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".

Laws of Riches Part IV

The Need For Emergency Cash

Many Singaporeans do not see the need to set aside their money incase of an emergency. It is very important for a person to have enough money to last him for at least 3 to 6 months. This would ensure that even if he is out of job for whatever reason; he would have enough to last him for the particular period till he finds another job. Not only jobs, usually bad things happen when you are down and out. Consider your fridge hanging up its boots or an unexpected death in the family. Life still goes on…that’s where emergency cash comes in.

LAW FOUR: SET UP AN EMERGENCY CASH FUND

I know of an acquaintance who invested almost all his savings and was involved in an accident caused by an error in his judgment while maneuvering his vehicle on a bend. Now, since it was a major accident, it became a police case and he was held in lockup. He was allowed bail for about $7,000. Had he kept aside 3-6 months of his salary, he would be able to settle the bail immediately without going through the trouble of raising that amount of money from scratch or putting his house as collateral and wasting valuable time. Even if he were to divest, it would have taken him some time and there would be a chance of losing if he had divested at the wrong time.

In life anything can happen anytime. People who are looking to invest should have some substantial amount of money set aside before they do so in case of ANY emergency that should arise.

Laws of Riches Part III

A GAMBLER NEVER WINS

Since time immemorial people of this world have always wished to make fast money by trying their luck in card tables, putting a wager on their favourite horses, betting on the outcome of the dice and so on. However, there are very few gamblers who die rich. Most of them have ran on the legs of borrowed time and once their 'luck' has run out, nine times out of ten, their money also runs out.

LAW THREE: QUIT GAMBLING

Gambling is one the greatest vices in the world. It breaks a family, split lovers and has inculcated negative qualities even in young children. Where money is concerned, if the shadow of this vice falls on it, it will never bear fruit. Yes you may win once, twice or even three times but it cannot be sustained. People then stake everything, and many lose everything.


In the epic mahabharata (bc 3000) gives a perfect example of this. It tells of five princes of hastinanpura(now known as delhi,India), who embodyrighteousness, courage,strength and morality being invited to a game of dice by their evil cousin and uncle. They start off by losing their cattle, then property and eventually their kingdom. They finally stake their wife on the gambling table. Where did all the divine qualities go to? The addiction of gambling causes men to lose their sense of reasoning thus destroying their lives.

"If i only i could win the lottery, then all my financial problems will be solved!"

This is what i've heard so many times. I myself have wished the same before because i thought that hitting the jackpot was the answer to my financial distress.

Lottery winners who lost their millions

By Ellen Goodstein, Bankrate.com

For a lot of people, winning the lottery is the American dream. But for many lottery winners, the reality is more like a nightmare.

"Winning the lottery isn't always what it's cracked up to be," says Evelyn Adams, who won the New Jersey lottery not just once, but twice (1985, 1986), to the tune of $5.4 million. Today the money is all gone and Adams lives in a trailer.

"I won the American dream but I lost it, too. It was a very hard fall. It's called rock bottom," says Adams.

"Everybody wanted my money. Everybody had their hand out. I never learned one simple word in the English language -- 'No.' I wish I had the chance to do it all over again. I'd be much smarter about it now," says Adams, who also lost money at the slot machines in Atlantic City.

"I was a big-time gambler," admits Adams. "I didn't drop a million dollars, but it was a lot of money. I made mistakes, some I regret, some I don't. I'm human. I can't go back now so I just go forward, one step at a time."

Living on food stamps

William "Bud" Post won $16.2 million in the Pennsylvania lottery in 1988 but now lives on his Social Security.

Post admitted he was both careless and foolish, trying to please his family. He eventually declared bankruptcy.

Now he lives quietly on $450 a month and food stamps.

"I'm tired, I'm over 65 years old, and I just had a serious operation for a heart aneurysm. Lotteries don't mean (anything) to me," says Post.

Sudden Wealth

"For many people, sudden money can cause disaster," says Susan Bradley, a certified financial planner in Palm Beach, Fla., and founder of the Sudden Money Institute, a resource center for new money recipients and their advisors.

"In our culture, there is a widely held belief that money solves problems. People think if they had more money, their troubles would be over. When a family receives sudden money, they frequently learn that money can cause as many problems as it solves," she says.

Craig Wallace, a senior funding officer for a company that buys lottery annuity payments in exchange for lump sums, agrees.

"Going broke is a common malady, particularly with the smaller winners. Say you've won $1 million. What you've really won is a promise to be paid $50,000 a year. People win and they think they're millionaires. They go out and buy houses and cars and before they know it, they're in way over their heads," he says.

Courtesy : Ellen Goodstein, Bankrate.com

"I WANT TO BE RICH FAST!"

One day while having dinner by the riverside , my one of my cousin who recently opened his business asked my rich uncle, "Uncle! Please tell me the fastest way to be rich!". To this he looked straight in the eyes of my cousin piercingly and said " Son! by asking me this question, you have already failed in your business!". There is no such thing as easy money. You have got to work hard and be patient. Just like the baby acorn, which needs sunlight from the sun, water from the rain, and continous care to become a mighty oak, money too has to be cultivated from the seed stage with regular savings and invested wisely so it brings decent returns".

Law of Riches Part II

As we realize the most fundamental law of riches is to stop wasting money, the second most important law plays a crucial role in accumulating riches. This law, if practiced with unwavering faith, has never failed to deliver. The wealthiest of men have hung on to this law as their lifeline even in the most turbulent times.

LAW TWO: PAY YOURSELF BEFORE ANYTHING ELSE.

The second most important law in acccumulating riches is to pay yourself first. Pay myself first? Some might ask.What does this mean? Some people say "I do pay myself because i get paid for the work i do isn't it? Thats not really true. We pay our housing loans, our electricity and water bills, our transport bills and so on. We are paying to everybody else except ourselves. Why?

In order to build our castle of wealth, we need to start paying ourselves first. Remember this, money is attracted to money. If a magnet can probably attract 10 iron fillings, a stronger magnet can attract 20. An even stronger magnet can attract 50. The more money you have, the more stronger the attaction, provided you abide by the laws.

Laws of Riches Part I

Many people dream to be rich. Why are some people rich and others poor? ladyluck? determined destiny? or just fickle fate? How does a man from poverty rise above the norms of society refusing to impose on himself limitations of any sort to becoming one of the wealthiest people in the country? Yes, we have heard all these stories before. From Henry Ford (Ford Motor Company) to Sam Walton(Walmart). From Andrew Carnegie( Carnegie Steel) to JP Morgan( JP Morgan & Co) .To give a bit of our local flavour we have our very own Mr Mustaq Ahmed (Mohammad Mustafa & Samsuddin). The list is endless. What does a rich man understand about money that a poor man does not? What were their beliefs towards money that led to their accumulation of such wealth?

The very first universal law of riches states that if a man wishes to be in possesion of money, he should stop wasting it.

LAW ONE :STOP WASTING MONEY

To waste money money simply put it is one of the biggest mistakes anybody can do. The idea of spending whatever you have and not buiding your castle of wealth will not allow the Goddess of wealth to follow you. Some people say "Oh! i have worked so hard today, let me buy for myself a nice pair of walking shoes". This is fine provided you don't already own one or the one that you own needs replacement because buying another pair just to make yourself feel good does not do justice to your money.

During my grandmothers demise a couple of years back, i had an rich uncle who attended the funeral. During the mourning period we had prayers everyday for twelve days. During one of the days after lunch was served to the all the people who came to offer their condolences, i noticed this uncle of mine was taking out a plastic cup. These are the type of plastic party cups that came in packs of 20 or 30 all stacked on top of each other.

Now, at anytime when we needed a drink, everybody including me would just take a cup, fill it with the drink, drink it and throw the empty cup away. Seems pretty normal. However this uncle of mine took his cup, filled it with drink, drank it BUT did not throw the empty cup away. Instead, he took a tissue out from his pocket after his finished drinking, placed it in the empty cup and put the cup on the shelf. Whenever he was thristy during the day which i observed him, he took the tissue out, filled his cup with drink, drank, put the same tissue in the cup and placed the cup on the shelf. This happened quite a few times. After a couple of times i finally got irritated and asked him scornfully, "Uncle! what are you doing? There are so many cups why can't you just throw the cup away and take a new one? There are more cups than we need! To this he just looked at me as if i was one of the most stupid person on the face of the planet. "I don't like to waste.", he remarked casually. With that he just turned and went about greeting the guests and attending to their needs.

This remark left a lasting impression on me. I realized then that why he was so rich. The fact that he did not like to waste even an insignificant item like a plastic cup that most people wouldn't even give a hoot about made me understand the universal law that governs money. This attitude of not wasting was one of the major factors of his accumulation of wealth. This IS the greatest law.