Long Term vs Short Term

This has always been a subject of discussion when I talk to people about building their long term wealth or the "Golden Goose".

The main idea is to have your money work as hard for you as you do for it. Our mission should be to save and invest rather than to spend it all. And this is a skill which we have to choose to develop, the rich skill and the poverty skill. It's may sound like a funny way of describing it, nevertheless it holds a lot of truth.

Rich skill is to have a lot of money and spend a little, while the poverty skill is having a little and spend a lot.

So long-term versus short-term, lets put it in simple terms: Poverty skill: people work to earn money to live today.
Rich skill: work to earn money to pay for investments, which will pay for the future.

Financial Freedom

The great debate!

In his book "Secrets of the Millionaire Mind" T.Harv Eker said when it's comes to the money game, most people don't have a clue to what it takes to win. That got me thinking and I read on to discover a unique blueprint that can easily be understood and applied.

His definition of financial freedom is simple: it's the ability to live the lifestyle you desire without having to work or rely on anyone else for money.

The desired lifestyle would cost money! Therefore to be "free" you will need to earn money without working. To win the money game, the goal is to earn enough passive income.

Two primary sources of passive income.

1. Money working for you.
This includes investment income from your stocks, unit trust, ASB as well as owning properties or other assets that appreciate in value and can be liquidated for cash.

2. Business working for you.
This means generating an ongoing income from a business where you do not need to be personally involved. WOW...that means the business must have it's systems in place. Of course, you need to build it up first...but once that is done...passive income comes in.

So by choosing business opportunities that immediately or eventually produce passive income, you'll have the best of both worlds - working income for now and passive income later.

Now, go have fun building up your investments and that business...just make sure that it's got the passive income structure. Good or good?

Buy America. I Am.

This is an extract from the text of an opinion piece written by Warren Buffett and published in the New York Times on Friday, October 17, 2008:

In his opening remarks this is what he said.

The financial world is a mess, both in the United States and abroad. Its problems, moreover, have been leaking into the general economy, and the leaks are now turning into a gusher. In the near term, unemployment will rise, business activity will falter and headlines will continue to be scary. So ... I’ve been buying American stocks.



This is some of the points, in summary of his reasons why.

1. A simple rule dictates my buying: Be fearful when others are greedy, and be greedy when others are fearful.

2. Fears regarding the long-term prosperity of the nation’s many sound companies make no sense. These businesses will indeed suffer earnings hiccups, as they always have. But most major companies will be setting new profit records 5, 10 and 20 years from now.

3. I can’t predict the short-term movements of the stock market. I haven’t the faintest idea as to whether stocks will be higher or lower a month — or a year — from now. What is likely, however, is that the market will move higher, perhaps substantially so, well before either sentiment or the economy turns up.

4. Bad news is an investor’s best friend.

5. Equities will almost certainly outperform cash over the next decade, probably by a substantial degree.

So there we have it, Mr Buffett's strategy. He's buying America. Question ... who are you buying?

You can read the full article at New York Times.

If you want further elaboration, you can also see what our team member, Mr Techno Lim has to say. Just click here to go to his blog.

What would the trend be in Malaysia ...

It's interesting to look at how matured market like the United States have grown in the mutual fund industry. Just have a look at some of the statistics.

As at end of 2007, the United States has US$12 trillion (RM36 trillion) worth of assets under management, Malaysia on it's private sector unit trust has about RM70 billion. The US has more then 8,000 funds and Malaysia has about 500. There are more funds available in the US than there are stocks on the NYSE.

How will this trend affect the local unit trust industry? Will it create more opportunity, will we see more funds being introduced, will the fees be going down further? Well, as I am not one of those futurist, what I can say, as far as learning and experience ... the best is yet to come.

Thanks Eddie...

Eddie is one of our senior consultants at LVG Consultants. Thanks Eddie for your contribution on the 4-Step Success Strategy:

1. Journey (or time period)
Unit trust investment is not meant for short-term gain. The recommended time period is three to five years.

2. Discipline
Consider investing regularly. This way, the investor rides both the ups and downs of the market to optimise their returns. This investing strategy is known as “Ringgit Cost Averaging”.

3. Monitoring and review
Engage a professional consultant or advisor who can constantly keep you updated with market developments as well as your investment portfolio. The advisor should offer a solid investment
strategy for the medium to long term period.

4. Taking action
Decide in advance what action must be taken when:

• the investment returns target is met
• market conditions indicate change, either for an upturn or downturn
• your risk profile changes
• your financial goal changes