How would an investor and a businessman fight a war?

Investing is business and business is investing. They are synonymous to one another. They are related in terms of the characteristics they have. Let me explain further.


From employee to employer

Many people would say that doing business is the way to get rich since being an employee and a slave to your company will only make the company richer but not yourself. I would say there is some truths in this but of course we know only a few businesses succeed in the end. You either make it or lose it. Older people would say doing business is risky. Young people who have got nothing much to lose are willing to take that risk. If they succeed, the rewards are extremely great.

From employee to shareholder

Some other people would say invest in the stock market and you can get rich. Being a shareholder in a company makes you effectively higher than the managers, the vice president, the managing director and even the CEO in the company. No? Try going to a company's AGM and ask the CEO questions. In fact, the company's top management knows they are working for the shareholders.

Investing in the stock market is risky too. You may have heard your grandparents or your parents caution you to avoid the stock market. They are right in a way. Invest in the right company and you will make money but invest in the wrong one and you can potentially lose all your money. So which is more risky? Doing business or investing in the stock market?


Putting business and investing together

Many people separate business and investing which in my opinion is a wrong way to look at it. How do people separate it?

Firstly, some businessman say investing is risky and they are afraid to invest now as the market looks like its going to crash. But at the same time, they are still doing their business. Won't their business be affected when the market crashes? Yes it would affect but they have backup plans and they are prepared for it.

Secondly, some investors say doing business is risky and we shouldn't start a business now because the economy doesn't look too good. But at the same time, they are still invested in the stock market. Won't their investments be affected when the economy declines? Again, the answer is yes but they too have backup plans and they are prepared for it.


The mystery of the backup plan

To eliminate risk, we need to have proper risk management. The backup plans are part of the risk management procedures which successful business owner and investors have. The 2 different backup plans are actually similar in concept.

Business people still do business even though they may expect the economy to deteriorate next year. They just reduce their exposure of risk by managing their expenses. As profits can hurt badly during an economic crisis, businessman can hold more cash and moderate expansion plans in anticipation of the crisis. When crisis hits, they will be able to tide it out and even find opportunities for expansion at much cheaper prices.

Similarly, investors still invest even though they may expect the economy or market to deteriorate next year. Investors reduce their risk by moderating their purchase of stocks and hold more cash in anticipation of the crisis. When crisis hits, they will still be able to live normally and also find opportunities to buy good companies at much cheaper prices.

Timing the market

It is impossible to time the market. No one can be certain of what will happen in the future. Even the best economist or the best financial/business analyst can have their predictions wrong. If we are always waiting for the right time to start a business or start investing, most likely we'll never even start at all. In 10 years time, you'll still be waiting.

The correct way is to start now but always have a backup plan in case a crisis hits. Don't throw all your money in to start a business or invest in stocks. Always have a stash of cash ready to deploy when crisis comes. Even in wars, generals do not send all their soldiers all out at once. If all get killed, they have nothing left. They send out troops assigned to do different task in different batches. This way, their chances of winning will be much higher. This is the art of war.

The art of doing business and investing lies in asset allocation. Your cash is like the soldiers which you can deploy. Break them down into different troops and deploy in batches. No matter what, always have one reserve troop on standby. This will only be used when the enemy is at its weakest point and the battle is a sure win. This is like a war chest which we keep to deploy when the market crashes and there are lots of opportunities to buy good companies at extremely cheap prices.

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Related Posts:
1. The benefits of investing when you're young
2. Buying the company on the streets (Part 1) - Discovery stage

Want to own some properties and collect rent using little money? Here's how.

We've heard of people buying properties and renting them out. This seems like a good way to have an extra income every month. The only problem is properties especially in Singapore are getting more expensive. If you want to buy one and rent it out, it will cost you a few hundred thousands dollars. You can loan the amount but even the down payment is at least a 5 figure sum. There are also lots of paper work and legal fees involved so after all, it may be too troublesome and not so worth it for us.

But, do you know you can actually own properties and still receive a portion of the rental collected paid to you with little money? From as low as $1000, you can start receiving rental from these properties. Here's how:

Owning a portfolio of properties with little money

Real estate investment trust or REITS provide you this opportunity to own a portfolio of properties. These properties are rented out and a portion of the rental that is collected will be paid to shareholders. You can buy these REITS through the stock market. Here are some examples:

1) Suntec REIT

Have you heard of Suntec or been there before? I'm sure you have if you live in Singapore. Suntec REIT owns their majority of properties in Singapore. This includes the Suntec shopping mall, the Suntec convention centre, the various Suntec office towers, a part of Marina Bay Financial Centre etc. If you buy the shares of Suntec, you are part of the owner of these properties and you are paid rental income from these properties. How much will you be paid?

For the whole year of 2013, Suntec REIT paid about $91 for every 1000 shares you own. If you bought at the current price of 1.64, this works out to a yield of 5.5%. Is this too low for you? Let's see the next one

2) Saizen REIT

You may not heard of Saizen REIT before as all of its properties are in Japan. They own a portfolio of residential properties. All these properties are rented out and a portion of the rent collected are distributed to shareholders. Sounds like renting out your house for extra income? I bet it is.

Saizen REIT owns a portfolio of over a hundred properties spread across Japan. You can own a part of all these from as low as $1000. Sounds like a good deal? The yield of Saizen REIT works out to be around 7.1%. Better still if you bought at the current price of 0.885, you are owning all these properties at a discount. The net asset value (NAV) shows us the fair value of the properties which Saizen REIT owns. The price of 0.885 is lower than the NAV of 1.17. This is a 20%+ discount to its value. Who doesn't like buying properties at a discount?

Buy low, rent out, collect rental

When we buy a house of our own, i'm sure many of us will find the best deals with a good location. If you're buying the property to rent out, you would naturally want to buy one which has a good location so you can rent it out at higher rates. If you can buy the property at below market price, that would be even better. But certainly you would not want to buy a property above the market price. 

When we invest in REITS, its the same analogy. Buy the REITs below its NAV if possible and the properties should be in good locations fetching good rental income. From its annual report, we can see the properties occupancy rate, their locations etc. These are valuable information to look out for. Reading an annual report can be liken to reading a brochure of a property launch. It's fun and exciting sometimes.

Stock prices can fluctuate but it does not reflect the true value of the properties that the REITS own. It's more important to focus on the value of the properties and the income which it produces. In the long run, all else remaining equal, the stock price will reflect the true value of the properties it owns. 

Investing in REITS can surely bring you that extra income. Not a lot but still better than nothing. However, when you have more money, it can become a lot. Invest $500,000 at 7.1% and see what kind of income you get. You'll be surprised. 

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Related Posts:

1. Company in focus - Suntec REIT

2. Looking to invest in Japan's real estate

7 Tips to Manage Your Money Better

Children are generally very good at imitating behaviours of their parents. Parents should always try to practice what they preach in order to succeed as good role models.

Teaching children the value of money and how to manage it well from a young age will help them become responsible adults. The same way a child is taught to eat and behave in the right manner, he should be taught to be responsible with money.

Source: http://i.huffpost.com/gen/1633282/thumbs/o-KIDS-MONEY-facebook.jpg

Here are seven tips which children can be taught to manage money better.

1. Start Training Them Early

Playing shopping at the grocery store is one of the oldest games parents play with kids. They learn the concept of purchasing and denomination of money to some extent. Teach young kids to go and make small purchases and then count the left over change.

2. Trust Them With Money

Start by giving a small amount as pocket money to your kids. Lay out clear guidelines of what and what not they can buy with it. If you give an allowance as a reward for a household chore, they will clearly understand the concept of a job and salary.

3. Encourage Responsibility

Dedicate two jars as spending and saving in the house and let them decide how much goes in which. You can open a bank account for slightly older children and allow them to do the saving themselves. Explain the concept of savings to them.

4. Be Open to Mistakes

There will be mistakes even after the rules so be ready for them. Resist the temptation of fixing their errors by dishing out more money. Private tutors in Singapore are doing a great job in advising families on money management.

5. Let Them Decide

Let the children voice their opinions on their age related money matters. Respect their idea and let them feel heard. Plan a project like choosing a board game for the house, where they do the research and comparisons.

6. Charity 

Source: http://www.seniorbrigade.com/consumer_protection/images/charities_080201_mn.jpg

Always teach them to keep aside for the less fortunate and have compassion for them. Let them be thankful of what they have.

7. Be a Good Role Model

Always try to be a god role model for them to follow in your footsteps. Brush up your own skills before giving the wrong information.

Guest post contributed by:

Author Bio: Lim Chuwei is a Teacher in Singapore at ChampionTutor and highly advocates the use of cloud based application for teaching and learning.

When the rich meets the poor and the poor meets the rich: L'Escargot

Many times, most of us think that the poor and rich live in different dimensions of life. The rich seems to have their own group of peers and the poor have their own group of friends. The poor have their own impressions of the rich and think that becoming rich is too far a place for them.

What happens if the rich and the poor's path happen to cross? When they meet each other will they be able to interact well? There's this new Hong Kong drama on channel 8 which interestingly shows the life of 2 different people. One is poor while one is rich. When i watch it, it seems exactly like how two different dimensions of people behave. The drama is titled L'Escargot or in chinese: 缺宅男女. It is shown on Mediacorp channel 8 every Monday to Friday at 7pm.

The show starts off with a family of 9 living in a small apartment. As they are quite poor, they have to share rooms and even think of ways to save money. When they didn't have money to buy a shoe cabinet, they use plastic holders to hang it on the wall and paste each family member's name on each plastic holder. They were still joking that each person can only buy one pair of shoes and if you want to buy another pair, then you have to throw away the first one if not there will be not enough space to put. On the other hand when the rich wanted to buy a shoe cabinet, they didn't even have to think of the cost and just bought a huge shoe cabinet which can put hundreds of shoes.

There were many other cases of how the rich and poor live their lives differently. But when their paths crossed, interestingly they had the same principle of life. Both were responsible in what they do and never go for petty gains. The poor even though they are poor, still had backbone when it comes to money. They will never accept money which oppose to their principle of life. The poor thought that the rich go for petty gains that's why they became rich but in the end, they realised that the rich also did not cut cost just to earn more money. This was what the whole drama is driving at till now.

What happens later will be for us to see. How the drama acts out life in such a realistic way is really commendable. Watch it if you're interested.

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The pursuit of money or happyness?

The word happyness is purposely spelt wrongly if you realised it. If you've watched the movie or read the book before, you would know that "the pursuit of happyness" exist. This was a movie based on a true story that was shown quite a few years ago. Till now, it's still one of the most inspirational movie.

The pursuit of money or happyness? 

Many people say do not chase after money. Money is not everything but everything is money. If you have bills to pay and food to put on the table, you need money. Instead of complaining that you do not have enough or because you're married young that's why you don't have much money, why not do something about it? You can't change your circumstances but you can change yourself. 

Now, some people would start to say if i work so hard for money, then wouldn't i need to sacrifice family time? Wouldn't i need sacrifice my health? Rich people don't have time right? This is a very big misconception.

The movie "The pursuit of happyness" tells the story of a young homeless man roaming around the streets with his young son. They have no place to stay and often slept in one of the toilets in a subway station. This man worked very hard as a medical equipment salesman but most of the time he didn't manage to sell any. He was desperate to get food for himself and his son. 

In this desperate state, one day he was walking along the streets and he noticed everyone smiling. He thought to himself why are all these people so happy? Then, one rich man drove a Ferrari and parked his car beside him. He immediately asked the rich man 2 questions which changed his life. The 2 questions were: What do you do and how do you do it? 

Many people who are not rich yearn to be rich one day. That's why you see long queues outside Singapore pools when there is a TOTO lottery ticket grand prize. You see the casinos flooded with people. But the way to get rich is actually very simple. Just ask the rich how they got rich!!

Don't chase after money

You may be thinking here i'm talking about getting rich and now i'm telling you not to chase after money. Isn't getting rich all about chasing money? The answer is no. Money is not the main product. It is the by product. Chase after your passion and learn to create value. By doing this, the money which is the by product will naturally come. 

Most of the rich have found what they like to do. They have dreams and go for it. When people tell them they can't do it, they still believe that it can be done. When the rich do business, they don't focus on making money but focus on creating value for their customers. When the rich invest, they also don't focus on making money but they focus on the value of the business. Go for your dreams, find your passion and excel in it. This is the pursuit of happiness.

I'll make this post short and end of with an inspirational small part of the movie: "The pursuit of happyness".

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1. What if money was no object?

A conversation with colleagues and my thoughts on poverty

Money, money, money is what a lot of us are concerned on. When we enter adulthood, money becomes an essential and a common topic too. Had an interesting discussion on the comments section of my blog on my previous post: 35 and totally broke or $100K savings by age 30?. There were lots of comments by a few other bloggers which really set my mind thinking. Coincidently, i was having a long chat with a few of my colleagues on the topic of money too.

I'm single now and have a simple and low maintenance lifestyle. A few other people commented that it's easy to save money when you're single but it'll be hard when you get married. This i agree and this is also what i've been thinking about. If your future wife and in laws wants to have a lavish banquet, can you refuse it? If your wife wants to buy a 5 room flat can you refuse it? If your wife is pregnant and wants to buy a car for more convenience will you refuse it? Most probably you will give whatever you can.

With the cost of buying a house and starting a family increasing, it is hard for these people to save money. It is hard to even plan for retirement when all your salary goes into household expenses. I really don't want to be just surviving for the sake of living and end up working my whole life still having not enough. Let me share with you a little bit on the family background which i come from then you will know why i have this thinking.

A little story on my family background

I come from a normal family with simple lifestyle. My parents are both not highly educated with my dad having only an O levels cert. As my parents income are not high, often they had to work long hours just to provide enough for the family. When i was young, i remember always seeing my dad asleep whenever i was home. He was working the night shift also. Of course i didn't understand back then but now i know how tough it was for him. My mum had to work all the way even when she was pregnant with me.

The reason why my dad was not educated is because he had to give up his education to work and provide for his family of 8 siblings. Yes, my dad's family had 10 members. Life was tough for all of them and i heard stories of how 10 of them stayed together in a 2 room flat back then. My dad went out to work and all his salary went to the household expenses. Yes, all his salary went to his parents and nothing was left for him. Not a single cent. With this, the rest of his siblings manage to get the education and most of them went on to university. Today, my uncles and aunties have a fairly high income. One of my uncle earns $12k a month and another uncle stays in a million dollar condo and drives a luxury car. In fact, all my uncles and aunties own at least a car. My dad never had the money to buy a car. Which means my family never had our own car before.

I know my dad feels inferior when talking to my uncles and aunties now. Of course they are grateful for my dad who sacrificed to see them through their education and they always treat my family for dinner and also offer to give us a ride. But still, it's never the same of owning your own car plus you feel bad when troubling other people to give you a ride. My mum had gone through all the hardship with my dad and they are still together till now. I know they put their hopes highly on me that one day i will be able to give them a good life. That's probably why i'm looking at ways to have more money so one day i could give my parents the good life they desired.

My parents are getting old but they are still working. I know in my heart that probably in a few years time, they will be too old to work. I have the responsibility to take care of them. My parents definitely do not have money to retire. I also know if i get married, i will have my own finances to take care. Will i have enough money to handle all these? This is probably why i'm thinking so much. If i do not have enough, i'll probably end up like my dad and sacrifice so much for the family and in the future, my kids will go through the same thing. This is what i do not want. That's how the poverty cycle happens.

Conversation with colleagues

My conversation with my colleagues was on how some rich people can don't work and still be rich? In the course of my work, i get to visit luxurious condos and private properties. One thing i always notice is most of the people staying there are at home. They are either swimming, enjoying their time at their balcony, or wearing shorts and getting ready to drive out in their big cars to shop or have afternoon tea. I thought i was seeing wrongly until one day, a security guard at the condominium told me that he too always see the people at home. They seem like they never had to work. He also wondered where they get their money to stay in these condominiums. One unit there is not just 1 Million. It's 7-8 Million dollars per unit.

Today, as i was telling this to my colleagues, one of them then said his neighbour drives a Mercedes and seems like he never works. He was curious so he asked his neighbour where he got his money? His neighbour replied he manages his own investments and owns a few properties. This brought us to the point that these people make money work for them. They don't work for money. Many of us know this but how many of us can really do it? Can we make money work for us instead of working for money? If we can do that, then we might be one of those people who don't work but still have money. Oh yes, one more thing my colleague said. He said seems like those people who worked the hardest have very little money and those who don't work much have a lot of money. To think of it, it seems quite true. Working smart is better than working hard in this world.

35 and totally broke or $100K savings by age 30?

I feel I have the responsibility to spread the message of financial prudence after seeing yet another article of people going into debts even when they are in their mid 30s. Here is the article on Asiaone: 35 and flat broke!

On the other extreme, there was an earlier article on the straits times which shows how a young person can save $100K by the age of 30. Which one do you want? You decide.

Let's continue with the people who're in their mid 30s and are in debt. These people are not low income earners. In fact, they earn over $4000 a month. Some as high as $6000-$8000 per month.

The curious case of being broke?

Case 1

The first person is a 35 year old who earns $5000 monthly. This person has no savings and is $20,000 in credit card debts.

The lifestyle:

• Has a taste for designer bags and shoes
• Enjoys eating at posh spots such as Mezza9, Otto Ristorante and Catalunya
• Stays at 5 star resorts and hotels when travellling

Now, spends $3000 on rent, phone and utility bills and the rest goes into paying 3 credit card debts which was accumulated over the past 10 years

Case 2

The second person is a 38 year old who earns $6000 monthly. Owes credit card company $7000. 

The lifestyle:

• Splashes on designer bags 
• Travels to expensive places like Maldives and Fiji
• Buys fancy clothes and toys for 5 year old son

Case 3

The third person is a 33 year old who earns $4000 monthly. Has credit card debt totalling $15,000 which was accumulated since 2007. 

The lifestyle:

• Go to the spa every week for massages, mani-pedis and hair treatments
• Take cabs everywhere
• Eat at expensive restaurants twice a week
• Always treating friends to drinks when outside

There were several instances where she was flat broke and has to walk one and a half hour from her office back home because she doesn't even have money to take a bus or MRT home.

Case 4

The fourth case is a couple of age 34 and 36. Both are lawyers and have a combined income of $17,000. This amount of salary is an envy for many but they still can get into trouble. Currently has debts amounting to a couple of hundred thousands dollars.

Their lifestyle:

• Spent $100,000 on wedding
• Pay six figure sum for a condo in a prime district
• Spent even more money on renovating and expensive furnitures for the house

They said the debts will probably take them 3 years to clear. 

Are you in trouble of debt?

There are already 4 cases in just one article. Who knows how many other cases are there out there? The main problem i see is in their lifestyle. Most think since they have a good income, they can spend more and live an extravagant lifestyle. All of them know their lifestyle is not good for them but they can't control it. This has become a habit and to be honest, habits are hard to change. 

What these people need to do is to simply change their lifestyle. How easy would it be i would never know because i've never been in that position before. 

Don't get into debt in the first place

This brings me to the point that we should all realise how bad this kind of situation is and prevent ourselves from sinking in. If you have kids, teach them how to budget and manage their lifestyle at a young age. Don't let them be used to an extravagant lifestyle even though you are rich. Teach the value of money to them. 

If you're still studying and about to graduate, keep your lifestyle in check now. Once you graduate and get a job with a good pay, don't keep thinking of where to spend your money. Save a portion of your income first and keep track of your expenses. If you're getting married and planning to buy a house, know the cost involved and plan for it. I've written articles on the cost of marriage and buying a house. You can read it using the links above. 

$100K savings by age 30?

I say it is possible because i'm on my way to my first $100K by age 28. 

My lifestyle is simply taking bus and MRT everyday. No cabs unless i'm in a rush or its midnight already. God knows how many months I haven't taken a cab now. Transport cost is only $80-$100 per month. Everyday, i eat at coffee shops and hawker centres with an average price of $3-$4 per meal. Once every weekend, eating at cafes or watching movies at cinema would be possible. Averagely, I spend $25-$30 per weekend. Seldom do I eat at posh restaurants. Some weekends I stay at home to study or relax so no money spent also. Every month i give my parents 10% of my salary for household expenses. Mobile phone bills is only $25 for me as my company subsidise most of the cost. 

Other cost like buying clothes, travelling, occasional treats for my family and gifts for friends will amount to roughly $1000-$1500 per year. One thing I have to admit is I seldom buy clothes and even if I buy, I will buy at a discount. 

With this lifestyle, i can save more than $20K per year.  

Why save so much?

This is the interesting part. I hope this will change your views on savings. The purpose of savings is not for you to bring into your grave. It is also not just for some rainy days which your parents might have told you before. Don't get me wrong, saving for rainy days is important and you should prepare at least 6 months of your expenses in savings.

The key point is money can grow money. It is like a seed which when planted, can grow into a tree which bear fruits. Yes, money does grow on trees if you plant it. Have you heard that a seed can grow into a tree and the fruits can produce even more seeds which can grow into even more trees? This is primary school science. I bet your teacher didn't tell you about the money seed. 

The concept is easy to understand. To implement it is another knowledge which you have to learn. Just like a farmer who plant seeds in his land and waits to harvest the fruits or vegetables. He has to understand what type of soil is needed, what type of fertilisers to use, how much water to give?, when to harvest? etc etc. It's the same with money. When you invest it, you need to know where to invest, how to invest, how much to invest, when to sell, when to buy etc. I hope you get the idea. 

If the money tree grows well enough, one day you'll be able to stop working and still have enough money to live your life. This is financial freedom. 

Save or spend now? You decide

Delayed gratification is necessary for financial prosperity. Sometimes a simple lifestyle may make you happier too. No money problems, more than enough to spend, no unnecessary debts will certainly make you happier. I did write on delayed gratification some time ago. You may want to read this: A generation of instant gratification - The cause of unhappiness. Do you want to own a condominium but be under the burden of huge debts or have a simple house with manageable debts and be happier? 

Your happiness depends on the decisions you make. Don't ruin your future because of the lack of planning, knowledge or some wrong decisions. Choosing the right lifestyle may well be the most important choice in your life. Choose wisely. 

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Related Posts:

1. Dream $110k wedding ends in debt

2. 7 factors that differentiate rich people from normal people