Purchasing Power

Literally purchasing power is the value of a currency expressed in terms of the amount of goods or services that one unit of money can buy. Purchasing power is important because, all else being equal, inflation decreases the amount of goods or services you’d be able to purchase. In investment terms, it refers to the ability for a customer to buy stocks or shares.

For a country to retain its purchasing power one of the elements is to have a certain control over its economical situation or in a layman terms, you are able to spend onto if you have something to spend. For an individual, the same ruling applies. Therefore purchasing power for any individual is very much dependent on the amount of savings we are able to establish.

The remarkable event on investment of 999 million shares unit on ASM (Amanah Saham Malaysia) allocated for Chinese quota last week which only took half a day to be perfected, couldn’t have been accomplished without a sturdy purchasing power. While the Indians manage to get on hold of 53.5 million shares unit out off 499.5 shares unit. But the tale goes differently with the shares allocated for Bumiputera . Only 7.65 million unit shares out off 1.165 million unit shares allocated were picked up.

Let us do a bit of simple analysis based on the price of RM1 per unit. The Chinese have invested about RM999 million within half a day while the Indians worked out RM53.5 million out of their pocket. But the Bumis only manage to come up with RM7.65 million for the investment. Why such scenario took place whereas the race based population distribution in Malaysia shown the other way around; Bumis 65%, Chinese 26%, Indians 8% and other unlisted ethnic group 1% out off approximately 27.7 million Malaysian.

Based on the scenario, does Bumis are not capable of investing in the Amanah Saham or Unit Trust? Does Bumis don’t have enough savings? Does Bumis spent lavishly on other items but not on the needs of their future necessities? Has Bumis failed to manage their financial equities wisely? Does most of them entrusted more on a multi level marketing investment scheme compare to the investment on unit trusts or Amanah Saham?

It’s a bitter pill to swallow for Bumis but this it is the facts that must be comprehend. Saving is a must for any individuals especially during the current economical uncertainty. On top of that, cutting down the monthly overhead spending is also a must. For a wage earner, savings might save them from putting more weight onto their financial burden for just simply relying on loans such as credit card loans and etc. In term of investment Bumis must start considering investing Amanah Saham or Unit Trust since they are excellent means for individual financial planning due to their affordability, liquidity and relatively low risk nature.

In short the relativity between purchasing power and proper money management is undeniable. Therefore don’t spend the money you don’t have and start managing your money wisely