Here’s an interesting article by Joe Harry Low, at Malaysia-Today.net on how safe our banking institutions really are.
Here are the four riskier aspects of banking that are not commonly known or talked about (except regurgitated in IPO small print that only insomniacs or the pointedly meticulous read):
1. Credit risk
2. Liquidity risk
3. Market risk
4. Operational risk
There’s an investment term called “risk-free rate”, which means zero risk, theoretically that is. In Malaysia, the risk free rate is usually referred to the 3 months Kuala Lumpur inter-bank offered rate (KLIBOR).
After you’ve read the article above, you would have realized that there’s no such thing as a zero risk investment. Even big banks collapse. Even with the introduction of Deposit Insurance System by Bank Negara which aims to protect depositors, it only covers up to RM 60,000 per depositor.
In the end, the key is to diversify. The Polygamist’s Strategy does has its benefits sometimes :-P
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