Q: Since becoming a university student, I have accumulated quite a lot of money in my bank account from my part-time job.  However, it’s really difficult for me to manage my money except for depositing it in that account.  There are so many investment-related words, like CMA, which are very confusing for me.  I don’t know where to start, but I want to know more prosperous ways to stop my money running through my fingers.  Please help me!

Inflation never seems to cease.  If you have your money in your hands, it is hard to resist the temptation to be extravagant.  Then what if you deposit your money in a bank account?  You may get some extra interest.  However, sometimes the inflation rate exceeds the interest rate, which results in decreases of real income.  It is time for you to divert your eyes to other ways to amass your money.  There are several investing methods like land or insurance investment.  However, these require a lot of money, which isn’t ideal for students.  Therefore, the Sookmyung Times introduces you to other ways to start investing with relatively less money.

Make the Best Use of Economic News

In order to ‘study’ money, you should read economic articles seriously, with your red pen to highlight important or hard parts.  Read between the lines so that you might be able to infer many factors of events in the article.  Also, you can get some clues about investment in economic news.  Reporters refer to economic analysis by experts in the field, especially renowned analysts, so you may get reliable information on investment through reading a relatively inexpensive newspaper.

After reading the newspaper, sorting the articles also helps you to fully understand each field.  It is up to you to choose the categories you make.  Experts recommend you sort them into 3 main categories at first.  Later, you might be able to classify them more specifically.

The Type of Investment Which Suits You

There are several types of investment according to your risk inclination.  Look at the chart below and find out which type you are.

(From「75 Basic Ways of Managing Money in your 20s」by Dae-jung Kim, One and One books)

You may have heard of ‘High Risk, High Return.’  This means that if you willingly accept high risk, which means great loss initially, you can reap a high profit.  Unfortunately, there are few investment subjects which guarantee you high profit with low risk, so it is very important for all investors to decide carefully which type they choose.  Generally, stocks are the best example of the saying, ‘High Risk, High Return,’ and conversely, national bonds symbolize ‘Low Risk, Low Return.’  Find out which type you are and refer to the recommendations above.

What is CMA?

CMA stands for Cash Management Account.  According to Webster’s New World Finance and Investment Dictionary, CMA refers to an account that is offered to consumers by a brokerage firm.  A cash management account combines the ability to trade securities while earning money market interest with the ability to write checks and make deposits.  A CMA often requires a minimum initial deposit amount. Then how does it differ from a regular bank deposit system? Take a look at the chart below and compare the differences between them.

  (From「Mastering Financial Common Sense」, Maeil Business Newspaper, Thenanbiz)

Join a Value Investment Club

There are so many value investment clubs. According to Wikipedia, value investing is an investment paradigm that derives from the ideas of investment and speculation.  They read books on value investing, discuss and join stock investment simulations held by stock companies.  Through the clubs, members might be able to learn not only difficult financial words but also the basic procedures of investing.

References

Mastering Financial Common Sense」, by Maeil Business Newspaper, Thenanbiz
75 Basic Way of Managing Money for 20s」by Dae-jung Kim, One and One books

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