Category Archives: Wealth

Total Money Makeover


daveramsey.jpgA Proven plan for financial fitness (2009)

By Dave Ramsey

The author supports the debt snowball method, where debtors pay off the lowest balance debt first before paying off for the highest interest rate debt. Small victories give the debtors motivation.

He has certain myths and truths in his book.

Myth : Debt is a tool and should be used to create prosperity.

Truth : Debt adds considerable risk, most often doesn’t bring prosperity, and isn’t used by wealthy people nearly as much as we are led to believe.

Myth : If I loan money to friends or relatives, I am helping them.

Truth : If I loan money to a friend or relative, the relationship will be strained or destroyed. The only relationship that would be enhanced is the kind resulting from one party being the master and the other party being a servant.

Myth : Car payments are a way of life, you’ll always have one.

Truth : Staying away from car payments by driving reliable used cars is what the average millionaire does; that is how he or she becomes a millionaire.





Buckets of Money


bucketsofmoney.pngBuckets of Money: How to Retire in Comfort and Safety (2004)
By Raymond J.Lucia

Most of what the author say is in American context. In 2012, he was accused by Securities and Exchange Commission for spreading misleading information.

Regardless of this, he has an interesting idea of putting your retirement planning in a few buckets of money. Or what to do when you are going to retire.


You have 3 buckets. In bucket number 1 you put your money for the next 5-7 years (for very safe and secure investments or those generating income – REITS) . Bucket number 2 is for the next 5-7 year period after that (can take some risk) . And finally, bucket number 3 is for the money you will not need for 10-14 years (can take more risk).

He has a few interesting Lucia’s Law that he talks about.

  1. The government isn’t going to take care of you.
  2. Don’t count on your employer to take care of you, either.
  3. It’s not what you make.. but what you keep that counts.
  4. If you don’t invest in stocks, you won’t be financially prepared for retirement.
  5. Too much trading can be hazardous to your wealth.
  6. Trying to pick the best mutual fund is an exercise in futility.


High Income Guide


highincomeguideBy Andrew Packer (2013)

This book is a very hands-on guide that really tells you specifically which are the things to buy in the context of America.

There are 3 financial sources in America to secure “golden years” – Social Security, retirement account and value of home.

Today’s retirees face significant headwinds especially in inflation. Albert Einstein calls “compound interest is the most powerful force in the universe. Inflation is also a compounding force. A dollar invested today, with interest re-invested, performs substantially better than if you don’t re-invest.

In a 1994 book “Stocks for long run”, Siegel’s research showed that over a long enough time period, returns on stocks with the dividends reinvested beat every other asset class hands-down.

These are some of the guides that the author provides. However, it may not be latest and things may change. Hence, take it with a pinch of salt.

  1. 3 Dividend giants safe for income : – Johnson & Johnson, Wal-mart and Cisco.
  2. 3 REIT : – Realty Income, Long term care type of REIT (skilled nursing properties), Annaly Mortgage (NLY)  etc.
  3. 3 Master Limited Partnerships (MLPs) : – Kinder Morgan, Buckeye Partners, Boardwalk Pipeline Partners.
  4. 3 Trust Preferred Payout : = Nuveen Quality Preferred Income Fund (JTP), Goldman Sachs Preferred Series D, ING Perpetual Hybrid Trust.
  5. 3 Covered Call Opportunity : – ING Global Equity Dividend and Premium Opportunity Portfolio Fund (fund writes covered calls), Madison/Claymore Covered Call and equity Strategy fund, Blackrock Enhanced Dividend Achiever Trust.
  6. 3 Business Development Companies (BDC) : = Hercules Technologies Growth Capital, Ares Capital, Apollo Investment Corp.
  7. Currency Plays : – Aberdeen Asia Pacific Income Fund (FAX) – bond fund which is low risk and income oriented, some currencies trade in opposite direction of US$ :
    1. Currency Shares Australian Dollar Trust (FXA)
    2. Currency Shares Swedish Krona Trust (FXS)
    3. Currency Shares Mexican Peso Trust (FXM)


Real Tips, Real Money


realtips What financially savvy folks know about money that others don’t (2003)
By Leong Chan Teik, Leong Sze Hian and Dr David Tay

It has been a few months since I last read. This book may be published more than 10 years ago, with some information outdated. However, it does provide some real insights on some financial areas about money.

  1. Avoid the kiss of debt
    Overspending can be undoing of everything you have worked long and hard to achieve, and in some cases lead to total devastation.
  2. Broken Nest Eggs
    Economic slumps hurt everyone, but perhaps none more so than retirees or those approaching retirement especially those who have made wrong financial moves with their savings.
    – Do not concentrate investments in one asset class.
  3. >

  4. How able are you able to fork out cash in an emergency?
    Calculate your liquid assets to net worth ratio. Liquid assets include shares and unit trusts while net worth is all your asset minus liabilities.

    Rule of thumb : The ratio should be 15% or more.

  5. >

  6. How able are you able to repay debt?
    Calculate debt to asset ratio, which is your total debt divided by total assets. (Assets include properties)

    Rule of thumb : The ratio should be below 50%.

  7. >

  8. How much can you afford to have your assets decline before you become insolvent?
    Work out your solvency ratio, which is total net worth divided by total assets. The lower the ratio, the higher the chance of bankruptcy.

    Rule of thumb : The ratio should be 40% or more.

  9. >

  10. Don’t be slave to numbers.
    A ratio by itself actually means very little. For example, if a person spends 50% of take home pay on personal development and educational course fees, does it mean that the person is not prudent?

    It is the integration and analysis of one’s current financial situation and future plans relative to one’s financial goals and concerns that really matter, rather than benchmarking with financial ratios, which may do more harm than good.

  11. >

  12. Bet on leaders who are desperate to be No.1.
    When investing in a company, find out the character of the leaders, their psyche, their determination to succeed beyond just being decent corporate stewards. Avoid successful Asian enterprises which start losing their lustre after the deaths of their founders. The decline happens because the new bosses lack the drive and hunger to be No.1.
  13. >

  14. When should stock investors cut their losses?
    Sell if the stock falls to a level representing a loss of up to 20%. Sell if there are signs that business fundamentals are worsening. Sell a stock when it has become the market’s darling. Sell when a stock or sector has too large a representation in your portfolio. Sell when you see more potential for gains elsewhere.
  15. >

  16. Usefulness of lifelong protection from whole life policies.
    Someone’s mother had a heart problem and was hospitalised for nine months before she died. Her bill was about $750,000. Everyone in the family had to cough up $100,000 each. If you don’t have insurance, it is your family who have to pay.
  17. >

  18. Cash is not always king.
    Cash grows at a lacklustre pace compared to long term investments in blue chip stocks.
  19. >

  20. Respect your elders
    If being nasty can cost you friendships, consider what is at stake if you are a potential beneficiary of a large inheritance. In one case, a widower had willed most of his assets initially to his only child, a daughter, but in his final years, made a complete U-turn. He left all his money to charities and hospitals here and in India. The daughter got nothing. She challenged the will but was unsuccessful.





The Chinese Way to Wealth and Prosperity


The-Chinese-Way-coverBy Michael Justin Lee (2012)

Here are some things I learn from the book.

  1. Obtain a fine education and then apply it.
  2. Go Mobile ad go global in pursuit of opportunity. People who have the stomach to leave their homeland in the first place, leaves everything behind, very likely have the stuff that converts big dreams to reality.
  3. Create a guanxi network. Top salespeople ferret out opportunities to perform a good turn, thereby establish a likelihood that the recipient will at least listen to a sales pitch at an appropriate time in the future.
  4. Debts inhibit wealth creation.
  5. Sow early, sow often. The more money you sow in the early years, the more you will reap in later years.
  6. Let time and miracle of compound interest do your heavy lifting for you.
  7. Utilize the advantages for tax code to make more money work for you.
  8. Greater attention must be paid to defer gratification.
  9. It is good to at least own a property for your own primary residence.
  10. Gambling is a great barrier to prosperity.

The Story of Rich


StoryofRichThe Story of Rich: A Financial Fable of Wealth and Reason During Uncertain Times by J.D.Joyce (2012)

This is an investing story that provides insights into dealing with your money and finding financial security. There is usual things like you must make a plan, have goals, risk tolerance, cash flow etc.

Tom’s brother put almost all of his money into investment portfolio and lived on capital gains and dividend payments. When market crashed, Tom’s brother’s portfolio dropped in value and stopped producing returns. He had to cash out part of his portfolio when it was undervalued just to have money to cover basic expenses.

Tom was not going to make the same mistake as his brother. He and his wife figure that they need a figure of $180,000 a year for living expenses and travel. So they took $720,000 – 4 years worth of cash flow – out of their potential investment funds and set it aside.

The first $180,000 was left in cash for year 1. Then they bought 3 certificates of deposit (CDs) for the remaining 3 years. They put $180,000 in a one year CF for the second year of the ladder, $180,000 in a 2 year CD for the third year, and $180,000 in a three year CD for the fourth year.

At first it was difficult to watch so much of our cash sitting in short- and medium-term fixed income assets, making virtually nothing. Infact, if you look at the real return after inflation, some of it may be generating a slight loss.

From the peak of the market in October 2007 through the trough in March 2009, the S&P 500 dropped 58%, while small caps fell 59% and international holding decline 62%. Tom looked around at his community of retired friends. Many had seen their cash flow dry up because they had everything invested in stock market or real estate.

“I was worried, of course,” Tom said. “But I wasn’t overly concerned because I knew I had over 2 years of cash flow before I needed to rely on earnings from my portfolio.”

The following year 2010 the stock market grew and their financial advisor started pointing out some healthy gains in their small caps. That’s when they revisited their cash flow ladder to prepare for the years beyond their original 4 year plan. They harvested some gains from the small cap assets and put them towards their cash flow savings for year 5 along with $30,000 they had saved in 2009. Three years into their cash flow ladder, they were pretty much set for year 5. Since then, they had been making similar preparations for year 6.

The Behavior Gap


ImageSimple Ways to Stop Doing Dumb Things with Money By Carl Richards (2012)

This is one of those really interesting books that I read that can revive my interest in reading. The author has a humorous and direct way of writing, that it feels most genuine that he is giving his advice and sharing his experience.

1. We don’t beat the market, the market beat us.
You need to have a real plan, like deciding where you want to be, and how you are going to behave to get there. Find investments to populate your plan.  Admit there is a problem. Face the fact that cash is not a solution to crisis. Develop a checklist of questions to ask before you make major financial decisions. Take your time and incorporate new information slowly. Focus on your behaviour and not the market.


2. The Perfect Investment
There is no such thing as best investment. The best investment depends on personal factors – such as your goals, your personality, your existing holding, your credit card balance.


3. Ignore advice, make fun of forecasts
Goals of educational institutions and a person’s goals as a human being are almost certainly very different. Institutions get very different deals on their investments. Fees on alternative investments and hedging strategies put them out of reach of people like you and me.


4. It is not financial planning. It is life planning.


Why we want financial security is because we want to be happy, and to provide a good life for our loved ones.  Happiness is more about expectations and desire than it is about income. Financial decisions are almost like life decisions. Before you decide on your financial goals, you need to choose your life goals. When you link financial decisions to life decisions, you encounter a whole different set of challenges. Each person’s financial situation becomes unique because their goals are unique.


5. Too much information
 Spend less time watching and worrying about money. – less time giving in to our anxiety, our need to control things. Gathering information – being in the know- is not the same as being mindful, being aware, being present for what’s actually going on behind the news.


6. Plans are worthless
Limit your attention to things that matter to you and things that you can influence them.


7. Feelings

Investing, like life itself, forces us to make decisions in the midst of uncertainty We will never be right all the time. How can you tell whether to act or not? Try asking the two questions :

1. If I act on this new information and it turns out to be right, what impact will it have on my life?

2. If I act on this new information and it turns out to be wrong, what impact will it have on my life?

Just forcing yourself to consider the potential outcomes of being wrong will result in making much better investment decisions.


8. You’re responsible for your behaviour (but you can’t control the results)

Make sure you consider the bigger picture – the context of your behaviour. A single action may have broader financial consequences that aren’t immediately obvious. For example, you decide to start your own business. Your daughter workers there in the summer and ends up running it. This could be good or bad – but it probably wasn’t part of the plan.


9. When we talk about money

Sometimes generation gaps or upbringing can cause different perspective. My friend and his wife always believed it was important for them to teach their kids that there are limits to what their family could buy. Like many of us, my friends made their case by falling back on the statement , “We can’t afford that” each time their kids asked for something. After a few months of this, my friend’s 14 year old son asked him a question : “Dad, on a scale of 1-10, with one being homeless and ten being Bill Gates, how much money do we have?” As they discussed their situation, it was clear that their son was asking not because he wanted to buy more things, but because he was actually worried whether the family was okay. My friend assured the boy that he didn’t have anything to worry, but explained that they didn’t have unlimited money. They should spend their money on things that really mattered, and avoid buying things that weren’t really important to them. Okay. Make sense.

Kids often know more than we think they do. They sense anxiety even if they don’t make the immediate connection to money. We can’t afford that is not the same as “We ‘d rather use our money for something more important.


10. Simple. Not easy.

Slow and steady capital is short term boring. But it’s long term exciting.