Prof Gul says that the more information, the better.

Some keep it in the bank, some buy property, some invest in shares and yet others keep it under the mattress – but however you choose to save money, we all know it is the prudent and smart thing to do.

But as the word economy rumbles uncertainly forward, we have to start considering if merely saving money is enough. With rising costs and inflation, consideration needs to be given on ensuring a stable future for ourselves and our loved ones.

There are many ways people can go about growing their savings. The safest bet seems to be a fixed deposit account and leave it at that.

But more and more people are looking at a more diverse portfolio. This essentially means having a more varied methodology in saving money or even growing it for the future. Financial planners usually recommend that you save some money, and then invest a certain percentage on property, unit trusts, bonds and stocks. This can be catered to suit your comfort level and the amount of risks you are willing to take.

However, not all of us have a financial planner, let alone good and savvy ones. Therefore, we make the decisions. That can prove to be difficult especially if you haven’t the experience or even the knowledge on the basics i.e. how much to invest, is it a good time to invest, where to invest, how long before you see returns and many more pertinent questions.

The lack of answers can be daunting to a beginner. You start to wonder maybe you should just leave your money alone or as Oprah’s favourite financial whiz, Suze Orman says, “It's better to do nothing with your money than something you don't understand.”

But if we have plans for ensuring a comfortable retirement, or having enough funds for education, health, a bigger house, car and the list goes on, perhaps keeping money under the mattress may not be adequate. We might have to step out of that comfort zone and dip our feet into the tumultuous waves of investment.

So how do we go about it? The most fundamental way would be to read up, do research, ask questions and listen to the experts.

One such opportunity arose when Professor Ferdinand A. Gul, Head of Accounting and Corporate Governance at Monash University Sunway campus’ School of Business, gave a talk to those of us in need of financial advice.

Entitled “Stock Market and Investor Behaviour”, Professor Gul shared his experiences and insight during the Monash Open Day.

With just as many parents as there were students in attendance, the professor said, “You must understand the workings of the capital market. There are so many pieces of information available on the stock markets and capital markets be it through the press, private information, public information, your own homework, reading through reports, or talking to the people you might know who are working for a particular organisation.”

Various activities were held during the Discover Monash Week including course counseling sessions.

“It is the financial information that impacts investors. There is a relationship between earnings and share prices. There are a number of pieces of information that investors reacts to. Then there is this idea of market efficiency. This means the market is efficient in responding to information. If a market is efficient, then any information would be impounded into the stock prices. It is critical to understand how quickly share prices react to information. So one of the pieces of information we are interested in is the dividend policies and accounting information.”

He added, “And the quality of accounting information is important. You can have high earnings but they may not be reliable earnings as was the case with Enron. So the role of auditors becomes very critical for an efficiently functioning stock market because they provide credibility. But of course if the auditors are in cohorts with the management and start fiddling with the books, and not reporting truthfully, then you will have an inefficient market.”

“Look at the earnings, profits, operating revenue. Each of these pieces of information will tell you about the company and how well the company is doing. If you can get more information it would be better. This sort of information will be used by shareholders to assess the viability of this company. So it is very important that it is all properly audited and is reliable.”

Continued Professor Gul, “Reliable data on earnings, corporate governance information, and stock prices are available now in the annual reports. In there, you also have detailed information about the board of directors. If one of the members spent 5 years in prison that might give you some cause for concern about their credibility. The point is you can delve in detail into their qualifications. So information is available for you to be able to make a proper investment.”