"Investing' is a need: part 2 - Insanity

Albert Einstein defines Insanity as doing the same thing over and over again and expecting different results.

If his definition of Insanity still holds true today, at least half the populations are insane.

Previously, we were talking about the different "asset" class that the poor, middle class and the rich invests in.

There are people, especially those that belongs to the middle class, investing in the "asset" class of the poor and middle class and expecting to achieve the rich people kind of results.

No wonder they are wondering when will the "big waves" come to ride them up to be on the same level as the rich.

The middle class expects the "big waves" to come to them while they are at their comfort zone while the rich get out of their comfort zone to go to the "big waves".

The Pareto's Principle (also known as the 80-20 rule) states that in anything a few(20%) are vital, and many(80%) are trivial.

And in Pareto's case it meant 20 percent of the people owned 80 percent of the wealth.

It holds true in the Industrial Ages.

But as we entered into the Information Ages, I believe personally that the 10 - 90 rules holds true in the world of money.

That the 10 percent richest owns 90 percent of the wealth in the world.

Accoding to a survey done in america @ http://www.mybudget360.com/top-1-percent-control-42-percent-of-financial-wealth-in-the-us-how-average-americans-are-lured-into-debt-servitude-by-promises-of-mega-wealth/ .

That the top 1% owns 42% of the wealth US.

This means that the middle class is shrinking.













As we are entering into the core of the Information ages, there will be more multi millionaires than ever, and there will be more poor people needing a handout from the government or the rich to help them to just "get by" life.

Which category will you fall into ? I know that I will be among the rich.

Investing for capital gain is the playground for the middle class, although once in a while the rich comes in and take what is rightly theirs.

For many of us, security is our focus.
But security in a job never buys you riches of the rich.
Because you are working for the rich, and how will they pay you more than themselves?

A part of us wanted to be like the rich, yet unwilling to step out of our "comfort" zone into a world of temporary discomfort.

So coming out with a doctrine for this group of middle class is the fastest way to make money.
The financial predators taught us to "invest" like the middle class & telling us that it will bring us into the world of the rich, yet allowing us to stay in our comfort zone.

What they are telling us only happens in fairytales.
And fairytales isn't just for the children.

People like you and me buy into fairytales hoping that it will come true in life.
You cannot do the same thing over and over again and expecting different results.
That's crazy!

"Investing" is a need

I would like to clear some misconception about investing, and I would like to ask my readers to "hear" me with an open mind.

Misconception No.

1. Investing is risky
2. Investing is only for the "rich"
3. Investing is not my cup of tea.
4. Since I'm not a finance student, it's "safer" for me not to invest, instead I'll get my master, work hard, save money.
5. I have no money, therefore, I don't invest.

When I say investing, I'm not just saying investing in unit trust or the stock market.

Everybody is investing regardless you know it or not, it's just that different group of people invest in different things.
Let's see the differences in what the poor, the middle class, the rich invests in.

The Poor invests in,

1. Children
I'm not against you having children, and I personally know of some of the very rich people having alot of children because they love kids and like to groom their kids and see them growing up useful to the society. One of the example is Ng Teng Fong.

But generally, all over the world, we can tell that the poor generally invests in children.
Just like my grandparents have 8 kids, and i believe your grandparents have alot as well.
For asian like us, it's only right for us to take care of our parents when they grow old, so by having more kids, they would in a way have a better retirement.

And, during their times, our country is not as prosperous as it is today.

2. Invests in "depreciating" material gains.
Once they get some money, they first thing they spend their money on is a good meal way beyond their budget, buying things for instant gratifications, and before you know it, that stuffs is being thrown away.

3. Invests in poor mindset.
Usually, this group of people submit to Fate that this is their life.
They don't bother to do anything to make themselves more valuable to the society.
People in this category always say things like," last time i never study hard, that's why now i'm poor"
They don't realised that our greatest asset is not a degree from harvey, but our ability to think.
I can show you examples of people who didn't even complete secondary school yet is richer than people who have a 1st class degree. They can actually start by thinking "how can I add more value to my workplace so that my boss notice me?" or "I must do my job to the best of my ability!"
People with this mind-set seldom stay poor for long.

Let's move on to what the middle class invests in.

1. A good education/degree
2. A secure job with good benefits
3. get married and buy a house(thinking that their house is their greatest investment)
4. Save money for one group of middle class/ bad debts through credit for another group of middle class
5. Invests the remaining into a well balanced, deversified portfolio of unit trust.

Finally,

let's take a look at what the rich invest in

1. Financial knowledge
2. how money works
3. Real estate
4. Hedge fund/Private equities/ Private placement Investment
5. Business
6. Good real estate & insurance & stock broker (the rich pays these group of advisors very well)
7. Lawyers & accountant & doctor (the rich pays these group of advisors very well)

They don't try to cut corners when meeting up with their brokers and say that their rates are too expensive.

They understand that the advise that comes out from the mouth is worth more than that few dollars.

Knowing these, knowing that we all invest, why not invest in something that helps us to get to our financial goals, instead of doing things that will keep us poor or just mediocre at best.

I'll move on into details next week!
See you again.

Not too long back

It's not too long back since majority of the population is made up of small business owners instead of employees working for the monopolies of businesses.

Yet as I talk to people around me today, they asked me the same questions like

1. If everybody is going to start our own business, who is going to work for you?

2. If everybody is going to start our own business, businesses will no longer be profitable.

I feel that these are unrealistic fears.

It's not too long back when some of our grand parents or great grand parents own a farm or a plantation.

Having your own cattles and selling it for money(i mean real money) or exchanging it for the commodities which we need with other "business owners" in other industries.

The reason we felt that it's impossible for the majority to have their own business is the way we are taught since we are young.

Our parents and our school system taught us to study hard, so that we can get a high paying job.

Job is working for the rich people, minding their businesses, making money for them.

From young, we are taught to prosper other people but not prospering ourselves.

Ever since the start of the Industrial Age, it makes more sense to work for the big business owner than to try to start your own businesses.

Because big businesses provides you with a stable paycheck.
AND they provides you with a paycheck for LIFE!

But recently, not too long ago, companies no longer wants to pay it's staffs for life.

Instead, we have what we called the CPF in singapore.
Where your employer match your contribution in this retirement account.

With effect of this law, employees no longer have a stable paycheque for life, after retirement,

should they spend finish their money in the retirement account, they are left on their own.

unlike a paycheck for life, you finish spending this month income, you just starve yourself till next month and a new paycheque will come in.

Businesses only realised after a while that the an income for life pension plan is too expensive an expenses for the business.

But with today inflation rate, having an income for life pension plan also doesn't guaranteed a comfortable retirement.

Not to mention having an account call CPF, where your employer match your contribution.

So why does people still play by the old rules of life, get a job, and look out for better jobs with better prospect with better paycheque, every night check your email for job updates.

They thought that always looking out for better prospect, better paying job is the smart thing to do, but actually, they are still living in the Industrial Age.


They doesn't realised we have already moved on into the Information Age.

I'm not against you having a job, receiving a paycheque.

But i'm against you having a job because you doesn't have a choice, you need a paycheque.

Put it this way, having to work at a job you hate is evil.

Having not enough money to support your current lifestyle and family is evil.

It is the lack of money or so call "greed" that cause people to do stupid things,
example gambling.

Have you experienced first hand of people around you committing suicide due to compulsive gambling and being in debt and unable to pay the debt.

And what happened?

These people took the easy way out, they get out of this world by choice.

And the very reason they went into gambling is because they lack money, they resort to gambling, all in the name of loving their families.

But the lack of knowledge to make more money to provide for their lifestyle and family is evil.

So I decided to write a blog, to share my knowledge with all of you, hoping that it will benefit you guys.