Why a Financial Plan?

Why is constructing a Financial Plan so important? some may ask...Let me tell you why, Financial planning is YOUR duty.....As a son, husband and father as a daughter, wife and mother.As long you have other people dependent on you...you have a moral obligation to ensure they can live should you die. YOU have to ensure that you can live when you are old, feeble and useless.


The truth is many people have no idea what is in store for them. In the olden days, the financial plan was to produce as many children as possible. " Aiya...at least one "tiok" also can, old uncle Lim used to say. Try having more than one kid in Singapore....they will leave you bankrupt as soon as they understand the word money!

It is not cheap to raise children in Singapore and we cannot depend on our children because they too will have their financial commitments. We have to be independent and to do that we have to have money.

Creating a Financial Plan offers you income protection due to death, disability, critical illness, allows you to settle huge hospital bills, child's university payment can be met, lets you retire in comfort, and gives you tax breaks!

It is your responsibility, so start now!

Here are 5 Reasons why you should invest in India

1) Indian stock markets performed exceedingly well and created enormous wealth for investors.

Some of the main features of 2005 were the Index which gained around 37%. Foreign Institutional Investors pumped in S$ 10 billion in Indian stock markets. Mutual Funds invested around S$6.4 billion in the Indian stock markets. 72 public issues raised S$ 9 billion from the investing public. Foreign Direct Investments were of the order of approx. $ 6.5 billion. Mergers and acquisitions were over $ 30 billion in almost 250 deals.

2) Big Boys vested Interest

MNCs, which have invested in India include GE, Dupont, Eli Lily, Monsanto, Caterpillar, GM, Hewlett Packard, Motorola, Bell Labs, Daimler Chrysler, Intel, Texas Instruments, Cummins, Microsoft, IBM, Toyota, Mitsubishi, Samsung, LG, Novartis, Bayer, Nestle, Coca Cola and McDonalds. India maintains its position as the number one market for outsourcing, topping countries like Poland and China due to their infrastructure and also due to their educated middle class command of the English. language.

Companies from Western countries have hired about 170,000 workers in India over the past few years for back-office jobs such as customer support services, telemarketing and accounting. Analysts expect the figure to reach 1.1 million by 2008.

3) Consumer Market

Booming Economy that gives consumers spending power - A large and rapidly growing consumer market up to 300 million people constitute the market for branded consumer goods estimated to be growing at 8% per annum. More than 40 million in India already have the same purchasing power as Americans.

4) A country which has stood the test of time

History has shown from the Mauryan Empire to The Mughal Monarchy, From Mother Theresa to Mahatma Gandhi, India time and again has been the guiding light to the world in many fields such as economics, music, philosophy etc. Going by the records it looks like its India’s time to regain her position as a superpower. Even after being forced to subjugation by the british, India now reveals herself as a self sustaining economy.

5) Education System that produces the best

A sound Education System that produces one of the largest pools of scientists, engineers, and managers in the world. Dedicated teachers who bring about the best in their students. Little wonder that why majority of Indian students usually top their class when they go overseas to study.

Comment- "The world will see how India's rise to superpower status with her fathomless glory unfolds.... right now i have made 40% profit investing in India in just one year. Plan to hold it till end of 2008.

Excerpted from -From Soros on Soros, Copyright © 1995 by George Soros.

An Interview with George Soros

How would you describe your particular style of investing?

My peculiarity is that I don't have a particular style of investing or, more exactly, I try to change my style to fit the conditions. If you look at the history of the Fund, it has changed its character many times. For the first ten years, it used practically no macro instruments. Afterwards, macro investing became the dominant theme. But more recently, we started investing in industrial assets. I would put it this way: I do not play according to a given set of rules; I look for changes in the rules of the game.

You have said that intuition is important in your investment success, so let's discuss intuition. What do you mean when you say you use intuition as an investment tool?

I work with hypotheses. I form a thesis about the anticipated sequence of events and then I compare the actual course of events with my thesis; that gives me a criterion by which I can evaluate my hypothesis.

This involves a certain element of intuition. But I'm sure the role of intuition is so great, because I also have a theoretical framework. In my investing, I tend to select situations that fit into framework. I look for conditions of disequilibrium. They send out certain signals that activate me. So my decisions are really made using a combination of theory and instinct. If you like, you may call it intuition.

Ordinarily, people think of money managers as having a combination of imagination and analytical ability. If you broke down all the skills into just those two categories, which one would be your particular strength – imagination or analytical ability?

I think my analytical abilities are rather deficient, but I do have a very strong critical faculty. I am not a professional security analyst. I would rather call myself an insecurity analyst.

That's a provocative statement. What do you mean by that?

I recognize that I may be wrong. This makes me insecure. My sense of insecurity keeps me alert, always ready to correct my errors. I do this on two levels. On the abstract level, I have turned the belief in my own fallibility into the cornerstone of an elaborate philosophy.

On a personal level, I am a very critical person who looks for defects in myself as well as in others. But, being so critical, I am also quite forgiving. I couldn't recognize my mistakes if I couldn't forgive myself. To others, being wrong is a source of shame; to me, recognizing my mistakes is a source of pride. Once we realize that imperfect understanding is the human condition, there is no shame in being wrong, only in failing to correct our mistakes.

You have said about yourself that you recognize your mistakes more quickly than others. That sounds like a necessary trait in investing. What do you look for to see if you are wrong?

As I told you before, I work with investment hypotheses. I watch whether the actual course of events corresponds to my expectations. If not, I realize that I am on the wrong track.

But sometimes things get off the track for a short time and then get back on the track. How do you know which is the case? That's what takes talent.

When there is a discrepancy between my expectations and the actual course of events, it doesn't mean that I dump my stock. I re-examine the thesis and try to establish what has gone wrong. I may adjust my thesis or I may find that there is some extraneous influence that has come into the picture. I may end up actually adding to my position rather than dumping it. But I certainly don't stay still and I don't ignore the discrepancy. I start a critical examination. And generally, I'm quite leery of changing my thesis to suit the changed circumstances, although I don't rule it out completely.

You have talked about the "joy of going against the herd." What signs do you look for to determine whether it is time to buck the trend?

Being so critical, I am often considered a contrarian. But I am very cautious about going against the herd; I am liable to be trampled on. According to my theory of initially self-reinforcing, but eventually self-defeating trends, the trend is your friend most of the way; trend followers only get hurt at inflection points, where the trend changes. Most of the time I am a trend follower, but all the time I am aware that I am a member of a herd and I am on the lookout for inflection points.

The prevailing wisdom is that markets are always right. I take the opposition position. I assume that markets are always wrong. Even if my assumption is occasionally wrong, I use it as a working hypothesis. It does not follow that one should always go against the prevailing trend. On the contrary, most of the time the trend prevails; only occasionally are the errors corrected. It is only on those occasions that one should go against the trend. This line of reasoning leads me to look for the flaw in every investment thesis.

My sense of insecurity is satisfied when I know what the flaw is. It doesn't make me discard the thesis. Rather, I can play it with greater confidence because I know what is wrong with it while the market does not. I am ahead of the curve. I watch out for telltale signs that a trend may be exhausted. Then I disengage from the herd and look for a different investment thesis. Or, if I think the trend has been carried to excess, I may probe going against it. Most of the time we are punished if we go against the trend. Only at an inflection point are we rewarded.

Courtesy of George Soros.

Laws of Riches Part V

Grow your wealth

I have always believed that in this modern age, to make money you need two things; one is money, and the other is time. Rich people don't look at money as money....they look at it like a seed that would sprout and grow to a tree that produces more seeds and hence more trees.The trick is the WAY you grow these trees.

Everyone understands how putting all your money in a bank is a dumb idea as inflation devalues your money right under your very nose.Enough said.

LAW FIVE : START INVESTING

After setting aside reserves for emergency, money then should be invested. There are many different kinds of vehicles that could grow your money for example,

1) Bonds
2) Unit trusts or ILPs
3) Stocks
4) Commodoties
5) Property
6) Currency
7) Business

Which investment vehicles you choose depends on the your level of appetite for risk and affordability. However even before you invest please understand what you doing,make an effort to learn as it is your money. What your investments can do for you in the long run is that they can generate returns which can greatly improve your financial position. Here is how....

Lets say for example you have invested $1000. Say your return on investment is 10%. You have made $100.Great! Now imagine you have $100,000 invested. Your return is still the same 10%. Now how much have you got? $10,000! This is called the compounding effect. AlbertEinstein called compound interest "the greatest mathematical discovery of all time".