I have found that people who have made money consistently through
their investments are able to do so because they treat it with same
seriousness as they would in building a business or a second career.
If you treat investing as just a 'by-the-way' activity that you
spend time on now and then, you will never be able to succeed. So,
how can you run your investing activity professionally like a home
business?
Decide On The Investment Strategies You Will Use
Just as an entrepreneur has to decide on the mix of products that
his business will sell, you have to decide on the type of
investment strategies you will use to generate the profits that you
aim for. You also have to decide how you are going to allocate your
investment funds between them.
There are a whole range of investing strategies to make money. Some
of them are short-term and some of them are long-term. Some of them
require daily monitoring while others require monthly monitoring.
The kind of strategies you should employ depends on your targeted
rate of return as well as the amount of time you have to spend. For
example, being a full time trader who is able to monitor the
markets for 5-6 hours a day, Conrad focuses 100% of his money into
very short-term momentum trades that make him quick gains within a
few days. Because of his smaller investment capital (which he first
started with), he solely uses Call & Put Options that give him the
highest possible return of 100%-200% on his money. His strength in
Technical analysis gives him an advantage in picking the best
momentum trades.
Whatever investment you decide to use, always remember that you
need to diversify your money adequately into at least 8-10
different stocks or options at any one time. No matter how much
research you do and no matter how good a company's stock can look,
things can turn against you with a single piece of negative
financial news.
Be prepared to make losses on a few trades, it is only natural.
However, if you stick to the rules and cut your losses, the profits
you make on your winning trades would be enough to build a small
fortune.
To your investing success
Friday, November 27, 2009
Thursday, July 3, 2008
Credit Cards As A Powerful Wealth-building Tool
when used properly, credit cards are a very powerful wealth-building tool
How you may ask. Here are the tips;
1) A two-months interest free loan
When you buy a product using your credit card, you will only be
billed for it at the end of the month. You are then given another
month to make payment. So, if you pay off your total bill, you
would have effectively gotten a two-month interest free loan.
2) Bonus points and dollars
Each purchase you make on your credit card(s) will earn you bonus
points which you can use to redeem for free products and services
like extra flyer -miles and dining vouchers, saving you even more
money.
3) A monthly statement that tracks and consolidates all your expenses
At the end of every month, the credit card company will tabulate
for you the total expenses for the month, making it easy for you to
track your total expenditure. So it becomes a free money management
tool.
However, you MUST ALWAYS PAY THE OUTSTANDING BALANCE when you pay
the full balance every month. This way, the bank does not earn a
cent off you, but you get the three great wealth building services
mentioned above. This is what I do and that is why my bankers hate
me.
So why do banks go all out, giving freebies and spend millions of
dollars in advertising to hook you on using their card? They know
that there are many consumers out there who just pay the minimum
sum every month (about 3% of the total debt you owe), because it is
so tempting.
What's worse is that many credit card owners don't even pay their
minimum sum on time because of a cash crunch or because they plain
forgot.
The moment you pay only the minimum sum and allow your outstanding
balance to roll, you become the bank's best friend. This is when
they will make a killing off you! Why?
This is because banks charge a 2% per month interest on your
outstanding sum. This may seem small, but again, that's 24%
interest a year. Just how much interest does this add up to?
Let's do the sums...
Question: Imagine if you had an outstanding balance of $2,000 on your credit card statement, and you just pay the minimum sum of
$60, how long will it take for you to pay off the while balance?
(this is only assuming you do not charge a single dollar more).
The shocking answer: It will take you 4.5 years! You would have
paid a total of $3,300, that's $1,300 in interest. In other words,
you would pay an actual interest rate of 65% off your balance.
So when used properly credit cards can greatly assist you in
creating wealth or it can destroy you if abused.
To your investing success
Kunle
How you may ask. Here are the tips;
1) A two-months interest free loan
When you buy a product using your credit card, you will only be
billed for it at the end of the month. You are then given another
month to make payment. So, if you pay off your total bill, you
would have effectively gotten a two-month interest free loan.
2) Bonus points and dollars
Each purchase you make on your credit card(s) will earn you bonus
points which you can use to redeem for free products and services
like extra flyer -miles and dining vouchers, saving you even more
money.
3) A monthly statement that tracks and consolidates all your expenses
At the end of every month, the credit card company will tabulate
for you the total expenses for the month, making it easy for you to
track your total expenditure. So it becomes a free money management
tool.
However, you MUST ALWAYS PAY THE OUTSTANDING BALANCE when you pay
the full balance every month. This way, the bank does not earn a
cent off you, but you get the three great wealth building services
mentioned above. This is what I do and that is why my bankers hate
me.
So why do banks go all out, giving freebies and spend millions of
dollars in advertising to hook you on using their card? They know
that there are many consumers out there who just pay the minimum
sum every month (about 3% of the total debt you owe), because it is
so tempting.
What's worse is that many credit card owners don't even pay their
minimum sum on time because of a cash crunch or because they plain
forgot.
The moment you pay only the minimum sum and allow your outstanding
balance to roll, you become the bank's best friend. This is when
they will make a killing off you! Why?
This is because banks charge a 2% per month interest on your
outstanding sum. This may seem small, but again, that's 24%
interest a year. Just how much interest does this add up to?
Let's do the sums...
Question: Imagine if you had an outstanding balance of $2,000 on your credit card statement, and you just pay the minimum sum of
$60, how long will it take for you to pay off the while balance?
(this is only assuming you do not charge a single dollar more).
The shocking answer: It will take you 4.5 years! You would have
paid a total of $3,300, that's $1,300 in interest. In other words,
you would pay an actual interest rate of 65% off your balance.
So when used properly credit cards can greatly assist you in
creating wealth or it can destroy you if abused.
To your investing success
Kunle
Tuesday, July 1, 2008
Growing Your Money at Millionaire Returns
All self-made millionaires utilize the power of investing to get
their money to make them even more money.
They get their money to start working for them so they can
eventually stop working for money.
Unless you master this money skill of investing, you will never
achieve financial fre-edom and abundance.
However when it comes to investing, most people share the painful
experience of getting burnt in the stock market or in mutual funds
(unit trusts).
"If I had kept all my money in the bank, I wouldn't have lost half
it."
"After so many years of buying and selling, I find that after
all the effort I have merely broken even".
"I should have kept the money in the bank instead.' ' Every time I
buy a stock, it seems to go down."
Do you share this experience with most investors?
If so, you are one of many people who have developed a phobia of
investing and have formed the belief that 'investing is risky'. As
a result, you are resigned to keeping your money 'safe' in fixed
deposits earning a measly 2%-3%.
This belief is compounded by the fact that we are taught by finance
courses, banks and financial advisors that 'High risk leads to high
return'. In order to earn high returns, you must be a risk taker!
This is totally rubbish! All of us have been brainwashed by this
inaccurate generalization. In fact, the greatest investors in the
world are NOT risk takers.
They are in fact, very risk averse. Warren Buffett, the world's
greatest investor, who achieved 24.7% returns per year for the last
49 years is extremely risk averse.
His fundamental principle in investing is 'capital preservation.'
He would rather not make any money if there is a chance of losing
it.
His first rule in investing is 'Never Lose Money.' His second
rule is 'don't forget rule number one.' As a result, Warren will
only invest in a stock if it has very low downside and a very high
probability of success of at least 90%.
To be a winning investor, you must adopt this same principle! You
must be risk averse! You must always follow the principle of
"capital preservation."
Now, you may ask me, ' If high risk does not lead to high returns,
then what does?' The answer is 'financial intelligence.' High
financial intelligence leads to high returns!
When you have high financial intelligence, there is little risk,
because you know exactly what you are doing. When you don't have strong
financial intelligence to fully understand the business behind the
stock, then investing becomes very risky.
Risk is contextual. How risky an activity is depends on the level
of competence of the person doing that activity.
For example, if I told you to climb a mountain where there is a pot
of gold at the top, would it be risky? Would you have to take a
high risk to achieve the high return?
Yes! It is risky for you because you have never been trained in
mountain climbing and do not have the necessary safety equipment.
There is a high chance you will fall and die!
However, for a professional & experienced climber who has scaled
Mount Everest twice without oxygen, would it be risky? No! Why?
Because his high level of competence eliminates the risk. To him,
it would be low risk, high return.
Take another example, if I were to ask you to drive a formula one
race car at 260 km per hour round the racetrack in order to win a
grand prize, would it be risky?
Again, to you it would because you are not trained. It would be
suicide and I would recommend you not do it at all. However, to
Michael Schumaker, it would be low risk and high return, because he
has been trained to do it.
So is investing risky? Again it depends. If you are like the
majority of people who have not been trained and have low financial
intelligence, then it is highly risky!
It's like climbing that mountain with no training at all. Indeed,
to them it is high risk, high return. I would suggest that they
keep their money in the fixed deposit.
However to Warren Buffett, investing is 'low risk, very high
return' because he has a high level of competence in investing. So
again, you can see that high risk does not lead to high return, it
is high level of competence that leads to high return.
To your Investing success
their money to make them even more money.
They get their money to start working for them so they can
eventually stop working for money.
Unless you master this money skill of investing, you will never
achieve financial fre-edom and abundance.
However when it comes to investing, most people share the painful
experience of getting burnt in the stock market or in mutual funds
(unit trusts).
"If I had kept all my money in the bank, I wouldn't have lost half
it."
"After so many years of buying and selling, I find that after
all the effort I have merely broken even".
"I should have kept the money in the bank instead.' ' Every time I
buy a stock, it seems to go down."
Do you share this experience with most investors?
If so, you are one of many people who have developed a phobia of
investing and have formed the belief that 'investing is risky'. As
a result, you are resigned to keeping your money 'safe' in fixed
deposits earning a measly 2%-3%.
This belief is compounded by the fact that we are taught by finance
courses, banks and financial advisors that 'High risk leads to high
return'. In order to earn high returns, you must be a risk taker!
This is totally rubbish! All of us have been brainwashed by this
inaccurate generalization. In fact, the greatest investors in the
world are NOT risk takers.
They are in fact, very risk averse. Warren Buffett, the world's
greatest investor, who achieved 24.7% returns per year for the last
49 years is extremely risk averse.
His fundamental principle in investing is 'capital preservation.'
He would rather not make any money if there is a chance of losing
it.
His first rule in investing is 'Never Lose Money.' His second
rule is 'don't forget rule number one.' As a result, Warren will
only invest in a stock if it has very low downside and a very high
probability of success of at least 90%.
To be a winning investor, you must adopt this same principle! You
must be risk averse! You must always follow the principle of
"capital preservation."
Now, you may ask me, ' If high risk does not lead to high returns,
then what does?' The answer is 'financial intelligence.' High
financial intelligence leads to high returns!
When you have high financial intelligence, there is little risk,
because you know exactly what you are doing. When you don't have strong
financial intelligence to fully understand the business behind the
stock, then investing becomes very risky.
Risk is contextual. How risky an activity is depends on the level
of competence of the person doing that activity.
For example, if I told you to climb a mountain where there is a pot
of gold at the top, would it be risky? Would you have to take a
high risk to achieve the high return?
Yes! It is risky for you because you have never been trained in
mountain climbing and do not have the necessary safety equipment.
There is a high chance you will fall and die!
However, for a professional & experienced climber who has scaled
Mount Everest twice without oxygen, would it be risky? No! Why?
Because his high level of competence eliminates the risk. To him,
it would be low risk, high return.
Take another example, if I were to ask you to drive a formula one
race car at 260 km per hour round the racetrack in order to win a
grand prize, would it be risky?
Again, to you it would because you are not trained. It would be
suicide and I would recommend you not do it at all. However, to
Michael Schumaker, it would be low risk and high return, because he
has been trained to do it.
So is investing risky? Again it depends. If you are like the
majority of people who have not been trained and have low financial
intelligence, then it is highly risky!
It's like climbing that mountain with no training at all. Indeed,
to them it is high risk, high return. I would suggest that they
keep their money in the fixed deposit.
However to Warren Buffett, investing is 'low risk, very high
return' because he has a high level of competence in investing. So
again, you can see that high risk does not lead to high return, it
is high level of competence that leads to high return.
To your Investing success
Monday, June 9, 2008
Want to be Rich?...Eliminate Consumer Debt.
The first step to take to increase your savings is to start
reducing your expenses. So what is the first expense you must
reduce and eventually eliminate? It is the interest expense you pay
on consumer debt.
While taking on a reasonable amount of consumer debt is necessary
for you to afford a car and a house, you must avoid taking on too
much for too long a period.
Why? Because a 5%-6% interest rate may seem small but over an
extended period of time, it compounds to a huge amount of money.
You will find yourself paying tens of thousands of dollars in
installment payments every month just to see that the principal sum
you owe go down by a couple of hundred dollars.
Lets take an example: let's say you bought a $250,000 apartment and took a
$200,000 mortgage at 6% stretched over 30 years.
Question: If you just paid the minimum installment payments every month, how much would you have paid in total interest?
Answer:Using a financial calculator, you can see that you will
pay $1,173 in monthly installments for 30 years. That's a total of
$422,280 in installment payments! You would have paid a total of
$222,280 in interest to the bank. That's like buying two apartments
and giving the bank one!
If You Took a $200,000 Loan Over 30 Years at 6% Interest, You Would
Pay a Total of $222,280 in Interest...Even More than the Loan Amount
Itself!
So besides paying the minimum required monthly installments (like
your bank wants you to), you must constantly PAY MORE to further
reduce and eventually eliminate your principal sum...or you will wind
up donating hundreds of thousands of dollars to your bank over the
long term!
When our spending is uncontrolled, our expenses always tend to rise
up to match our level of income. No matter how much we earn. If we
earn $2,000, we will find a way to spend over $2,000 and end up
broke.
When we start earning $10,000 a month, we believe that we deserve a
grander lifestyle, a flashier car, dine in exclusive up-market
restaurants. Very often, the $10,000 we earn a month will be spent
and we will end up having to start from scratch over again.
This pattern has been repeated by many intelligent people I know,
some of them being my close friends. When unmanaged, whatever
additional in-come we earn seems to disappear without a
trace...doesn't it?
Always remember: It is not how much you earn that will determine your wealth. More importantly, it is how much you are able to save and invest!
To your investing Success
reducing your expenses. So what is the first expense you must
reduce and eventually eliminate? It is the interest expense you pay
on consumer debt.
While taking on a reasonable amount of consumer debt is necessary
for you to afford a car and a house, you must avoid taking on too
much for too long a period.
Why? Because a 5%-6% interest rate may seem small but over an
extended period of time, it compounds to a huge amount of money.
You will find yourself paying tens of thousands of dollars in
installment payments every month just to see that the principal sum
you owe go down by a couple of hundred dollars.
Lets take an example: let's say you bought a $250,000 apartment and took a
$200,000 mortgage at 6% stretched over 30 years.
Question: If you just paid the minimum installment payments every month, how much would you have paid in total interest?
Answer:Using a financial calculator, you can see that you will
pay $1,173 in monthly installments for 30 years. That's a total of
$422,280 in installment payments! You would have paid a total of
$222,280 in interest to the bank. That's like buying two apartments
and giving the bank one!
If You Took a $200,000 Loan Over 30 Years at 6% Interest, You Would
Pay a Total of $222,280 in Interest...Even More than the Loan Amount
Itself!
So besides paying the minimum required monthly installments (like
your bank wants you to), you must constantly PAY MORE to further
reduce and eventually eliminate your principal sum...or you will wind
up donating hundreds of thousands of dollars to your bank over the
long term!
When our spending is uncontrolled, our expenses always tend to rise
up to match our level of income. No matter how much we earn. If we
earn $2,000, we will find a way to spend over $2,000 and end up
broke.
When we start earning $10,000 a month, we believe that we deserve a
grander lifestyle, a flashier car, dine in exclusive up-market
restaurants. Very often, the $10,000 we earn a month will be spent
and we will end up having to start from scratch over again.
This pattern has been repeated by many intelligent people I know,
some of them being my close friends. When unmanaged, whatever
additional in-come we earn seems to disappear without a
trace...doesn't it?
Always remember: It is not how much you earn that will determine your wealth. More importantly, it is how much you are able to save and invest!
To your investing Success
Thursday, March 27, 2008
Two Important Lessons in Investing
Lesson One: Invest From A Business Perspective
One of the most important lessons Buffet learnt was to invest from
a business perspective. Most people treat stocks like lottery
tickets. Buying and selling based on predictions of whether the
price will go up or down in the short term.
Because stock prices go up and down randomly and erratically based
on world events, there is no way anyone can consistently beat the
market by attempting to predict its movements. Many of these
punters know every little about the business operations behind the
stocks they own.
Warren learnt that buying a stock meant becoming a part-owner of an
ongoing business. He knew that the only way to consistently make
money was to identify very good businesses run by a strong
management team.
Good businesses would over time generate higher and higher profits.
Increasing profits will increase the value of a company and hence
its share price.
By honing his expertise in sniffing out companies that had the
potential to generate huge amounts of earnings growth over time, he
was confident that the stocks he held onto would increase
significantly in price over time.
Lesson Two: The Market is Irrational, Take Advantage of It
While most financial experts teach that the market is rational and
efficient (stock prices reflect the true value of a company),
Benjamin Graham taught Buffett that stock market prices were
determined by demand & supply, which in turn are irrationally
driven by fear and greed. As a result, a stock's price did not
always reflect the true value of a company.
In times of mass investor optimism & greed, buyers rush in and push
a stock's price way above its value. In times of fear and panic
(i.e. news of a recession) investors sell their shares, causing a
stock's price to fall way below its value.
The Market tends to overvalue a company's stock when there is good
news and under-value a company's stock when there is bad news.
Benjamin Graham developed a systematic way to determine a stock's
true value (known as its intrinsic value) and taught that by buying
a stock when it was undervalued, the investor could make a huge
profit when the market eventually overvalued the stock.
Philip Fisher added another dimension to investing by developing a
way to not only find undervalued companies, but to find companies
that had the potential to also significantly grow in their earnings
and hence increase their stock value even higher.
Any investor no matter which level he is at should learn about and
make use of the lessons covered here.
To your investing success
One of the most important lessons Buffet learnt was to invest from
a business perspective. Most people treat stocks like lottery
tickets. Buying and selling based on predictions of whether the
price will go up or down in the short term.
Because stock prices go up and down randomly and erratically based
on world events, there is no way anyone can consistently beat the
market by attempting to predict its movements. Many of these
punters know every little about the business operations behind the
stocks they own.
Warren learnt that buying a stock meant becoming a part-owner of an
ongoing business. He knew that the only way to consistently make
money was to identify very good businesses run by a strong
management team.
Good businesses would over time generate higher and higher profits.
Increasing profits will increase the value of a company and hence
its share price.
By honing his expertise in sniffing out companies that had the
potential to generate huge amounts of earnings growth over time, he
was confident that the stocks he held onto would increase
significantly in price over time.
Lesson Two: The Market is Irrational, Take Advantage of It
While most financial experts teach that the market is rational and
efficient (stock prices reflect the true value of a company),
Benjamin Graham taught Buffett that stock market prices were
determined by demand & supply, which in turn are irrationally
driven by fear and greed. As a result, a stock's price did not
always reflect the true value of a company.
In times of mass investor optimism & greed, buyers rush in and push
a stock's price way above its value. In times of fear and panic
(i.e. news of a recession) investors sell their shares, causing a
stock's price to fall way below its value.
The Market tends to overvalue a company's stock when there is good
news and under-value a company's stock when there is bad news.
Benjamin Graham developed a systematic way to determine a stock's
true value (known as its intrinsic value) and taught that by buying
a stock when it was undervalued, the investor could make a huge
profit when the market eventually overvalued the stock.
Philip Fisher added another dimension to investing by developing a
way to not only find undervalued companies, but to find companies
that had the potential to also significantly grow in their earnings
and hence increase their stock value even higher.
Any investor no matter which level he is at should learn about and
make use of the lessons covered here.
To your investing success
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