The most important decision a man can make is arguably his choice of wife. A wrong choice can ruin his happiness for the rest of his life. If he tries to regain his happiness by getting rid of the wrong wife, he risks financial ruin because of the huge cost of divorce. At least women gain financially when they divorce. Therefore, it is very important for men to put very careful thought into the screening criteria for potential wives.
ALL men, including me, start off on a wrong foot when we look for wives. We are immediately turned on by a gorgeous hot babe. Naturally, we get instantly turned off by this other babe (click here).
Like value investors with a contrarian streak, we should not dismiss too quickly what makes us feel uncomfortable. Often, it is the unpopular and neglected that yields value.
Physical beauty is the most over-rated attribute among the qualities that men seek in women. It is so desired by men that we bid up prices of beautiful women in the marriage market to stratospheric heights and yet, is beauty really that important? Have you ever heard of parents advising their sons to get a hot babe who performs well on the bed so that he can receive good sex? To parents who know better, it is
always about good character and someone who is respectful to them. Physical looks appeal to our basic
animal spirits but in the ultimate scheme of things, they do not matter
that much. Besides, all women, however beautiful, must become ugly some day. Aging is inevitable. Postponing the inevitable costs lots of money. Is that good value? Instead of paying up for a depreciating asset, should we men not focus on the more enduring assets like good character, mutual love, great communication, matching interests, good financial habits? It will be ideal if a gorgeous hot babe also possess these enduring assets. However, if such a woman comes along, she most likely will be very expensive to acquire. She will probably be spoilt by rich suitors who treat her with expensive dinners and gifts. The poor and middle-class simply cannot compete. For the richer ones, it will still cost a bomb. Why get yourself embroiled in a bidding war? On the other hand, if we were to place our bet on a value babe who possesses the enduring good assets but looks like a pig, she will not only be cheaper to acquire but the probability of success is also higher. Money spent on wooing girls who reject you yields zero returns. So, place your bets on higher-probability ones where there are no competing bidders.
Alright, I know I know. It is madness to expect men to settle down with a pig-like value babe. Just as investors should choose a style that suits their temperament, men should choose a wife that does not look too abhorrent to their taste. A plain-looking Jane with 2 eyes, 1 nose and 1 mouth should do fine.
If you are a cheapskate on the prowl for value, ugliness presents the opportunity for mis-pricing in the wife market. An ugly woman does not make a bad wife. In fact, it may be a blessing in disguise for her. I have a theory that men who marry beautiful women have a higher chance of straying. They marry for beauty. Unfortunately, the aging wife's beauty fades with time and when that happens (with 100% certainty), they look for a younger and prettier mistress. The ugly wife, on the other hand, is on safer grounds because the husband will hardly notice that the aging wife has gotten uglier because it cannot get any worse. Besides, if the husband really cared about beauty, he would not have married her in the first place. It may not be a bad idea for a man to get used to an ugly wife right from the start since she is going to become ugly one day anyway. This reduces the risk of him womanizing which is financially disastrous even for the rich because of the cost of divorce. Unfortunately, boys will be boys.
Since men are expected to foot the bill on dates, we should think of ways to minimize this cost. The most cost-effective way is to find a wife during your school days. As students, it is fair to expect both parties to go on Dutch since both are not earning an income.
Dating women near or slightly above the marriageable age yields a higher chance of landing a wife. When a woman gets older, she will start to worry about being left on the shelf. Older women are more serious about getting married. Therefore, money spent dating older women is more likely to yield returns than on younger women. The older age is a catalyst that will shorten the time for one's investment to bear fruit. Younger women who are not so keen on marriage will keep the poor man waiting and spending. To minimize your cost, keep your expenses on dates to women who are serious about marriage. The ideal case is to marry the first girl you date and kiss. This is not only cheap but the relationship is also healthy as it is free from past emotional baggage. This advice is not applicable to swinging bachelors who derive pleasure from switching girlfriends and having fun with lots of partners. This is just another freedom of choice for one's lifestyle, although it is a very expensive one.
For men who are thrifty and aim for financial freedom at an early age, it is very important to find a thrifty wife. It is hard to save if one party earns and the other spends. It is hard to fill a leaky bucket. Opposing financial habits in a couple can kill a relationship. The European crisis is an example of such a union at risk of breaking up because of the mismatch between thrifty Germany and spendthrift Greece.
From my personal experience, a good way to evaluate whether a girl is of wife material is to observe how she treats her own family. How she treats her family today is an indication of how she treats you when you become family tomorrow. If she is not a filial daughter, drop her. If she cannot get along with her siblings, find out why. If she loves her family very much and showers them with great care and generosity, she will probably be a good wife to you, a good mother to your children and a good daughter-in-law to your parents. Such a wife, even if she looks like a value babe, should bring happiness to the man who marries her.
Tuesday, February 12, 2013
Sunday, December 2, 2012
Suggestions to Olam in their fight against Muddy Waters
When Muddy Waters (MW) strikes, the immediate aftermath will be a double-digit percentage plunge in high volume in the share price of the stock being shorted. When MW strikes, it always provide lessons and entertainment for investors unless you happen to be vested in the company attacked by MW. MW sends shudders down the spine of CEOs of public-listed companies. Olam CEO Sunny Verghese must be cursing MW now. Why me? When he learnt of MW's first strike, it was fearsome enough to make him cancel his flight while waiting in the departure lounge.
Olam is a component stock of the Straits Times Index. As a Singaporean investor, I do not think this is a healthy development for our local stock market. On the other hand, shortists do play an important role in the stock market by knocking sense into an over-confident Mr Market who overlooks risks. For this, Singaporean investors (except Olam's of course) should thank Muddy Waters for opening our eyes to the risks of investing in Olam and in providing us keen investment lessons. Their Olam report is an interesting exercise in forensic accounting and due diligence.
In this battle between Olam and Muddy Waters, I hope to see Olam emerging as the final victor. Not through the court-room but by business savvy and creation of shareholder value. I would like to give some suggestions to Olam in their fight against Muddy Waters, although I am definitely not qualified to do so.
MW's main thrust of attack is that Olam is a complex business which is not only hard to understand but also easy to manipulate. MW contends that the biological gains and Level 3 derivatives in Olam's accounts allow management the discretion to manipulate profits to mislead investors. To counter this attack, Olam management needs to win investors' trust so that we trust their highly discretionary profit numbers. One way of doing this is substantial insider buying of Olam's stocks. Preferably, the insider buying should consist of multiple insider buying from executive management, starting from the CEO. Each insider should spend a substantial(>20%) portion of his net-worth or 2 years' salary to buy Olam's stocks. A few months' salary worth of buying is not sufficient. Buying too little and appearing too desperate may backfire if investors treat it as a public relations exercise to win confidence. While CEO Sunny Verghese share purchases a few days ago is to be applauded, his impatience to announce it even before the market closed is highly unusual and may be taken by investors as a desperate measure to win back confidence. Once investors are convinced by the insider buying action that top management's interests are aligned with theirs, then they will be less worried that the profits are being deceptively manipulated.
Please, no more company share buybacks. Don't use shareholders' money to prop up the share price, particularly when MW is alleging that senior management has pledged significant numbers of their own shares and could be facing margin calls. Management could be exposing themselves to shareholder lawsuits if they use shareholders' money to support the share price only to see it plunge later due to management's forced selling from margin calls.
Cumulative negative operating cashflow is a major bugbear for Olam investors. Profits are useless if they do not generate cash. In fact, it is worse than useless because it generates suspicion among investors. It was for this reason that I cease becoming an Olam shareholder a few years ago. I first became a shareholder because of the impressive profit growth. Initially, one can accept the argument that for a high-growth company, operating cashflow is negative in the beginning due to enormous upfront capital expenditure. However, investors lose patience if operating cashflow continue to remain negative over a multi-year period and the company keep asking for more money from shareholders and bondholders. This is the case for Olam. Operating cashflow has been cumulatively negative since FY2008. The poor operating cashflow also lends credence to MW's contention that Olam executes terribly in its acquisitions. Although Olam has rebutted MW on this point, no amount of clever persuasion is enough unless you can show me the money (cash, not accounting profits!). Good execution must show up in the numbers eventually. By numbers, I mean hard cash and not profits determined by opinions of accountants or management.
One suggestion to Olam's management is to, at least for the time being, base their staff's bonuses and promotion on cash-flow metrics, not profits. MW compared Olam to Enron for their shared appetite in acquiring companies to create fake profits through complicated accounting. By pegging staff incentives to real cashflow and not opinionated profits, investors need not fear Olam staff are motivated to practise Enron-like behavior of spending real $10 on acquisitions to create fake $5 of accounting profit.
I hope Olam will pause its capital-raising activity for the time being. Show us some cash first before you continue asking for more cash from us. Despite its impressive growth, Olam's Piotroski score is only 1 for FY2011. However, I am not sure if this is accurate as this was computed by a software I wrote early this year when I had plenty of time being unemployed.
MW is a tough opponent. Its latest move to pay for Olam's debt to be rated is cunning. It is an offer that Olam simply cannot accept. Even if the bonds are rated at better-than-expected ratings, it is useless because Olam's bonds are already trading near distressed levels. It is a lose-lose situation if Olam accepts. If Olam rejects, it appears as if Olam has chickened out. This offer by MW was designed to embarrass Olam.
I hope to see Olam emerge as the final victor. Not vested at the moment but enjoying the show. Will consider investing once Olam starts showing us some real money (cold, hard cash).
Olam is a component stock of the Straits Times Index. As a Singaporean investor, I do not think this is a healthy development for our local stock market. On the other hand, shortists do play an important role in the stock market by knocking sense into an over-confident Mr Market who overlooks risks. For this, Singaporean investors (except Olam's of course) should thank Muddy Waters for opening our eyes to the risks of investing in Olam and in providing us keen investment lessons. Their Olam report is an interesting exercise in forensic accounting and due diligence.
In this battle between Olam and Muddy Waters, I hope to see Olam emerging as the final victor. Not through the court-room but by business savvy and creation of shareholder value. I would like to give some suggestions to Olam in their fight against Muddy Waters, although I am definitely not qualified to do so.
MW's main thrust of attack is that Olam is a complex business which is not only hard to understand but also easy to manipulate. MW contends that the biological gains and Level 3 derivatives in Olam's accounts allow management the discretion to manipulate profits to mislead investors. To counter this attack, Olam management needs to win investors' trust so that we trust their highly discretionary profit numbers. One way of doing this is substantial insider buying of Olam's stocks. Preferably, the insider buying should consist of multiple insider buying from executive management, starting from the CEO. Each insider should spend a substantial(>20%) portion of his net-worth or 2 years' salary to buy Olam's stocks. A few months' salary worth of buying is not sufficient. Buying too little and appearing too desperate may backfire if investors treat it as a public relations exercise to win confidence. While CEO Sunny Verghese share purchases a few days ago is to be applauded, his impatience to announce it even before the market closed is highly unusual and may be taken by investors as a desperate measure to win back confidence. Once investors are convinced by the insider buying action that top management's interests are aligned with theirs, then they will be less worried that the profits are being deceptively manipulated.
Please, no more company share buybacks. Don't use shareholders' money to prop up the share price, particularly when MW is alleging that senior management has pledged significant numbers of their own shares and could be facing margin calls. Management could be exposing themselves to shareholder lawsuits if they use shareholders' money to support the share price only to see it plunge later due to management's forced selling from margin calls.
Cumulative negative operating cashflow is a major bugbear for Olam investors. Profits are useless if they do not generate cash. In fact, it is worse than useless because it generates suspicion among investors. It was for this reason that I cease becoming an Olam shareholder a few years ago. I first became a shareholder because of the impressive profit growth. Initially, one can accept the argument that for a high-growth company, operating cashflow is negative in the beginning due to enormous upfront capital expenditure. However, investors lose patience if operating cashflow continue to remain negative over a multi-year period and the company keep asking for more money from shareholders and bondholders. This is the case for Olam. Operating cashflow has been cumulatively negative since FY2008. The poor operating cashflow also lends credence to MW's contention that Olam executes terribly in its acquisitions. Although Olam has rebutted MW on this point, no amount of clever persuasion is enough unless you can show me the money (cash, not accounting profits!). Good execution must show up in the numbers eventually. By numbers, I mean hard cash and not profits determined by opinions of accountants or management.
One suggestion to Olam's management is to, at least for the time being, base their staff's bonuses and promotion on cash-flow metrics, not profits. MW compared Olam to Enron for their shared appetite in acquiring companies to create fake profits through complicated accounting. By pegging staff incentives to real cashflow and not opinionated profits, investors need not fear Olam staff are motivated to practise Enron-like behavior of spending real $10 on acquisitions to create fake $5 of accounting profit.
I hope Olam will pause its capital-raising activity for the time being. Show us some cash first before you continue asking for more cash from us. Despite its impressive growth, Olam's Piotroski score is only 1 for FY2011. However, I am not sure if this is accurate as this was computed by a software I wrote early this year when I had plenty of time being unemployed.
MW is a tough opponent. Its latest move to pay for Olam's debt to be rated is cunning. It is an offer that Olam simply cannot accept. Even if the bonds are rated at better-than-expected ratings, it is useless because Olam's bonds are already trading near distressed levels. It is a lose-lose situation if Olam accepts. If Olam rejects, it appears as if Olam has chickened out. This offer by MW was designed to embarrass Olam.
I hope to see Olam emerge as the final victor. Not vested at the moment but enjoying the show. Will consider investing once Olam starts showing us some real money (cold, hard cash).
Sunday, November 25, 2012
The right investment vehicle for retail investors - ETF
It is an open secret in the fund management industry that most fund managers under-perform over the long-term (around 5 years). Very few people who are in the business of selling investment-linked products will reveal this embarrassing secret to their clients. A simple search on Google will show the facts. You can always verify next time someone persuades you to buy an investment fund. Don't blame the salesmen if they are not forthcoming because they cannot sell if all the embarrassing secrets are out.
Two years ago, I wrote about relying on fund managers for our investments. What I wrote then still stands today. I still think the average IQ of fund managers and the bottom 5% of hedge fund managers to be much higher than mine. However, it is puzzling why intelligent people under-perform as a group. A recent brief exchange with a fund manager explains the reason. Institutional investors form the bulk of the transactions, so they are the average. Add in their management fees, so they naturally under-perform the average. If we cannot rely on fund managers who are far more intelligent with much more time and resources on their hands than us, then how? What if there is an investment vehicle that outperforms most fund managers but charges a much lower fee? These are index funds and ETFs. The ETFs referred to in this article are country indices which are baskets of blue chips in the respective countries. So, if you want to invest in Singapore stocks, the right ETF is an ETF that tracks the Straits Times Index.
Cheaper and better than active fund managers, ETFs are a no-brainer for retail investors. DIY investors who pick their own stocks should review their trading records and honestly self-assess if they outperform the index ETFs. If not, index ETFs have a rightful place in their portfolio. Even for skilful ones who manage to beat the index, they can still consider ETFs if they decide to spend less time on investments and more time on their family or take on more meaningful enterprises like starting their own business.
I have yet to encounter a better writer than Andrew Hallam on ETFs and index funds in Singapore's context. Since my writings cannot hold a candle to his, please read his articles on ETFs and index funds below.
http://andrewhallam.com/2010/08/local-and-expatriate-investing-in-singapore-part-i/
http://andrewhallam.com/2010/10/singaporeans-investing-cheaply-with-exchange-traded-index-funds/
http://andrewhallam.com/2010/10/singaporeans%E2%80%94beware-of-high-cost-index-funds/
http://andrewhallam.com/2010/10/singapore-index-funds-cost-1500-more/
Among ETFs and index funds, there are good and bad ones. It is for this reason that I opened a US brokerage account just to buy ETFs in the US stock exchanges. On the local exchange, the STI ETF will suit most retail investors who want exposure to Singapore stocks. I will discuss more about this in a later article.
Two years ago, I wrote about relying on fund managers for our investments. What I wrote then still stands today. I still think the average IQ of fund managers and the bottom 5% of hedge fund managers to be much higher than mine. However, it is puzzling why intelligent people under-perform as a group. A recent brief exchange with a fund manager explains the reason. Institutional investors form the bulk of the transactions, so they are the average. Add in their management fees, so they naturally under-perform the average. If we cannot rely on fund managers who are far more intelligent with much more time and resources on their hands than us, then how? What if there is an investment vehicle that outperforms most fund managers but charges a much lower fee? These are index funds and ETFs. The ETFs referred to in this article are country indices which are baskets of blue chips in the respective countries. So, if you want to invest in Singapore stocks, the right ETF is an ETF that tracks the Straits Times Index.
Cheaper and better than active fund managers, ETFs are a no-brainer for retail investors. DIY investors who pick their own stocks should review their trading records and honestly self-assess if they outperform the index ETFs. If not, index ETFs have a rightful place in their portfolio. Even for skilful ones who manage to beat the index, they can still consider ETFs if they decide to spend less time on investments and more time on their family or take on more meaningful enterprises like starting their own business.
I have yet to encounter a better writer than Andrew Hallam on ETFs and index funds in Singapore's context. Since my writings cannot hold a candle to his, please read his articles on ETFs and index funds below.
http://andrewhallam.com/2010/08/local-and-expatriate-investing-in-singapore-part-i/
http://andrewhallam.com/2010/10/singaporeans-investing-cheaply-with-exchange-traded-index-funds/
http://andrewhallam.com/2010/10/singaporeans%E2%80%94beware-of-high-cost-index-funds/
http://andrewhallam.com/2010/10/singapore-index-funds-cost-1500-more/
Among ETFs and index funds, there are good and bad ones. It is for this reason that I opened a US brokerage account just to buy ETFs in the US stock exchanges. On the local exchange, the STI ETF will suit most retail investors who want exposure to Singapore stocks. I will discuss more about this in a later article.
Sunday, November 4, 2012
Update on my favourite life insurance plan (Aviva SAF Group Term Life) for Singaporeans
Last year, I wrote about my favorite life insurance (Aviva SAF Group Term Life) for Singaporeans. It is still my favorite today and I just got an update that the maximum coverage allowable has been raised to SGD1 million. This will cost SGD1536.00 annually and I signed up for it with little hesitation. Based on my personal experience, I seldom need to pay the full premium each year because Aviva gives partial refund of the premium at their discretion.
For Singaporean NSmen with dependents, this is a no-brainer if the objective is to use minimum sum of money to provide maximum protection for the family. This plan is open only for NS men and I am not aware of other cheaper plans. Fortunately, the policy holder can buy protection for his spouse at even lower cost probably because the wife has no risk of death from military accidents. This is the only plan I know of that protects against military mishaps. Singaporeans who have been through NS will know that this risk is not really that low.
Much of what I wrote in my first article for this insurance plan still applies. So, I shall not repeat here.
By the way, I will bet very few insurance agents or fee-based financial advisers will recommend this product. This product is so value-for-money that there is hardly any room left to pay for commission. I do not get paid a single cent for recommending this product.
For more details, please refer to the Aviva brochure and judge for yourself.
http://www.aviva.com.sg/pdf/SAF_GTL_Brochure.pdf
PS: I do not collect any commission from Aviva. In fact, I have never collected any commission for my product reviews. Just a happy customer who wants to share with fellow Singaporeans on the kind of protection that they should have to protect their own family.
For Singaporean NSmen with dependents, this is a no-brainer if the objective is to use minimum sum of money to provide maximum protection for the family. This plan is open only for NS men and I am not aware of other cheaper plans. Fortunately, the policy holder can buy protection for his spouse at even lower cost probably because the wife has no risk of death from military accidents. This is the only plan I know of that protects against military mishaps. Singaporeans who have been through NS will know that this risk is not really that low.
Much of what I wrote in my first article for this insurance plan still applies. So, I shall not repeat here.
By the way, I will bet very few insurance agents or fee-based financial advisers will recommend this product. This product is so value-for-money that there is hardly any room left to pay for commission. I do not get paid a single cent for recommending this product.
For more details, please refer to the Aviva brochure and judge for yourself.
http://www.aviva.com.sg/pdf/SAF_GTL_Brochure.pdf
PS: I do not collect any commission from Aviva. In fact, I have never collected any commission for my product reviews. Just a happy customer who wants to share with fellow Singaporeans on the kind of protection that they should have to protect their own family.
Sunday, October 21, 2012
Different ways of spending money leading to different wealth outcomes
How nations spend their money will ultimately determine their wealth. Same goes for companies and individuals. I will talk about the different ways we spend money and why certain organizations fail/succeed because of the way they spend money. Before that, I confess that I am not smart to think of such a powerful, yet simple concept. This credit goes to Milton Friedman, arguably the most influential economist of the 20th century, who introduced the concept in his book "Free to Choose".
Children in western societies love Christmas because they receive gifts from adults. Children in Chinese society love Chinese New Year because they receive red packets (红包) which contain money from adults. Suppose you are free to choose, what would be your choice? For me, I am so glad to be born a Chinese :)
When your Uncle buys gifts for you on Christmas, he is spending his money on someone else (First way of spending money). He may love you very much and has the kindest intention to shower you with the best gifts. The problem is he does not know you well enough to buy what you really like. He could spend a bomb and still end up with a gift that you do not like, do not need, do not want. Worse still, he may even buy you something you already have. He could end up buying you an expensive white elephant that serves no useful purpose except take up space.
When your Uncle gives you red packets (红包), the money is yours and you can spend your own money on yourself (Second way of spending money). Nobody knows your likes and dislikes better than yourself. Since it is your own money, you will do your best to get value for money when you spend it and therefore, not overspend. In other words, you will use the minimum sum of money to extract maximum pleasure. This can best happen when you are spending money on yourself. This way of spending money leads to far superior capital allocation compared to the first one when a person spends his own money on someone else.
When you go on overseas trips with expenses fully paid by your employer, you are spending other people's money on yourself (Third way of spending money). Because it is other people's money, you do not really care how much you spend. What you really care is to extract maximum pleasure from spending the money. This way of spending money will lead to wastage but it will at least serve its purpose of being put to good use on yourself. Wastage but at least good outcome.
Suppose you are a kind, idealistic person and joins the government one day with the intention to help other people. As a government official, you are charged with the responsibility to spend taxpayers' money on taxpayers. Now, what happens? You are spending other people's money on other people (4th way of spending money). This is the worst of both worlds. Because it is other people's money, one tends to spend with less care. Because it is spent on other people who are faceless strangers, the spender does not really know what other people want and need. Therefore, chances are that the people whom the money is to be spent on do not really benefit much from it. This is going to lead to plenty of wastage without achieving good outcome. A good example of the proverb "The road to hell is paved with good intentions".
The 4 ways of spending money is a simple concept and is a useful tool to think about economic systems. The private sector does a better job allocating capital than the public sector because most people there spend their own money on themselves. Even with the best of intentions, the government is unlikely to achieve more than a group of selfish individuals pursuing their own selfish interests using their own money (read the invisible hand of Adam Smith). This is why free, capitalistic countries have succeeded so spectacularly economically compared to the socialist/communist, centrally-planned economies.
It is naive to think that most government officials are public-spirited and have the people's interests at heart most of the time. All forms of government is guilty of the third way of spending money - spending other people's money on themselves. In other words, corruption. Despite Singaporeans' numerous complaints about the government, this is one aspect that our government score very well in being relatively corruption-free. China can do everything that Singapore can from low-end work to high-end technology but it is very hard for them to copy this clean aspect of Singapore. The vested interests are too deep. Closer home, due to human nature, there is a natural tendency for Ministerial salaries to go up if set by Ministers themselves. The fact that the PM has agreed to cut his own salary as well as his colleagues' is a good sign that we have good men in charge and democracy is kicking alive here. I have actually written a letter to the PM on this issue but I doubt he will have the time to read it.
Due to the ease at which government officials can spend other people's money on themselves, it is far more important to focus on the character of the people they are recruiting than on their intelligence (1st-class honors, good academic grades etc) which our government tends to be obsessed about. Intelligent workers are double-edged swords. A smart worker in a position to steal will be able to steal more without getting caught. Who can disagree with that? Problem is it is very hard to judge a man's character because intelligent but bad people can put on a good show to show they are good people.
A more insidious form of "spending other people's money on yourselves" today are financial institutions taking excessive risks with other people's money and paying themselves very high bonuses when things go right but push the losses to taxpayers when things go wrong. When things run well, Wall Street lobbied for deregulation and that government should have the good capitalist sense to keep their hands off. In 2008, when things went wrong, Wall Street screamed for help "Save me, save me or the world will go to an end", hoping that the government will turn socialist to save them. Since taxpayers' money are at risk for too-big-to-fail institutions, there is a good case for more regulation. In fact, any institution that have taxpayers' money on the hook should be heavily regulated.
One vital purpose of Finance is optimal capital allocation which is channeling idle capital to productive uses. Ironically, allowing financial institutions to spend other people's money on themselves without adequate regulation has led to one of the worst capital allocation in living memory which culminated in the global financial crisis of 2008. The global major banks lost so much money that the government has to print money to save them. So much money was lent to people with bad credit because the bankers have repackaged the debt and sold off to other investors who are not in a good position to make credit decisions compared to the bankers themselves.
Thirty years ago, all major Wall Street investment banks were private partnerships. They were handling their own money. By 2000, Goldman Sachs became the last major investment bank to go public. By then, all of them were using other people's money to get rich, some at a leverage of 30 to 1. The risks people take with their own money and with other people's money are very different. 2008 crisis would surely not happen had investment banks remain in private hands.
The free market works best when enterprising people have maximum freedom to use their own money for themselves with minimum interference from government. If they screw up or just suffer hard luck, the free market will discipline them to ensure that poor capital allocation decisions get punished. The government should lay their hands off these enterprising people because the free market will be there to punish (or regulate) them for bad decisions/behavior. However, the free market does not work for certain groups of people (too-big-to-fail financial institutions) who have at their disposal so much of other people's money that when they screw up, society cannot give the free market total freedom to punish them without risking social chaos. Government has to step in for such cases.
As a Singaporean hoping for a more prosperous future for our country, I hope to see more of our people using their own money for themselves and get rich as entrepreneurs. Today, it is not healthy to see too many of our finest minds joining the government sector and getting rich as bureaucrats who spend other people's money on other people, however well-intentioned. It is also not healthy if a disproportionately huge number of bright minds join the financial sector and get rich in a poorly regulated environment where they use other people's money on themselves neglecting their fiduciary duties to people who entrust money to them.
On a final note, this blog is about helping your own money which is really about managing your own money yourself. If possible, always rely on yourself on money matters as very few can be trusted when it comes to handling money. There is no better incentive structure than to have a person manage his own money and invest/spend his own money for himself.
Children in western societies love Christmas because they receive gifts from adults. Children in Chinese society love Chinese New Year because they receive red packets (红包) which contain money from adults. Suppose you are free to choose, what would be your choice? For me, I am so glad to be born a Chinese :)
When your Uncle buys gifts for you on Christmas, he is spending his money on someone else (First way of spending money). He may love you very much and has the kindest intention to shower you with the best gifts. The problem is he does not know you well enough to buy what you really like. He could spend a bomb and still end up with a gift that you do not like, do not need, do not want. Worse still, he may even buy you something you already have. He could end up buying you an expensive white elephant that serves no useful purpose except take up space.
When your Uncle gives you red packets (红包), the money is yours and you can spend your own money on yourself (Second way of spending money). Nobody knows your likes and dislikes better than yourself. Since it is your own money, you will do your best to get value for money when you spend it and therefore, not overspend. In other words, you will use the minimum sum of money to extract maximum pleasure. This can best happen when you are spending money on yourself. This way of spending money leads to far superior capital allocation compared to the first one when a person spends his own money on someone else.
When you go on overseas trips with expenses fully paid by your employer, you are spending other people's money on yourself (Third way of spending money). Because it is other people's money, you do not really care how much you spend. What you really care is to extract maximum pleasure from spending the money. This way of spending money will lead to wastage but it will at least serve its purpose of being put to good use on yourself. Wastage but at least good outcome.
Suppose you are a kind, idealistic person and joins the government one day with the intention to help other people. As a government official, you are charged with the responsibility to spend taxpayers' money on taxpayers. Now, what happens? You are spending other people's money on other people (4th way of spending money). This is the worst of both worlds. Because it is other people's money, one tends to spend with less care. Because it is spent on other people who are faceless strangers, the spender does not really know what other people want and need. Therefore, chances are that the people whom the money is to be spent on do not really benefit much from it. This is going to lead to plenty of wastage without achieving good outcome. A good example of the proverb "The road to hell is paved with good intentions".
The 4 ways of spending money is a simple concept and is a useful tool to think about economic systems. The private sector does a better job allocating capital than the public sector because most people there spend their own money on themselves. Even with the best of intentions, the government is unlikely to achieve more than a group of selfish individuals pursuing their own selfish interests using their own money (read the invisible hand of Adam Smith). This is why free, capitalistic countries have succeeded so spectacularly economically compared to the socialist/communist, centrally-planned economies.
It is naive to think that most government officials are public-spirited and have the people's interests at heart most of the time. All forms of government is guilty of the third way of spending money - spending other people's money on themselves. In other words, corruption. Despite Singaporeans' numerous complaints about the government, this is one aspect that our government score very well in being relatively corruption-free. China can do everything that Singapore can from low-end work to high-end technology but it is very hard for them to copy this clean aspect of Singapore. The vested interests are too deep. Closer home, due to human nature, there is a natural tendency for Ministerial salaries to go up if set by Ministers themselves. The fact that the PM has agreed to cut his own salary as well as his colleagues' is a good sign that we have good men in charge and democracy is kicking alive here. I have actually written a letter to the PM on this issue but I doubt he will have the time to read it.
Due to the ease at which government officials can spend other people's money on themselves, it is far more important to focus on the character of the people they are recruiting than on their intelligence (1st-class honors, good academic grades etc) which our government tends to be obsessed about. Intelligent workers are double-edged swords. A smart worker in a position to steal will be able to steal more without getting caught. Who can disagree with that? Problem is it is very hard to judge a man's character because intelligent but bad people can put on a good show to show they are good people.
A more insidious form of "spending other people's money on yourselves" today are financial institutions taking excessive risks with other people's money and paying themselves very high bonuses when things go right but push the losses to taxpayers when things go wrong. When things run well, Wall Street lobbied for deregulation and that government should have the good capitalist sense to keep their hands off. In 2008, when things went wrong, Wall Street screamed for help "Save me, save me or the world will go to an end", hoping that the government will turn socialist to save them. Since taxpayers' money are at risk for too-big-to-fail institutions, there is a good case for more regulation. In fact, any institution that have taxpayers' money on the hook should be heavily regulated.
One vital purpose of Finance is optimal capital allocation which is channeling idle capital to productive uses. Ironically, allowing financial institutions to spend other people's money on themselves without adequate regulation has led to one of the worst capital allocation in living memory which culminated in the global financial crisis of 2008. The global major banks lost so much money that the government has to print money to save them. So much money was lent to people with bad credit because the bankers have repackaged the debt and sold off to other investors who are not in a good position to make credit decisions compared to the bankers themselves.
Thirty years ago, all major Wall Street investment banks were private partnerships. They were handling their own money. By 2000, Goldman Sachs became the last major investment bank to go public. By then, all of them were using other people's money to get rich, some at a leverage of 30 to 1. The risks people take with their own money and with other people's money are very different. 2008 crisis would surely not happen had investment banks remain in private hands.
The free market works best when enterprising people have maximum freedom to use their own money for themselves with minimum interference from government. If they screw up or just suffer hard luck, the free market will discipline them to ensure that poor capital allocation decisions get punished. The government should lay their hands off these enterprising people because the free market will be there to punish (or regulate) them for bad decisions/behavior. However, the free market does not work for certain groups of people (too-big-to-fail financial institutions) who have at their disposal so much of other people's money that when they screw up, society cannot give the free market total freedom to punish them without risking social chaos. Government has to step in for such cases.
As a Singaporean hoping for a more prosperous future for our country, I hope to see more of our people using their own money for themselves and get rich as entrepreneurs. Today, it is not healthy to see too many of our finest minds joining the government sector and getting rich as bureaucrats who spend other people's money on other people, however well-intentioned. It is also not healthy if a disproportionately huge number of bright minds join the financial sector and get rich in a poorly regulated environment where they use other people's money on themselves neglecting their fiduciary duties to people who entrust money to them.
On a final note, this blog is about helping your own money which is really about managing your own money yourself. If possible, always rely on yourself on money matters as very few can be trusted when it comes to handling money. There is no better incentive structure than to have a person manage his own money and invest/spend his own money for himself.
Sunday, August 5, 2012
In memory of Dennis Ng Kah Wan 吴加万
Update: My attitude towards financial trading/investing courses is summed up in this blog post I wrote. If you can learn from cheaper alternatives such as books/internet, please do so.
I know little about Dennis' financial training courses. He was very generous with his time with people who engaged him online. For that, I'm grateful and this is why I wrote this eulogy.
Money gurus who charge thousands for their courses are viewed skeptically by experienced financial practitioners. Going by their hourly rate, their students pay more for the course compared to an MBA from a reputable university but do not get a recognized certificate upon graduation.
Skeptics will ask ... "if you are such a good investor and love the game so much, why don't you invest and make money for yourself? Why are you sharing your secrets to strangers and diluting your future gains? Are you making more money teaching than doing? Have I hit the nail on the head?"
The financial gurus will reply something along the line ... "I have already made enough money from the market. I want to give back to the community. I want to help people by sharing what I know."
Since battle-hardened investors are trained skeptics, almost all of them will find it very hard to believe the financial trainer. But if there is one man who can make me believe, he is Dennis Ng Kah Wan 吴加万 (RIP on 26 Jul 2012 at the age of 43)
I state upfront that I have never met Dennis in person. However, I know him online on WallStraits (under another nick) since 2004 long before he got famous after setting up http://www.masteryourfinance.com. Maybe it is presumptuous to write an article on him without meeting him but Dennis spends so much time online sharing his knowledge that it is easy to know him well by reading his posts.
Before Dennis set up his own financial website, he easily ranks among the most frequent contributor to various investment forums like WallStraits (now defunct), ChannelnewsAsia Market Talk and ShareInvestor.com. Yet, on each one of them, he was extremely unpopular and threads end up with personal attacks on his character. His critics blast him as being arrogant, intolerant of opposing views and is a shameless self-promoter. It is hard to disagree with the critics if you read just a few of Dennis's posts. However, if a person has the patience to read through most of his posts and ignore the self-advertising part, one could sense that Dennis knows his stuff and was extremely willing to share his knowledge. What was particularly impressive was his willingness to sacrifice his own time to write long replies to answer questions from newbies. I was worried that such a fine contributor would be driven out of WallStraits forum. Out of selfish reasons, I wrote a long post in support of Dennis so that he would not leave the forum. Dennis was quite touched and I guess that was how I got into his good books and why he invited me to join his inner circle to share ideas on individual stock picks. (I don't think it was because he thought I was a good investor as I never shared my stock picks). I politely declined because while sharing investment techniques is fine with me, sharing portfolio is not fine. On investment matters, I would rather be a lone operator. Since Dennis believed deeply in sharing, I guessed I got kicked out of his good books after rejecting his offer.
I probably would have gained more from picking Dennis's stock-picking brain than he from mine because Dennis was the better investor. He gained his financial freedom around the age of 39 through investing in stocks. Despite his vast investment experience, Dennis was not at his best as a teacher at investing on investment forums (except www.masteryourfinance.com). He gets impatient when his advice is not taken. It may not be that people do not take his advice because they doubt him. In investing, there are many ways to skin a cat. One man's meat could be another man's poison. What suits him may not suit others. He showed this darker side of himself on one of Musicwhiz's blog post. I thought he was not being fair to Musicwhiz when he commented that Musicwhiz's 36.9% returns over a 5-year period was very poor returns with the effort put in. Given that Dennis lost half his fortune in the Asian Financial crisis, Musicwhiz's first 5-year performance was at least superior to his.
Dennis would get irritated and impatient when people disagree and refuse to learn from him. This aspect of him made him come across as arrogant and was one of the reasons why he was so unwelcomed on investment forums. I believed Dennis was deeply hurt by the experience. In a private correspondence with him, Dennis revealed (in his own words) that "the reason my MasteryOfFinance forum was not open to public comment is becos of silly personal attacks I've been through in public forums, which you should know very well, why I left wallstraits.com" In his defense, I think this seemingly arrogant behavior stems from his deep passion to teach. When a teacher is anxious to see results, he will become impatient with students who doubt his teachings. Unfortunately, fellow forummers never had any intention to be his students. Many of them were good investors in their own right and could make good money with their own methods. If Dennis wanted people to listen to his advice, then the most effective way is to get people to pay to listen to him. This was why Dennis was so well-respected in his own forum www.masteryourfinance.com but disliked in all the other investment forums that he actively participated before. Dennis's fault was trying to impose his methods on others but he never held back on what he knew for those who wanted to listen. In all fairness to Dennis, can any of his detractors accuse him of being selfish in sharing what he knows?
Dennis was at his best as a Personal Finance teacher. People who took his Personal Finance advice saved lots of money by not overpaying for high-commission aggresively sold insurance plans or buying a car unnecessarily. Dennis never bought a a car. Simply put, owning a car in Singapore just does not make financial sense. Despite gaining financial freedom, his mode of transport remains BMW (Bus, MRT, Walk). He literally walked his talk.
Dennis never really upgraded his lifestyle as his wealth grew. This multi-millionaire still lived in a HDB flat and refused to buy a car. This led to netizens who do not know Dennis well to comment that he was stingy, never sat back to enjoy his wealth, was so keen on making money from his training seminars that he worked to his last breath. I am convinced Dennis did not work that hard for money. What makes me so sure was Dennis's simple, low-cost lifestyle. Does it make sense to work for money and continue doing something you do not like when you have no need for more money? Or does it make more sense to do what you like after you have made enough money to be free to do whatever you want? If Dennis had upgraded from a HDB flat to a Sentosa Cove property, bought a Ferrari, then his detractors may be right in saying he is one of those financial trainers who are out to make a quick buck for themselves. Dennis had already reached financial freedom when he started www.masteryourfinance.com. He has already learnt a hard lesson that few would listen to his advice if he did not get them to pay for advice. Ironically, I guessed he felt he would do his students more good if he had charged them a fee than give knowledge away free of charge. Besides, any good cause can only be sustainable if it generates cashflow. Charity alone is not enough.
I have a theory about thrifty people who remain thrifty despite attaining immense wealth. These people do not work for money. They work for their passion. They live for themselves. Warren Buffet still lived in the same house after 30 years. Through Lee Wei Ling's letters, Singaporeans know that our founding father, Lee Kuan Yew, and his family lived frugally. Likewise for Dennis Ng. Dennis was working for his passion when he started www.masteryourfinance.com. Even before Dennis started www.masteryourfinance.com several years ago, he had been talking about his passion to spread financial literacy. This can be verified even by his detractors who quarreled with him in the investment forums.
According to some web postings, Dennis had a defective heart. Yet, he worked so hard that he was probably the most active financial trainer in the public arena in Singapore FREE of charge. He writes fortnightly (alternate Tuesday) for My Paper.sg. He has a weekly Radio program on Capital Radio 95.8 FM every Thursday 10.10 am to 11 am. He blogs for CPF Board's imsavvy.sg. He writes on a monthly basis for share investment magazine http://www.sharesinv.com/author/dennis-ng. With his wealth, he need not have worked to death. On this aspect, he led life like a fool. However, in his pursuit for his passion, his life was full.
PS: Dennis's death shocked me. My regret was that I never met him in person to express my thanks for sharing his knowledge free of charge on investment forums. Thanks to Dennis, I did not overpay for insurance, did not buy a car and always kept an emergency reserve for bad times. This helped me saved a comfortable sum of money and made my recent period of unemployment more bearable. This long post is a posthumous act to express my gratitude to Dennis Ng.
Other eulogies for our late friend Dennis Ng;
http://www.bigfatpurse.com/2012/07/eulogy-for-dennis-ng-lessons-from-my-teacher/
http://www.donnadaritan.com/2012/07/how-would-you-know-it-will-be-last.html
http://ivanismyname.blogspot.sg/2012/07/rip-to-my-teacher-my-friend-my-mentor.html
http://www.newagedentists.com/uncategorized/dennis-ng-was-right-rip/
http://www.propwise.sg/in-memory-of-dennis-ng-1969-2012/
http://singaporeshortstories.blogspot.sg/2012/07/dennis-ng-founder-of-housing-loan-sg.html
http://sgwebreviews.blogspot.sg/2012/08/personal-finance-expert-dennis-ng.html
I know little about Dennis' financial training courses. He was very generous with his time with people who engaged him online. For that, I'm grateful and this is why I wrote this eulogy.
Money gurus who charge thousands for their courses are viewed skeptically by experienced financial practitioners. Going by their hourly rate, their students pay more for the course compared to an MBA from a reputable university but do not get a recognized certificate upon graduation.
Skeptics will ask ... "if you are such a good investor and love the game so much, why don't you invest and make money for yourself? Why are you sharing your secrets to strangers and diluting your future gains? Are you making more money teaching than doing? Have I hit the nail on the head?"
The financial gurus will reply something along the line ... "I have already made enough money from the market. I want to give back to the community. I want to help people by sharing what I know."
Since battle-hardened investors are trained skeptics, almost all of them will find it very hard to believe the financial trainer. But if there is one man who can make me believe, he is Dennis Ng Kah Wan 吴加万 (RIP on 26 Jul 2012 at the age of 43)
I state upfront that I have never met Dennis in person. However, I know him online on WallStraits (under another nick) since 2004 long before he got famous after setting up http://www.masteryourfinance.com. Maybe it is presumptuous to write an article on him without meeting him but Dennis spends so much time online sharing his knowledge that it is easy to know him well by reading his posts.
Before Dennis set up his own financial website, he easily ranks among the most frequent contributor to various investment forums like WallStraits (now defunct), ChannelnewsAsia Market Talk and ShareInvestor.com. Yet, on each one of them, he was extremely unpopular and threads end up with personal attacks on his character. His critics blast him as being arrogant, intolerant of opposing views and is a shameless self-promoter. It is hard to disagree with the critics if you read just a few of Dennis's posts. However, if a person has the patience to read through most of his posts and ignore the self-advertising part, one could sense that Dennis knows his stuff and was extremely willing to share his knowledge. What was particularly impressive was his willingness to sacrifice his own time to write long replies to answer questions from newbies. I was worried that such a fine contributor would be driven out of WallStraits forum. Out of selfish reasons, I wrote a long post in support of Dennis so that he would not leave the forum. Dennis was quite touched and I guess that was how I got into his good books and why he invited me to join his inner circle to share ideas on individual stock picks. (I don't think it was because he thought I was a good investor as I never shared my stock picks). I politely declined because while sharing investment techniques is fine with me, sharing portfolio is not fine. On investment matters, I would rather be a lone operator. Since Dennis believed deeply in sharing, I guessed I got kicked out of his good books after rejecting his offer.
I probably would have gained more from picking Dennis's stock-picking brain than he from mine because Dennis was the better investor. He gained his financial freedom around the age of 39 through investing in stocks. Despite his vast investment experience, Dennis was not at his best as a teacher at investing on investment forums (except www.masteryourfinance.com). He gets impatient when his advice is not taken. It may not be that people do not take his advice because they doubt him. In investing, there are many ways to skin a cat. One man's meat could be another man's poison. What suits him may not suit others. He showed this darker side of himself on one of Musicwhiz's blog post. I thought he was not being fair to Musicwhiz when he commented that Musicwhiz's 36.9% returns over a 5-year period was very poor returns with the effort put in. Given that Dennis lost half his fortune in the Asian Financial crisis, Musicwhiz's first 5-year performance was at least superior to his.
Dennis would get irritated and impatient when people disagree and refuse to learn from him. This aspect of him made him come across as arrogant and was one of the reasons why he was so unwelcomed on investment forums. I believed Dennis was deeply hurt by the experience. In a private correspondence with him, Dennis revealed (in his own words) that "the reason my MasteryOfFinance forum was not open to public comment is becos of silly personal attacks I've been through in public forums, which you should know very well, why I left wallstraits.com" In his defense, I think this seemingly arrogant behavior stems from his deep passion to teach. When a teacher is anxious to see results, he will become impatient with students who doubt his teachings. Unfortunately, fellow forummers never had any intention to be his students. Many of them were good investors in their own right and could make good money with their own methods. If Dennis wanted people to listen to his advice, then the most effective way is to get people to pay to listen to him. This was why Dennis was so well-respected in his own forum www.masteryourfinance.com but disliked in all the other investment forums that he actively participated before. Dennis's fault was trying to impose his methods on others but he never held back on what he knew for those who wanted to listen. In all fairness to Dennis, can any of his detractors accuse him of being selfish in sharing what he knows?
Dennis was at his best as a Personal Finance teacher. People who took his Personal Finance advice saved lots of money by not overpaying for high-commission aggresively sold insurance plans or buying a car unnecessarily. Dennis never bought a a car. Simply put, owning a car in Singapore just does not make financial sense. Despite gaining financial freedom, his mode of transport remains BMW (Bus, MRT, Walk). He literally walked his talk.
Dennis never really upgraded his lifestyle as his wealth grew. This multi-millionaire still lived in a HDB flat and refused to buy a car. This led to netizens who do not know Dennis well to comment that he was stingy, never sat back to enjoy his wealth, was so keen on making money from his training seminars that he worked to his last breath. I am convinced Dennis did not work that hard for money. What makes me so sure was Dennis's simple, low-cost lifestyle. Does it make sense to work for money and continue doing something you do not like when you have no need for more money? Or does it make more sense to do what you like after you have made enough money to be free to do whatever you want? If Dennis had upgraded from a HDB flat to a Sentosa Cove property, bought a Ferrari, then his detractors may be right in saying he is one of those financial trainers who are out to make a quick buck for themselves. Dennis had already reached financial freedom when he started www.masteryourfinance.com. He has already learnt a hard lesson that few would listen to his advice if he did not get them to pay for advice. Ironically, I guessed he felt he would do his students more good if he had charged them a fee than give knowledge away free of charge. Besides, any good cause can only be sustainable if it generates cashflow. Charity alone is not enough.
I have a theory about thrifty people who remain thrifty despite attaining immense wealth. These people do not work for money. They work for their passion. They live for themselves. Warren Buffet still lived in the same house after 30 years. Through Lee Wei Ling's letters, Singaporeans know that our founding father, Lee Kuan Yew, and his family lived frugally. Likewise for Dennis Ng. Dennis was working for his passion when he started www.masteryourfinance.com. Even before Dennis started www.masteryourfinance.com several years ago, he had been talking about his passion to spread financial literacy. This can be verified even by his detractors who quarreled with him in the investment forums.
According to some web postings, Dennis had a defective heart. Yet, he worked so hard that he was probably the most active financial trainer in the public arena in Singapore FREE of charge. He writes fortnightly (alternate Tuesday) for My Paper.sg. He has a weekly Radio program on Capital Radio 95.8 FM every Thursday 10.10 am to 11 am. He blogs for CPF Board's imsavvy.sg. He writes on a monthly basis for share investment magazine http://www.sharesinv.com/author/dennis-ng. With his wealth, he need not have worked to death. On this aspect, he led life like a fool. However, in his pursuit for his passion, his life was full.
PS: Dennis's death shocked me. My regret was that I never met him in person to express my thanks for sharing his knowledge free of charge on investment forums. Thanks to Dennis, I did not overpay for insurance, did not buy a car and always kept an emergency reserve for bad times. This helped me saved a comfortable sum of money and made my recent period of unemployment more bearable. This long post is a posthumous act to express my gratitude to Dennis Ng.
Other eulogies for our late friend Dennis Ng;
http://www.bigfatpurse.com/2012/07/eulogy-for-dennis-ng-lessons-from-my-teacher/
http://www.donnadaritan.com/2012/07/how-would-you-know-it-will-be-last.html
http://ivanismyname.blogspot.sg/2012/07/rip-to-my-teacher-my-friend-my-mentor.html
http://www.newagedentists.com/uncategorized/dennis-ng-was-right-rip/
http://www.propwise.sg/in-memory-of-dennis-ng-1969-2012/
http://singaporeshortstories.blogspot.sg/2012/07/dennis-ng-founder-of-housing-loan-sg.html
http://sgwebreviews.blogspot.sg/2012/08/personal-finance-expert-dennis-ng.html
Saturday, July 21, 2012
A good investment book for Singapore context
The best investment a person can make is investing in himself. The safest and most rewarding asset I possess is my knowledge and ability to earn a living. It is safest because nobody can take my knowledge away. Enemies can rob all my physical possessions but they cannot rob my knowledge away.
A good education does not always have to come with a high cost. Reading good books is a cost-effective way to get a good education. I would suggest to kiasu Singaporean parents that after your kids are old enough to read books on their own, encouraging them to read good books is more value for money than sending them to enrichment courses. It will be interesting if someone can do a study on whether the lucrative tuition industry in Singapore has enriched our kids more than impoverish our parents.
In investing, it is even more important to read the right books. Unlike the hard sciences where nonsense can be invalidated through rigorous experiments via the Scientific Method, nonsense teachings on investment can appeal to readers by playing on their sense of greed and fear. This is why so many people, even smart ones, fall prey to investment scams which look downright stupid on examination.
Investors are money-minded people. It is hard to make money by writing books for the small Singapore market. To make more money, it makes more sense for investment gurus to spend time on investment than writing a book on investment. Some authors use their books as marketing material to promote their much more lucrative trading courses which charge thousands of dollars. I do think some of the financial trainers know their stuff and their students will gain some benefit. However, attending expensive trading/investment courses is not a cost-effective way to get educated compared to reading good books, not to mention these authors will withhold some of their knowledge from the books to keep the best for the more expensive courses. It is only fair to keep the best for the best-paying customers.
When choosing investment books, one thing to look at is the background of the author. He should have the right background to know his stuff. He should have a long and positive track record to prove that he knows his stuff as well as to temper theory with practical advice. Lastly, he should be willing to share his knowledge, preferably without hidden agenda. The last characteristic is almost impossible. How can you expect altruism from investors who are money-minded by nature?
I believe Dr Michael Leong, author of the book "Your First Million - Making it in stocks", comes closest to fitting the above characteristics. He was a successful entrepreneur as the Founder of ShareInvestor.com. Successful businessmen are better investors because they know what to look out for in assessing a business. It certainly helps in analyzing companies. Being in charge of a financial media company that supports public-listed companies brings him in close contact with numerous CEOs of Singapore's most successful companies. Very few has this privilege. He shares his insights from these experiences in his book.
In the old days, ShareInvestor forum(no longer visit the forum nowadays) attracted very good private investors to share their special insights. Old-timers will remember wonderful contributors like Mossie and Warren. I believe members of the forum, including Dr Leong himself, picked up some of their investing prowess from interaction with these forummers who shared willingly without expecting much in return simply because they like to talk about investing.
Dr Leong made enough money from his investments to enjoy an early retirement. This is a proven track record for fellow investors to at least read what he writes about investing. The fact that he is retired is one of the things that attracted me to the book. A person who has already made enough money from his investments to retire from the rat race is more willing to share his knowledge without hidden agenda because he has already reached his money goal. If an investment book was written by people like me who still has kids to feed and in constant worry of retrenchment, do not expect similar altruistic sharing. Recently, Dr Leong told me this about his book (in his exact words), "I truly wrote it for my kids as they are not interested in these things currently and I am concerned that when they are, I may not be able then to recall as much as I can now." What can be more genuine than advice to one's own kids?
Readers may consider reading the last chapter of the book "Money and Life" first. It is a chapter on Personal Finance and a person's relationship with money. Not many of us can be rich through investing but most of us can stay out of financial trouble by following basic Personal Finance practices like saving money and not getting into heavy debts. Therefore, the order of learning should be Personal Finance first, then investing for capital gain.
One caveat when reading investment books is that the investment strategies outlined in the book is based on what fits the author best. All of us are unique in our own ways with differing talents and personalities. Just because Dr Leong can be successful with a concentrated portfolio does not mean that his readers can. A concentrated portfolio is actually a highly risky method as compared to investing in a diversified passive index fund or ETF. Readers should not blame the author if they follow his strategy without the same outcome.
Most of the good books I have read on investing were written for US investors. It is refreshing to find a good book like "Your First Million - Making it in stocks" which is written in the Singapore context. I cannot say it is the best because this is the only Singapore-centric investment book I have read so far. I highly recommend "Your First Million - Making it in stocks" for fellow investors who want to invest in the Singapore stock market.
PS: I am not paid a commission to write this promotional article. Dr Michael Leong does not know my real identity. Nobody can pay me any commission because nobody, not even my parents, knows my real identity except my wife but she does not like to read my blog.
A good education does not always have to come with a high cost. Reading good books is a cost-effective way to get a good education. I would suggest to kiasu Singaporean parents that after your kids are old enough to read books on their own, encouraging them to read good books is more value for money than sending them to enrichment courses. It will be interesting if someone can do a study on whether the lucrative tuition industry in Singapore has enriched our kids more than impoverish our parents.
In investing, it is even more important to read the right books. Unlike the hard sciences where nonsense can be invalidated through rigorous experiments via the Scientific Method, nonsense teachings on investment can appeal to readers by playing on their sense of greed and fear. This is why so many people, even smart ones, fall prey to investment scams which look downright stupid on examination.
Investors are money-minded people. It is hard to make money by writing books for the small Singapore market. To make more money, it makes more sense for investment gurus to spend time on investment than writing a book on investment. Some authors use their books as marketing material to promote their much more lucrative trading courses which charge thousands of dollars. I do think some of the financial trainers know their stuff and their students will gain some benefit. However, attending expensive trading/investment courses is not a cost-effective way to get educated compared to reading good books, not to mention these authors will withhold some of their knowledge from the books to keep the best for the more expensive courses. It is only fair to keep the best for the best-paying customers.
When choosing investment books, one thing to look at is the background of the author. He should have the right background to know his stuff. He should have a long and positive track record to prove that he knows his stuff as well as to temper theory with practical advice. Lastly, he should be willing to share his knowledge, preferably without hidden agenda. The last characteristic is almost impossible. How can you expect altruism from investors who are money-minded by nature?
I believe Dr Michael Leong, author of the book "Your First Million - Making it in stocks", comes closest to fitting the above characteristics. He was a successful entrepreneur as the Founder of ShareInvestor.com. Successful businessmen are better investors because they know what to look out for in assessing a business. It certainly helps in analyzing companies. Being in charge of a financial media company that supports public-listed companies brings him in close contact with numerous CEOs of Singapore's most successful companies. Very few has this privilege. He shares his insights from these experiences in his book.
In the old days, ShareInvestor forum(no longer visit the forum nowadays) attracted very good private investors to share their special insights. Old-timers will remember wonderful contributors like Mossie and Warren. I believe members of the forum, including Dr Leong himself, picked up some of their investing prowess from interaction with these forummers who shared willingly without expecting much in return simply because they like to talk about investing.
Dr Leong made enough money from his investments to enjoy an early retirement. This is a proven track record for fellow investors to at least read what he writes about investing. The fact that he is retired is one of the things that attracted me to the book. A person who has already made enough money from his investments to retire from the rat race is more willing to share his knowledge without hidden agenda because he has already reached his money goal. If an investment book was written by people like me who still has kids to feed and in constant worry of retrenchment, do not expect similar altruistic sharing. Recently, Dr Leong told me this about his book (in his exact words), "I truly wrote it for my kids as they are not interested in these things currently and I am concerned that when they are, I may not be able then to recall as much as I can now." What can be more genuine than advice to one's own kids?
Readers may consider reading the last chapter of the book "Money and Life" first. It is a chapter on Personal Finance and a person's relationship with money. Not many of us can be rich through investing but most of us can stay out of financial trouble by following basic Personal Finance practices like saving money and not getting into heavy debts. Therefore, the order of learning should be Personal Finance first, then investing for capital gain.
One caveat when reading investment books is that the investment strategies outlined in the book is based on what fits the author best. All of us are unique in our own ways with differing talents and personalities. Just because Dr Leong can be successful with a concentrated portfolio does not mean that his readers can. A concentrated portfolio is actually a highly risky method as compared to investing in a diversified passive index fund or ETF. Readers should not blame the author if they follow his strategy without the same outcome.
Most of the good books I have read on investing were written for US investors. It is refreshing to find a good book like "Your First Million - Making it in stocks" which is written in the Singapore context. I cannot say it is the best because this is the only Singapore-centric investment book I have read so far. I highly recommend "Your First Million - Making it in stocks" for fellow investors who want to invest in the Singapore stock market.
PS: I am not paid a commission to write this promotional article. Dr Michael Leong does not know my real identity. Nobody can pay me any commission because nobody, not even my parents, knows my real identity except my wife but she does not like to read my blog.
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