Identifying Your Fund Manager Styles

Reading the Business Times this week, I came across an article within that had some pointers on creating an investment portfolio. While reading it though, it came across as quite generic and brief. As such, I pulled out the only section that I felt had some value - a section on knowing your fund managers investment style. 

Why is this important?

The author, Mr. Edmund Teo, regional director, investment solutions, Asean, Hong Kong, Taiwan, and India at Russell Investment, says that "investors need to understand the style of different managers in their portfolio, and why they under or outperform in different market conditions. Employing manager and investment style diversification is critical for reduced volatility across market cycles." Perhaps, it may be good to give them a ring to find out their approach.

In the article, Mr. Teo listed 3 types of styles. I would like to add a fourth. 

1) Growth managers

These managers focus on companies whose earnings are growing faster than average. Often, these fast-growing companies will reinvest their profits back into their business, so the dividend yield (if any) could be lower than market average. But note that if growth slows, their stock prices are more likely to fall harder than average. 

2) Value managers

These managers look out for and invest in undervalued companies whose true value has yet to be recognized which therefore gives the share price potential to rise upon realization by the market. They believe in the saying, "buy low, sell high". Often these companies are solid, but not spectacular performers with good cash flows and at times with dividend yields above market average. The risk of investing in undervalued companies is that these companies may remain undervalued for extended periods of time with no indication when share prices may rise.

3) Market-oriented managers

These managers focus on themes within the market and the economy to decide on the companies to invest in that should outperform market averages. For example, if the manager feels that the Singapore dollar is about to rise, he or she might focus on increasing positions in companies that import goods while reducing holdings in companies heavily reliant on exports. The risk of this style is that themes can have short lives and catch investors unaware.

4) Momentum managers

These managers look out for hot stocks and for stocks that though have risen a fair amount still have fuel to rise even higher. They believe in the saying, "buy high, sell higher". They look for companies that have made new highs, and/or show strong upward trends based on technical analysis. Constant positive earning surprises is one other criteria these managers scan for. The obvious risk is that prices are constantly undergoing corrections when prices rise too drastically. As such, momentum investing could go against managers who mistime the entry of their purchase.

Hey, if any of you know of any more styles than is listed here, pls feel free to leave a comment below. And if you're willing, it'd be great to hear your investment style as well. =)

Cheers,

~K

7 Ways to Improve Your Finances in 2011

2011 is upon us. In a couple of hours, fireworks will light the sky and parties will last till the wee hours of the morning. In the spirit of making the coming year a good one, here's a list of things that one can do to financially improve oneself.

1) Set a Budget for the Month

At the start of every month, withdraw your "allowance" and stash it at home, setting yourself a spending limit per day. Cater an additional sum for transport, fuel and parking coupons if you drive, handphone bills, and whatever monthly bills you have. Personally, I tend to top up a $100 into my MRT (that's our train here for non-local readers) card each month regardless whether I finish up the previous $100 or not. This ensures that I'll always have enough to travel should I run out of actual cash.

Also, try to set aside an emergency amount per month too, which acts as a buffer for unforeseen circumstances. At the end of each month, any leftovers can either be used to treat yourself and/or loved ones to something or to add into your 6- month savings account.

2) Pay in Cash Where Possible

Studies have shown that people are less likely to spend when they use cash versus credit cards because they feel the pinch when handing over their cash. This allows a higher chance that we buy only the things we really need or want and not spend blatantly. Also, spending by cash allows you to see how much you have left thereby allowing you to figure out how to stretch your cash till the end of the month.

3) Save for Big Things

We all have our wants. A simple way to fulfill this is to set aside a monthly amount that is catered to this. Therefore, when the item of our desire presents itself, be it a new wallet or a branded bag, we'll have the cash ready for it.

4) Make Use of Promotions. Use Loyalty Cards and Discount Coupons

Make use of specials and promotions to stock up on things you need monthly. This includes facial products, nail polish and whatever knickknacks which helps reduce your spending in the long run as you'll be saving on things you need. Note the word "need".

Points gained from loyalty cards will also help offset expenses. Discount coupons, normally found in the mail though intended to make one spend, is most welcomed if they refer to things you would normally spend on anyway. 

However, that said, beware of the trap of buying things that you do not need or buying just because the item is on discount. You'll end up broke much quicker. A discipline approach is necessary.

5) Delay Spending

Try to put off buying an item for a week or two. This allows you to think about the purchase more preventing impulse buying. 

6) Choose the Cheaper Alternatives

Spending time with friends and/or family needn't be a wallet breaker. Instead of spending time at the neighbourhood Starbucks, a hang out at the coffeeshop or a cheaper cafe may prove just as or even more satisfying. Also, you could decide to hang out at free public spots such as the beaches and parks, where the money saved could be put to better use. 

For drivers, Orchard and town area carparks differ in charges. A bit of research into the charges at each venue will help you plan where to park thereby reducing unnecessary spending.

7) Set Up a Savings Plan

I cannot fully emphasize the importance of saving. As hard as it may seem to do, having a stash of cash lying somewhere is crucial especially in times of emergency. 

One painless way is to set up an automatic deduction that transfers a portion of your pay into a savings account. By doing this every month, you'll realize you're not missing the cash and sooner or later, you'd have amassed a substantial amount. You'll feel most achieved when that happens I guarantee.

To your 2011.

Cheers,

~K

18 Lessons in Investing from Watching the 2010 Barclays World Tour Men’s Singles Tennis Finals

I have always considered tennis as a combat in an arena between two gladiators who have their racquets and their courage as their weapons.

~ Yannick Noah

Tennis is an addiction that once it has truly hooked a man will not let him go.

~ Russell Lynes

It's no secret the rivalry between Roger Federer and Rafael Nadal. This has produced some of the best tennis matches in history. (Read more on the Federer-Nadal rivalry)

After hearing much about their legendary Wimbledon meet in 2008 which lasted nearly five hours, I've been kicking myself for not watching it then and reduced to watching the highlights on bad quality videos posted on YouTube. It's a real great waste I hadn't started watching tennis earlier, starting one Grand Slam later from the 2008 US Opens. Talk about a little too late! So after nearly two years of waiting and hoping, I was so excited to finally get to see them have a mini-rematch during the 2010 Barclays ATP World Tour. I only hope they'll play this well during another major championship next year. Beautiful tennis.

Date: 29^th Nov

Roger Federer (Switzerland) vs Rafael Nadal (Spain)

Final score: 6-3, 3-6, 6-1

Watching the tour left me thinking about the spirit and effort they put into honing their craft and resulted in me compiling a list of lessons that investors could learn from them.

Here they are:

1) You may not pick a winner every time but when you do, make it count.

At the end of the match, statistics showed that Federer had a low percentage first serve in at 61%. However of that, 92% earned him a point as the serves were either unreturnable or were hit into the net. In investing in stocks, properties, alternative investments and what not, not every investment will make you money. Some may even go belly up. But the important thing is to aim to make those winners, WINNERS that win the game.

2) Poor service can cost you the game. Slacking off can be dangerous. 

The opening set must have taken its toll on Federer. Or perhaps he got a bit cocky. In the second set, Federer seemed to start out with lower energy and aggression causing him to make multiple errors resulting in poor plays, eventually costing him the set. In investing, it's important not slack off and/or become too cocky about a company or investment. Make sure to monitor your investments. At the minimum, take note of quarterly results and announcement to ensure nothing major has taken place.

3) You may fall trying to get that impossible shot the first time but have faith, you’ll get your chance again. 

In the second set, score 1-4, Nadal returned a ball that hit the net but managed to still end up in Federer's court causing Federer to slip and fall hard onto the floor in his attempt to reach it due to the sudden change in footing. However as luck would have it, Nadal hit an almost exact shot later at score 3-5. This time Federer got to it in time and sent the ball straight back into Nadal's court scoring the point.

4) Sometimes it takes a hard fall to wake you up to play better.

Surprisingly, it was only after the fall that Federer started playing better again. In investing, losing money may provide the impetus for us to learn more about ourselves and how to improve our investing styles and strategies, giving us a chance to analyze where we went wrong and correct the mistake, thereby helping us to preform better in the long run.

5) Even when you’ve been knocked down, getting back up ensures you have a chance of winning again.

Sometimes in life, hard knocks can be taken two ways, you stay beaten down or you get up, dust yourself off and do it again. It's obvious which way is better.

6) Never give up.

Throughout the game, the never say die spirit was obvious in Federer & Nadal. Both players kept going for almost every ball, even when it looked almost impossible to us audience. This resulted in quite a bit of ooohh-ing and ahhh-ing when both these players not only managed to reach these balls in time, but also hit them back into play accurately. The moral of the story? Don't give up. The more you learn from the mistakes you make, the better your chance of attaining success. To give up ensures you'll not reach it, ever.

7) If you know what you’re doing, you can do the impossible and succeed even if no one believes you can.

People who have never done what you intend to do and have no idea how hard you’ve trained and prepared yourself for it are quick to write off the success of your efforts as they're basing it on their capability. Don't be discouraged by them. The opinions that count most are those who have reached the "impossible" you're striving for. Seek their guidance and advice instead. 

8) Commentators are just that, commentators. Take what they say with a pinch of salt. 

This is to add to the previous point. People don't always agree with one another. Two different people may have different opinions on the same thing. Though they may have valid opinions, if you're going to listen to every Tom, Dick and Harry, you're going to end up mighty confused. Learn to filter advice. If you have trouble doing so, seek expert help instead. Get their feedback. Believe in yourself. Then give it your all.

9) Supporters will take you further than you think.

In life, you’ll have supporters and you’ll have jeerers. Concentrate on your supporters. They’ll provide you the extra energy to take you to the next level. The encouragement and support they give is priceless in helping you believe in yourself and make you want to try harder. Ignore the jeerers who are boo-ing. They suck the energy out of you and blur the path for you to go far.

10) Focus on the game. The crowd can distract you, but if you’re focused you can still hit a winner.

It's amazing that despite the din from the crowd, both players played wonderful tennis. Their focus was so strong resulting in their superb performance. In today's day and age with so many commitments eating into our time, focusing our abilities and concentration can be a challenge. However, investing requires this. There'll be noise in the market that can lead to emotional rollercoaster rides and make you want to sell out or buy in but if you're focused on the long term goal, the noise shouldn't matter. 

11) Plan your shots well, then do as you plan.

The long term goal needs planning. Lots of planning. Once you've settled on the goal, fix it and carry it out to its entirety with all you can muster. Don't keep shifting your goals. They'll result in you lowering them when times get challenging resulting in mediocre results when you could have achieved so much more.

12) Learn to congratulate yourself on winners and not beat yourself up over losers.

When you hit a poor shot, release the frustration but don’t lose heart. Chin up and believe the next you hit will be better.

When you hit a good shot, congratulate yourself and believe you’ll continue hitting them. Don't attribute it solely to luck and/or God, instead believe that Lady Luck or God favoured your preparation and rewarded you.

13) Know when chasing after a wild ball is gonna waste energy and stop. Conserving it for the next point may count more. 

Despite all the determination to get every ball, both players were quick to realize the waste of effort to run for a ball that was beyond themselves and was obviously unreturnable. In investing, if you made a mistake in your research or realize that the company or investment you're researching on is a waste of time, admit it and stop chasing it just to make the time you spent on it worthwhile. Cut your losses immediately and stop hoping for a rebound. 

14) Know thyself.

That said, the linking point to the previous is to know who you really are. Know your temperament, your ability to control your emotions, your stress threshold, etc. and then find an investment plan that allows your personality to complement it so that it'll be easier for you to see your investment plans through and allow you to reap maximum gains. Conflicting personality and investment plans could have disastrous results such as losing sleep during volatile periods, and cause you to pull out investments prematurely resulting in mediocre gains or even worst, losses.

15) Learn to play from all angles, it increases your chance of success.

In the third and final set, after falling and losing the second, Federer started varying his game again, producing unexpected plays and strategies which eventually won him the match. As it is in investing, keep learning and try to incorporate the relevant strategies into your plan. This prevents you from stagnating and may even help you achieve success sooner than expected.

16) Psychology is important.  Keep your head when the opponent is panicking

In the third set, it was clear that Nadal was frustrated to the point of letting it affect his game play. This caused him the match. Body language matters a lot in competitions. It changes sure winners into unexpected losers and sure losers into unexpected winners. In turn, knowing your own psychology and being able to read the psychology of the market will help immensely in helping you reap better returns. Also, if you've done your research on the investment proper, keeping a calm head will help you pick up bargains when everyone is selling. This ensures you'll be following the age old mantra of "Buy Low, Sell High".

17) Do what you love. You have a higher chance of being really good at it.

A quote from Federer in his recent interview after his triumph, "I have no plans at all, quitting, stopping - whatever you want to call it." In his book, the Outliers, Malcolm Gladwell writes that all greats had to put in a minimum of 10,000 hours fine tuning their craft to achieve their success. When you love what you do, you'll continue doing it despite the odds, and learning how to better yourself at your passion. In time, you'll reach this magic number of 10,000 hours too.

 18) Sometimes when you think your shot’s out, it just may be the point that wins the Championship. 

At match point, Federer's return barely clipped the line that resulted in a couple of seconds of uncertainty.  He looked like he was about to head back to the base line again when officials ruled in his favour winning him the championship. In investing, an example I can think of is Wilmar & Peter Lim. Peter Lim had thought of writing off his $10 million investment in Wilmar when the company sprung to life turning him into one of the richest men in Singapore. Guess it ain't over till the fat lady sings huh?

Hope you enjoyed this post everyone. Feel free to post your comments.

Cheers,

 ~K

I Thinketh! - Stuff in My Room & the Need to be Financially Free

This is the true joy of life, the being used up for a purpose recognized by yourself as a mighty one. 
~ George Bernard Shaw

As I sit up on my bed typing this post with my future wife lying fast asleep cuddling up next to me, I’m reminded how important and what being financially free really is to me from just observing my surroundings.

In front of me stands my library. Three 2m high bookshelves cluttered with books.  These books from a wide range of categories – literature (classic and modern), contemporary fiction, finance, philosophy, travel, history, arts, science and language – lie dusty, in need of wiping, and quite a number in need of being read. It’s been a nagging thought of mine to start. Instead, I find myself constantly being distracted by something else that needs looking into causing me to put down the book I intended to read.

The last I had any proper time to really start and concentrate on my book was on a holiday to Krabi in September. That was a beautiful and relaxing trip. I finished the book too - all 300 odd pages of it - in the 4 days I was away. Just like I used to in the past. It helped that it was a page-turner. The Fight Club by Chuck Palahniuk.

Today, I find my eyes constantly drawn to my guide on Italy. The breakfast chatter with my brother has got me longing to travel once more. I love Europe and want to visit it again. Backpacking around for a month wasn’t enough. England, France, Germany, Czech Republic. That was more than four years ago. The mini-trips since then never quite matched up to the experience. Let's Go, the words on my travel guide to Italy says on the cover. I want to. It’s been a dream of mine.

My future wife rolls over in her sleep and my thoughts turn to her. In another year, we should be married. A wedding. Honeymoon. A house. And then kids. I’m not quite sure that they’re always in that order though. But I am sure that I want to be capable no matter the order they come in, and not handicapped by that piece of paper constantly changing hands called money.

I’m also sure that eventually we’ll have a dog. A dog that will provide love to and will be loved by the family. A dog that will be annoyed by the kids, but will play with them all the same. But eventually dogs too, grow old, and a lot faster than us. And at the end, we’ll wish we had spent more time with it before the inevitable. I’ve experienced this before. And I never hope to experience it again, let alone wish it on my children. The mat in the corner of my room ensures this. It belongs to the past.

Old age, illness, they go hand in hand. Personal calamities that need dealing with. The medicine bottle lying on the shelf serves as that reminder.  Zoom out. The world is a lot larger than our own personal problems. Wars, famine, poverty. Animals ill-treated. Species threatened. Dying. People suffering, children homeless. Uneducated. Sometimes all they need is a bit of helping hand. Isn’t that what humanity is all about? A dollar goes a long way. Involvement goes even further.

In short, being financially free opens up options, giving one more time to do the things that really matters to oneself and in that way, living and eventually dying without any regrets.

Able to do what one wants to do, when one wants to do it. The long awaited freedom.

~K

I Thinketh! - The Student and the Barometer

In physics, you don't have to go around making trouble for yourself - nature does it for you. ~ Frank Wilczek

Here's a story I read that I find extremely interesting for the relevance to our current education system. A laugh out loud punchline with a food for thought moral.

Enjoy peeps!

~K

The following concerns a question in a physics degree exam at the University of Copenhagen: 

"Describe how to determine the height of a skyscraper with a barometer." 

One student replied: 

"You tie a long piece of string to the neck of the barometer, then lower the barometer from the roof of the skyscraper to the ground. The length of the string plus the length of the barometer will equal the height of the building." 

This highly original answer so incensed the examiner that the student was failed. The student appealed on the grounds that his answer was indisputably correct, and the university appointed an independent arbiter to decide the case. The arbiter judged that the answer was indeed correct, but did not display any noticeable knowledge of physics. To resolve the problem it was decided to call the student in and allow him six minutes in which to provide a verbal answer which showed at least a minimal familiarity with the basic principles of physics. 

For five minutes the student sat in silence, forehead creased in thought. The arbiter reminded him that time was running out, to which the student replied that he had several extremely relevant answers, but couldn't make up his mind which to use. 

On being advised to hurry up the student replied as follows: 

"Firstly, you could take the barometer up to the roof of the skyscraper, drop it over the edge, and measure the time it takes to reach the ground. The height of the building can then be worked out from the formula H = 0.5g x t squared. But bad luck on the barometer." 

"Or if the sun is shining you could measure the height of the barometer, then set it on end and measure the length of its shadow. Then you measure the length of the skyscraper's shadow, and thereafter it is a simple matter of proportional arithmetic to work out the height of the skyscraper." 

"But if you wanted to be highly scientific about it, you could tie a short piece of string to the barometer and swing it like a pendulum, first at ground level and then on the roof of the skyscraper. The height is worked out by the difference in the gravitational restoring force T = 2 pi sqroot (l / g)." 

"Or if the skyscraper has an outside emergency staircase, it would be easier to walk up it and mark off the height of the skyscraper in barometer lengths, then add them up." 

"If you merely wanted to be boring and orthodox about it, of course, you could use the barometer to measure the air pressure on the roof of the skyscraper and on the ground, and convert the difference in millibars into feet to give the height of the building." 

"But since we are constantly being exhorted to exercise independence of mind and apply scientific methods, undoubtedly the best way would be to knock on the janitor's door and say to him 'If you would like a nice new barometer, I will give you this one if you tell me the height of this skyscraper'." 

It is told, that the student was Niels Bohr, who later received the Nobel prize for Physics.

I Thinketh!

We are what we think. All that we are arises with our thoughts. With our thoughts, we make the world. ~ Buddha 

I realized as I revamped my site that I needed to have a new subsection for any postings that are unrelated or only tangentially related to focus of the blog. Questions, gripes, interesting bits of news, gossip, those kinda stuff.

All these will be placed under a new header I decided to call "I Thinketh" heh. Stylo mylo huh? =)

Stay tune for my first thinketh post. Look out for it!

~K

Living a Rich and Fulfilling Life

Don't be afraid your life will end; be afraid it will never begin. ~ Grace Hansen

You only live once, but if you do it right, once is enough. ~ Joe Lewis

Such true, true words spoken by Ms. Hansen and Mr. Lewis. I've had more than a year since my last post to reflect on that. That's quite a story if you have time.

Last September, when I first started this blog, I had only just been introduced to the idea of investing and passive income in a financial seminar held by my organization. It was a "revolutionary" idea to me really. The only investing I did back then was to turn my money (cash & CPF) over to an insurance agent who sold me these investment-linked policies and endowment plans. Only during the recent financial crisis, when I witnessed the China-India fund which I was invested in, which at one point almost doubled in 2007/8, crumble into a $15,000 loss did I get my first wake up call. I needed to care about my finances. For who else is going to be more concerned about my money than me? Thankfully, I rode out the wave to recovery without selling and managed to break even and then gain some at the beginning of this year. Talk about Scary!

Since then, I focused a lot of effort into learning and finding out more about the different investments in the market, attending talk after talk and reading book after book. But most important of all, I began to take action. Action to get my money working hard for me. But while I focused tremendous time on this new-found direction of living a rich and free life, or at least wanting to live one, I also realized that there were other things to life that were equally or even more valuable - relationships, love, experiencing new cultures, seeing new worlds, cities, charity, volunteer work and finding peace with God for example. To quote Napoleon Hill in his True Riches video below, "observe if you will, with great benefit, the fact that money comes at the end of the list of the twelve things that makes men rich".

That said, it does not mean that money isn't important. It is. But there is a whole world more to life than simply that.

With this new focus, shall I continue this blog; to record my journey into living a rich and fulfilled life with money providing me with the opportunities.

Wish me luck! =)

Cheers,

~K

Site Revamp

Nobody can go back and start a new beginning, but anyone can start today and make a new ending. ~ Maria Robinson

As you guys can see, my last post was more than a year ago. This was because I was quite disappointed when my Adsense was cancelled. Nonetheless, I'm making an attempt to continue especially since I've more time these days. It's gonna start with a major blog revamp.

Post again real soon!

~K

It's All Part of the Plan

Vision without action is a dream. Action without vision is simply passing the time. Action with vision is making a positive difference. ~ Joel Barker

Yes I'm a Joker fan if you recognized the title as a quote from the latest Batman film, the Dark Knight. And which emotion did the Joker incite most? Yep, that's right (or at least I hope you said). Fear.

Fear is a very powerful emotional tool that prevents a lot of people from achieving their dreams. It's so powerful that it's been one of the main obstacles in hindering people from reaching their first million dollars. Why is that? Well for starters, some of us have strong doubts of our ability. Or, we fear the amount of work we'll have to put in, the sacrifices we'll have to make, the relationships we'll have to sacrifice, the cost of failure, the fear of embarrassment, the lost of respect, the troubles we'll cause, the label of "bankrupt" stapled to us wherever we go, the loss of our homes, our jobs, our families, all because of a desire to live life to its fullness. And so what do we do? We make excuses, we procrastinate, we delude ourselves into thinking we're ok just scrapping by, we think life will change when we're lucky enough to strike TOTO or 4-D or whatever lottery we take part in, we look at the guy driving the Ferrari and think "Lucky devil." and just continue looking, we blame the world for our circumstance, our parents, our teachers, our damn luck. Yes, we just wait. I waited too, for such a long time, without realizing I was missing out on opportunities everywhere. So I know exactly what waiting does to oneself. It does absolutely nothing.

If you want to see money coming into your pockets, wanting it is simply not enough. Yes, the first step is to desire it but then, you have to vision it, see it, feel it, believe that you can obtain it and then most important of all, act on it. The Mindset is crucial and that gets you acting. So what do you do now?

Now you start to aim, plan and do. Aim how much you want to retire on, or how much you want to earn each month, or how much you want to be able to spend each month, etc. Figure out what your objectives are. Is it to grow your money? Protect your capital? Save for an education fund for your kids? Are you saving for future medical costs? And then prioritize. Make this aim clear with real figures with real dates to achieve this by. Divide this into long-term goals (>5yrs), mid-term goals (2-5yrs) and short-term goals (<2yrs).>

Whew, sounds complicated isn't it? Well if it is, the first person you'd like to speak to is a financial planner. Wherever you are, you should consult a certified financial planner who is well-versed in the various investments and who is able to tailor your plan to your objectives. But believe me, it really isn't that hard to start.

You might want to educate yourself first. Here are some suggestions:

1. Personal Finance for Dummies

2. Mastering Your Personal Finance - Dennis Ng

3. The Automatic Millionaire - David Bach

4. Start Late Finish Rich - David Bach

5. Secrets of Self-Made Millionaires - Adam Khoo

6. Rich Dad Poor Dad - Robert Kiyosaki

Well, the weekend is here again. So take care and enjoy!

Cheers,

~K

Believe Your Path to Wealth

Believing a solution paves the way to solution ~ Dr. David Joseph Schwartz

Dr. Schwartz certainly knew what he was talking about. A leading authority on motivation in America, he authored his first bestseller - The Magic of Thinking Big about 30 years ago which became a bestseller. A trainer, consultant, lecturer and expert on motivation, Dr. Schwartz studied the subject for years and found that the key factor to personal success was the desire for it. That's the secret. Success, is not simply luck or circumstance but it's a choice.

Similarly, if you want to be financially free or even rich, you have to make a decision and hold strongly to that choice, desiring to see it through despite adversity, fear, worry or any obstacles come what may. In Napoleon Hill's historic book, Think and Grow Rich, the idea of belief and persistence are constantly emphasized. This is one book that most rich people have read before they became rich. I strongly recommend reading it as well to set it as a stepping stone to your success and financial independence.

But till that day comes, Believe.

Till next post,

~K

Want it? Believe in Yourself & Go for it

To accomplish great things, we must not only act, but also dream; not only plan, but also believe. ~ Anatole France

You are destined to be a millionaire.

What was your reaction to that? Was it disbelief? Were you cynical? Did you go "Yeah right. Sure I will..." and then roll your eyes?

Yes, I totally understand why you'll think it impossible. Firstly, how many of us "normal" people have ever seen a $1,000,000 before? Yes, I can relate to that. Couple of years ago, I barely saw $5,000 in my account at any point of time. And when I did see it, mostly thanks to the December bonus, it was gone really quickly too. So lets not even think of a million dollars right? Don't answer that. Secondly, you'll probably say you aren't earning enough or aren't earning period, especially if you're a student, to even begin to amass such an amount. Lastly, you'd probably have truckloads of bills to pay & things you'd want to get. So that'd mean you'll be paying for all those goodies and not have much left to save.

Truth to tell, if you're gonna think like that, you aren't gonna be able to. If you want to be financially free, you got to think financially free. BUT most important of all, you have to believe that you can become financially free. Remember that it all starts from your mind. And there are many aspects of the mind that hinders the path to wealth and financial freedom such as fear, disbelief, no confidence in one's ability, laziness, procrastination, unwillingness to learn, false perception, inertia and many others. Only you can set right these sabotaging thoughts and prevent them from being an obstacle to your goal of being financially free.

I recommend reading these books in helping you change your way of thinking.

1. Think and Grow Rich - Napoleon Hill

2. Secrets of the Millionaire Mind - T. Harv Eker

3. The Rules of Wealth - Richard Templar

These books are packed with valuable content and is too much to lay them out here in this blog. Nonetheless, I'll touch briefly on those that I feel are especially noteworthy in future posts.

Till then, think rich, think free.

You are destined to be a millionaire. Believe it.

Cheers,

~K

Mindset to Financial Freedom

My greatest challenge has been to change the mindset of people. Mindsets play strange tricks on us. We see things the way our minds have instructed our eyes to see. ~ Muhammad Yunus

While you're saving your hard-earned cash & building up your reserves, perhaps also clearing your debts too, lets turn our attention to something we can work on together while waiting for your savings to grow substantially.

As Muhammad Yunus realized, mindset is extremely important in how we perceive things to be. For example, if you grew up not liking the colour green, chances are you'd be fussy with your vegetables. Or, if you had a bad fright in a plane due to the horrible turbulence you experienced when you were a child, chances are you'd still feel this unreasonable aversion to flying every time you go for a trip. As you can see, the mind has a tendency to develop biasness due to the experiences we gather during our childhood development. Fear of insects, snakes, cats and/or dogs or distrust of foreigners, people of authority, etc. can mostly be traced back to bad childhood experiences.

My mother, for one, used to be terrified of swimming because she nearly drowned as a child in the sea. So for the great portion of her years she used to cling to the edge of the swimming pool or to my dad (who used to grumble or tease her about it heh). However, one day she decided to overcome her fear. She first started forcing herself to be comfortable in the water without holding onto the edge. Later she ventured into wading around and in a couple of months was swimming the breath of the pool. She never let her head go underwater though but the distance she's come & the achievement she's gained, is impressive. How did she achieve this feat? Simply put, she had a change of mindset.

Similarly, if you want to become financially free and/or rich, your mindset needs tweaking. A lot of times people say they want to get rich, even attempt to get rich, but their mind is not ready to get rich and so these people fall by the roadside frustrated & stop trying eventually. Therefore before the person can become rich, the mind has to become rich & think rich first. Only then can you change your attitude and attain the level of richness you sought.

Simply put:

Mindset leads to Thoughts which leads to Feelings which leads to Attitude which leads to Actions which leads to Results/Outcome

In the next couple of posts, I will expound on how to prepare your mind in order for you to attain that financial freedom you deserve.

Till then, keep saving!

Cheers,

~K

Aim to be Debt Free

Debt is the slavery of the free ~ Publilius Syrus

Hooray! It's the weekend again. So I won't bore you with long-winded posts (I'll save that for another time heh). I'll just make this quick.

In a previous post, I mentioned reducing your expense as a means to increase your savings. However, if you have an outstanding debt to pay, please try your best to clear that off as soon as possible. Now I don't mean housing debts that take eons to pay off. What I'm referring to are debts arising from things like credit cards & installment plans for luxury items, like a new iPhone for example, that you bought from furniture and/or gadget shops like Courts or Harvey Norman. The simple reason for this recommendation is that the interest kills! Instead of saving up precious cash to earn your financial freedom, you'd be wasting potential savings putting the money into someone else's pocket. So be smart. Pay it off as fast as possible.

Another alternative strategy is to portion out a sum to save while using the remainder to pay for your debt. To reiterate, I did say that paying yourself 20% of your gross income per month is a good way to earn your financial freedom. But if you've debts to be paid off, perhaps keeping 10% in your savings while using the other 10% as debt payments would be ideal if you'd like some emergency cash in hand. Or you could portion out 5% savings & 15% debt repayments if you're more comfortable or have a larger payment to clear. Either way, discipline is key and with time, your debts will be cleared and you'll be another step closer to financial freedom.

K, have a good weekend & a great Hari Raya Puasa!

Cheers,

~K

The Saving Attitude

"Planting rice is never fun. Bend from morning till set of sun. Cannot stand and cannot sit. Cannot rest for a little bit."

How many of you have heard that nursery jingle before? Well, my parents taught this catchy rhyme to me when I was just a child. And what did I learn from it? That it must be a heck of a lot of work & dreadful business planting rice, that's what! During mealtimes, every mouthful was a reminder by my mother of the hard work put in by farmers to give me this plate of rice. Did I grow up wanting to be a padi farmer? Definitely not! I just wanted to enjoy the fruits of their labour. =)

So, although seemingly out of topic, the point is this. Attitude matters.

You'll notice that when you're having fun, time seems to fly by without any realization but when you're dreading something, work for example, time somehow slows to a crawl. Similarly, when engrossed in a hobby, you'll find that nothing seems like work to you. Heck, you'll even complete more than necessary. But when compared to actual office work for example, how many times have you heard/seen/been in the situation where the bare minimum is all that gets done? Rhetorical question.

Therefore the question of the day is, what is your attitude towards saving money?

If you want to save and hold onto your savings, I'd recommend you start enjoying that you have money in the bank. Not only that. Every time you see this amount increase, even if it's by a couple of cents from the bank interest rates, you should congratulate yourself and look forward to the next increase. Clap your hands, pat your bank, shout out your joy if you feel like it. Such an attitude, though seemingly loony & obsessive at first, will help you grow your savings faster. By reprogramming your mind to enjoy having saved cash, this will lower your impulse to spend by making you think twice as you'll start feeling "heartache" when you do have to spend, thereby ensuring that you only spend on the necessary and not on the luxurious.

Personally, I use a tip I picked up from Blair Singer's Sales Dog Training program to help reinforce my want to save. Every time I reach my goal of an intended saved amount in the bank, I clench my hand into a fist, curl my elbow to 90 degrees, tuck it into my body rather quickly and go "Yes!". I find that helps as my positive reinforcement. On a flipside, don't complain about saving your cash. Don't bitch that you aren't able to buy such & such. That's a surefire way of spending everything you accomplished. Negative reinforcement you see. So think about it, and do whatever works for you too.

Yes!
~K

Save for a Reason

Big goals get big results. No goals gets no results or somebody else's results. ~ Mark Victor Hansen

I can't help but find the above quote extremely true. How many times have I started saving my hard-earned money in the bank only to have it "disappear" due to some "fantastic buy". Other times, they vanish because of a sales pitch that seemed like a once-in-a-lifetime opportunity. That said, after the many years of working and trying to save, the realization that wanting to save is not as important as having a reason to save.

In fact, I had never ever accumulated anything more than $5,000 in my bank ever since I started working. Truth to tell, my savings constantly dwindled to a couple of hundreds and at times, I even had barely enough to get through the month, hoping for my next paycheck so I could pay off my outstanding debts.

Fortunately, as I have a contracted job, I am assured of a paycheck every single month. Many of you however, don't. I, myself, will lose this security in a couple of months when my contract expires. When I realized the impact of this, having an aim in mind truly changed my saving attitude & my attitude towards money. I began planning for my long-term portfolio first as these need much longer time to grow & mature. With this aim, wonders started happening. Only in the last couple of months did I see my bank account grow to more than double that amount. The accumulated amount was recently invested and from what I was told from my consultant, has begun to show slight profits. I am already aiming for my next investment in Jan '10.

So the experience & knowledge that I hope to pass on to you is simply to have an aim if you're intending to save. In every case of saving up some cash, it doesn't matter if the reason is financial freedom (which I hope it is), a new car, your children's education or your anniversary. You have to have a reason so as not to get distracted and to find your way back to the path when you get sidetracked. In our context of achieving financial freedom, setting your aim of perhaps accumulating $10,000, will provide the motivation for you to reduce expenditure & increase your income, two vital components in helping you accumulate your big sum of money faster.

In summary, if you want to save, aim to save and save with an aim.

Cheers,

~K

Increase Your Savings - Pay Yourself First

If you would be wealthy, think of saving as well as getting ~ Benjamin Franklin

On a final note on increasing your savings, the single most important tip would be to pay yourself first. Although this was mentioned previously. I can't stress this enough. Many people usually pay everyone else first (like what was shown in the Profit & Loss statement post) and then save the balance.

What would be smarter to achieve your goals faster & more efficiently is to pay yourself first. Whenever you get your pay or total income, just immediately set aside 10 - 20%, or more if you can afford it, into your savings account. Then pay everyone else with the balance you have left. If you find that you're left with insufficient funds to pay them, then instead of touching your savings account, cut your expenses or increase your income as I explained previously. Do not touch your savings unless it really is an emergency case. Be discipline. Do not be discouraged or impatient at the speed of growth of your savings. This is only setting the foundations in place for more opportunities to emerge. The turtle eventually won the race compared to the hare, remember?

However at the end of the day, it comes down to what you really want. If you wish to be finally financially free or at least have more than pennies in your savings account then please start saving. If you want immediate gratification and have a need to spend lavishly then just know that you risk having pennies in your savings account at the end of the day and after years of working. It's your choice in the end. This is only a blog to share about what I've learnt from the various authors, searches & talks that I attended.

Happy saving and good journeying in your path towards financial freedom.

Till next time,

~K

Increase your Savings - Increase Your Income

A penny saved, is a dollar earned ~ Benjamin Franklin

The US Open Men's Semifinals is starting so I thought I'd blog a bit before the action starts. =)

So now that you've got an idea of sorting your expenses out and how you might be able to reduce them, the second way of increasing your savings, is to increase your income. Obvious isn't it? However, while it may seem the obvious thing to do, you'd be surprise to learn how many people don't seem to have enough no matter how much money comes into their pocket. Instead of more savings as a result of more income, what occurs is an increase in expenditure! This is because with an increased income, the person normally feels that now he/she can afford that much coveted item to satisfy his or her desire. From eons of studies & examples, human nature is such that there's no such thing as satisfying a desire. As soon as one desire is satisfied, human nature finds another desire to be satisfied. As such, disciplining yourself into parking your extra income may be a challenging thing to do.

What then would be a good approach? Well, I think that if you're earning extra income, be it from your year-end bonus or an extra job, that you should reward yourself. Since you are working harder for that money it would seem criminal not to feel good about yourself for receiving some much deserved extras. So go out, enjoy yourself, pamper yourself a bit, have a beer or buy that bag you much longed for or what else you want...BUT all in total of a certain percentage of the extra income. What do I mean by this? Means if you earn an extra of $1000 for the month, that you should portion out about 20% to be spend on leisure items & activities while saving the balance 80%. This way, you get to feel that satisfaction and still not resent saving.

These are some ideas to increase your income:

1. Get a second job - dog walking, babysitting, tuition, etc.

2. Start an internet business

3. Do paid online surveys - CashCrate.com, OnlinePaidSurveys.net etc.

4. Join affiliate programs & market their products. - Amazon.com, ClickBank.com etc.

5. Go into consultation with regards to your expertise

6. Publish and sell your ebook or if you're driven enough, aim to publish a book proper

7. Do freelance work.

8. Provide financial planning services part-time - Prudential, IPP etc.

9. Sell yours or other peoples old unwanted stuff - Ebay.com, garage sales, push carts

10. Provide a service - offer to clean your mum's or neighbour's house for a fee

11. Rent out a room

12. Rent out a service - web designing, computer fixing/servicing, paint a friend's house, help someone to move, etc.

Well, personally I know how tedious these tasks can be. Myself, I have only just begun in my search increasing my income. I was previously concentrating a lot on investment vehicles which I will share in future posts. Currently, am looking into starting an internet business but have not decided my niche as yet. Things like this will take time, be it starting an internet business, writing an ebook & getting it sold, renting out a room etc. All this takes time to build. The important thing is to get yourself started. With persistence, once you start moving, the momentum you gain will propel you on to bigger things.

Hope this helps.

Till next time,

~K

Increasing your Savings - Reduce your expense

It is not how much you earn that is important, it is how much you keep that matters.

Well to link back to my previous post, I mentioned that you could increase your savings by putting your money with high-yield banks like ING Direct. Another bank which also gives pretty good interest rates, as I've found in the last couple of weeks is Emigrant Direct. Both banks offer 1.3% interest which you have to admit, sure beats the usual 0.25% here in Singapore, doesn't it? I wonder if Singapore have any high-yield banks. Anyway, as I caution again about the risk of currency fluctuation I also think that if you wanna diversify the portfolio (in your cash portion) with some foreign currency then perhaps this would be a good time. Currency conversion rates are after all at a all-time low. I will be blogging about portfolio construction in future posts for your understanding so please bear with me. Right now, it's just the basics that I hope to put in place for you so you can have a good start.

Anyway, moving on. The next way to increase your savings is simply to reduce your expenses. Now this may seem common sense, and it really is. However, you'd be surprise how many people spend without any knowledge of where their money goes on. I've been in that situation myself so I can perfectly relate and understand this phenomenon. One way to track your expenditure is to put all your incomes & expenses into a personal profit and loss (P&L) statement. No! It's not difficult at all. Rest assured that you'll find it extremely easy to prepare.

Steps:

1. Divide your page into two.

2. The left of the page, is your Income entries.

3. Enter all monthly income - net pay, dividends, interest, rental paid by your tenant, etc.

4. The left of the page is your Expense entries.

5. Enter all monthly expense - shopping, food, entertainment, necessities, facial products, car expenses etc.

6. Add the entries up per column.

7. See which column is more, the Income column or the Expense column

Here's an example. Pls pardon the format. I've been trying to arrange the format for the last 20 mins with no success.

Personal Income Statement

Income $

Net Pay 2,400

Dividends 50

------------

$2,450

Expense $

Credit Card 100

Clothes 56

Movies 100

Food 450

Insurance 80

Car Fuel 500

Car Maintenance 200

Parking Coupons 100

Wife 400

Mum 250

Handphone 100

Internet 80

Balance 34

------------

$2,450

So $34 would be what's left to save. Easy isn't it?

By doing this you can see exactly how much you can put aside in your savings account. Also, if you do this, you can see all the unnecessary expenses and thereby cut down on them. You'd be surprise how much you're spending in total when you put it into a P&L statement. A friend of mine who's a financial planner told me today that she attended to a client who didn't realize he spent $150 a month on Famous Amos & Subway cookies! That said, if you have problems balancing your finances, engaging a financial planner is a really good way to start maximizing your savings. And the best part? It's FREE service! That's right. You don't pay unless you buy a product that they recommend. Now before you misinterpret my intentions, I'm not recommending that you cheat a financial planner of his/her worth. Truth be told, the financial planners I know are worth their weight in gold. They allow excellent idea bouncing and I am extremely grateful for their help & assistance in planning mine & my loved ones future. So my advice is, find a financial advisor to start a saving plan tailored to meet your desired goal(s). In Singapore, I like IPP Financial Advisors as they are not linked to any Insurance company and can do a fair comparison to ensure that you have the best deals. If you live outside Singapore, I'm pretty certain that there are independent financial advisors as well. Worldwide Financial Planning, for example, is an independent financial advisor group based in UK. You can also approach banks and insurance companies like Prudential to assign you a financial planner to help you meet your objectives. We'll talk more about insurance & finding a good financial planner in future posts. Right now, it's good to broaden your knowledge about what's available.

In summary, by reducing your expenses, you allow more to be put into your savings which will enable you to start investing it earlier for faster growth & higher returns which if you recall, is the aim of saving up. With the help of a financial advisor, you'll be certain to achieve this much faster.

Good luck!

~K