Thursday, September 28, 2006

Money matters

Consultants and experts......
This year has been a traumatic one for many of my close friends with regards to money matters. I have encountered many times where my friends who are close to me getting involved in dubious and frivilous investment schemes promoted by eager "consultants" and "financial experts". Nowadays, every "Tom, Dick and Harry" is an expert in finance. In this article I am not dishing out any advice on finance. Far from it, I would like to just share some of my friends and my own experiences(adventure and misadventures) on this matter of utmost significance. We all agree that because of money, family and life can get destroyed, literally and figuratively speaking.

The real expert....Sir John Bond, the highly successful Chairman of HSBC who retired this year after heading the second largest bank in the world for many years has this to say. In an interview which I read in The Edge this year he was asked as to what one single advice he wanted to share with the world. He said that in his life long carrier he always "learn the most from OTHER PEOPLE mistakes". Seeing, understanding and learning from other people's misadventures helps him NOT to commit the same mistake. Abraham Lincoln also penned the famous statement that "History repeats itself for those who do NOT LEARN from it". In this way, we will not end up in the situation where "Fools rush in where angels fear to tread".

Money makes money....The above statement has become famous after Robert Kiyosaki used it in his blockbuster book, "Rich dad, Poor dad". He introduced the concept of having a passive income stream whereby an astute investor need not have to work at all but yet have an endless and abundance of money to spend. Something like "they live happily ever after" fantasy world. The Bible(NIV) in 2Th3:10
says "If a man will not work, he shall not eat". This is clear indication that everyone should work until his retirement comes and not fall into the trap of wanting to "enjoy life without need to work". Work is good as it gives us a purpose and worth in life. If you do not like your work now, it is not a change of the type of work that is required but rather a change in our heart towards that work. Our attitude towards it is critical. John Wesley has reminded us on this matter when he says about 300 years ago "Work as hard as you can, earn as much as you can, and give as much as you can". Moreover, "idleness is the devil's workshop".

Investment....The most often used tactics by "financial experts" to lure people to invest in all kinds of funny schemes is by using inflation as a weapon to "scare the hell" out of those who are not investing. Their reasoning goes like this. Our inflation rate for Malaysia this year of 2006 is about 3.5%. Our fixed deposit rate is 3.75%. By not investing and keeping your money in the bank, our money is not actually growing(that is shrinking) albeit at a minutae 0.25%. Many times they convince us by saying that the real inflation rate is much higher. Just look at the price of a car or house 10 years ago and now. So you cant loose by investing. That logic is erroneous. Why? Most of the times, the investment they suggest gives worse returns!!! I mean negative territory. Although, they always portray a rosy picture at the begining. But we all know that it is at the end when we liquidate that counts for all our intent and purposes. The second richest man in the world (next to Bill Gates), Warren Buffet who has also been called the "SAGE of Omaha" has always maintained that the most important single rule of investment is "NOT TO LOOSE THE CAPITAL" . In other words, you are likely to even loose your pants in investing if you are naive and stupid. Even, Sir Isaac Newton, the brilliant scientist lost a huge fortune in shares and henceforth noted that " I can calculate the pathway and trajectories of the heavenly bodies but not the folly of humankind"

Should I invest.................Almost all people who are hard at work in their field does not not have the expertise, time and energy to invest in areas outside that field. In other words, if your line is not in finances, by reasoning you should not invest. Without skill, knowledge and experience in investment you are "trying luck" and tempting fate too much. During my childhood days, I remember very clearly the game called "Tikam Tikam". In the canteen or sundry shops are these beautiful toys hanging there as prizes for all to get if by luck the tiny slip of folded paper which we buy (something like 10 cents for each slip) strikes it. On hindsight now, the unwary and foolish candidate is invariably the loser. Many times some of the toys are still hanging there when all the slips have been purchased!! In other words, most of us are actually not equipped to invest at all in our life span. Dont "Tikam Tikam". Caveat Emptor("Investor beware"). Better to have simple food on the table than the "roast duck in our dreams".

Conclusion of the matter

Eccl 12:13 "Fear god and keep his commandments for this is the whole duty of man".


  1. I like what John Wesley said, "Work as hard as you can, earn as much as you can, and give as much as you can". This is probably how I will answer the first question in our bible study of Hebrews, Chapter 13, which I shall be leading this week. Thank you for the advice and making my job simpler.

  2. Actually it is more than laziness that is the pitfall of many "investors", most of the downfalls are due to GREED and FEAR. The herd mentality is always driven by these 2 factors.

    Some simple principles of investment - manage your immediate finance first i.e. always pay your credit card in full, if you decide to buy a car make sure you have the money or minimise your loan so that you do not pay out unnecessary interest.

    For those with "spare money" i.e cash after deducting 6 x monthly expenses (which should be set aside for contigency e.g. sudden loss of job, emergencies...) then one can invest some very "solid" shares or good properties to keep up with inflation. Examples of these shares would be Maybank, Public Banks because if these shares were to collapse our ringgit would be worthless anyway.

    But there is always some elements of risks in everything and hardwork is always needed but it will be more enjoyable if more is more prepared.

    Hope it make sense.....