins, investing in exchange traded funds,
buying mining and other gold-associated stocks, investing in mutual
funds and even buying jewellery.
Companies and funds
Tip #3 - Invest in stocks. Investing in the stock markets is an
excellent way to beat inflation. When we buy stocks we are actually
buying into a share of a company's profit, losses and assets. If we
choose stocks (or shares) in the right company and the company's
profits grow, then the value of our stock should also grow, allowing us
to beat inflation. There are a number of ways we can invest in stocks.
An excellent way to enter the markets is by investing a set amount each
month. However, there are many factors influencing a company's stock
(or share) price, so it is advised that investors obtain the advice of
a professional financial adviser or stockbroker.
Tip #4 - Invest in equity funds. An equity fund is a fund that
invests in stocks and shares. There are many such funds to choose from.
For example, if we wanted to achieve capital gains, then we could
invest in a Growth Fund. If we wanted to achieve an income, then we
could invest in an Income Fund. Similarly, if we wanted something more
aggressive, we could invest in a Hedge Fund, or if we wanted something
a little more hassle-free, we could invest in an actively managed fund.
In short, there are numerous funds to choose from and which fund we
choose largely depends on our attitude to risk. With the right choice,
investing in a fund is an excellent way to make money grow and will
enable us to beat inflation.
As with all investments, it is important to consult with a professional
to ensure the investment matches our specific needs and objectives for
the future and any risks are clearly understood.
Trevor Keidan is managing director of
Infinity Financial Solutions. Infinity Financial Solutions provides
impartial, tailor-made personal financial advice to clients in
Cambodia and Southeast Asia. Should you wish to contact Trevor, please
send an email to [email protected] . Trevor welcomes comments
and/or questions about his articles or any other financial matters.