Invest In Stocks Using A Monthly Investment Plan

Utilize the dollar-cost averaging method while reducing your commission fee. What is there not to like?

Just a year ago, investing in blue chip stocks listed on the Singapore Exchange (SGX) seems like a rich man's game not meant for everyone. That was because board lot sizes were only available for purchase in multiples of 1,000. In those days, it was difficult for retail investors to invest in all companies, since some stocks such as OCBC would cost roughly S$10,000 per lot.

Since then, minimum lot size have been reduced significantly to 100 units allowingyour favourite blue chip counter to be within reach.

Read also: Reasons to begin investing in 2015

While the above mentioned is helpful for investors who would like to get started without a sizable capital, it poses yet another problem, and that is, the high commission cost that one incurs when buying stocks in small units. Frequently, retail investors still have to pay a minimum fee of about $25 per transaction regardless of the value of the stocks that they are purchasing.

Some stock brokerage houses have introduced monthly investment plansas a way to help offset the problem of incurring significant commission cost. As the name suggests, these investment plans allow you to invest a fixed amount of funds each month into buying the stocks of your choice.

They provide an affordable and hassle-free way for those who want a relatively easy way to invest. In addition, investors are also able to effectively take advantage of "dollar-cost averaging" thus benefitting thosewho do not have the time or the patience to be monitoring the stock market regularly and react accordingly to fluctuations.

Where to go for Monthly Investment Plans

There are currently 4 major players offering monthly investment plans namely: POSB Invest-Saver, OCBC Blue Chip Investment Plan, POEMS Share Builders Plan andMaybank Kim Eng Monthly Investment Plan. Since all of them allow investors to kickstart investing with as little as $100 a month, we will do a minor comparison of the other features with the chart below to understand the differences and similarities. 

	POSB	OCBC	Poems	Maybank Kim Eng
Share counters available	ABF Singapore Bond Index Fund & Nikko AM Singapore STI ETF	18 local share counters & Nikko AM STI ETF	19 local share counters	225 share counters across 5 markets (Singapore, USA, Hong Kong, Malaysia and Thailand)
Fees	0.5% sales charge per transaction for the ABF Singapore Bond Index Fund	0.30% of the total investment amount OR S$5 per counter, whichever is higher	≤ 2 share counters: $6 for inv. of $1,000 and below, the higher of 0.2% or $10 for inv. above $1,000	1% sales charge for inv. < S$1,000
	1% sales charge per transaction for the Nikko AM Singapore STI ETF		≥ 3 share counters: $10 for inv. of $1,000 and below, the higher of 0.2% or $10 for inv. above $1,000	0.18% sales charge for inv. ≥ S$1,000; subject to min. of S$10
Dividends	Cash credited to DBS/POSB debiting account	Cash dividends credited to OCBC account; Stock dividends or bonuses safe-kept with OCBC Securities	Dividends are being reinvested but charged 1% on net dividend capped at $50	Dividends are credited into the Maybank Kim Eng account directly.

At first glance, POSB and Maybank Kim Eng stood out from the rest in the "Share counters available" category. The former is able to put forward the opportunity to diversify into bonds while the latter has more than 10 times of the counters as compared to OCBC and POEMS. In fact, being a newcomer to this market, Maybank Kim Eng is now offering zero commission for the period from 1 March 2015 to 31 August 2015!

As for the fees, assuming we invest S$1,000 monthly in just the Singapore STI ETF, OCBC turns up as the winner for its fees of S$5, equivalent to only 0.5% charge. Then again, considering a quantum of S$200 monthly, POSB and Maybank Kim Eng turn out to be better options due to their standard 1% sales charge; which would translate into S$2 as compared to S$5 and S$6 for OCBC and Poems respectively.

Last but not least, the dividends are usually credited to each bank's own account except for POEMS, which would reinvest it back back with a 1% charge on the net dividends (after tax if any).

Conclusion

Monthly investment plans are a relatively new approach to investing which is suitable for people who would like to adopt a long-term view in investing due to the beauty behind dollar-cost averaging.

Do you think a monthly investment plan will help you better invest in stocks? Discuss it with us on Facebook.

DollarsAndSense.sg is a website that aims to provide interesting, bite-sized financial articles which is relevant to the average Singaporean.

Written By: James Yeo

Why You should take Brokers' Analyst Reports with a Pinch of Salt

Conflicting Interests

If you have watched the "Wolf of Wall Street" Movie, the most significant takeaway is that people (not only stock brokers) are usually there for their own interests. When you know that a stock broker earns his pay-check by the commissions when you trade, you would have jolly well know that they will try all means to entice you to trade stocks in and out actively for their commissions to be as fat as possible.

Furthermore, they have the tendency to be slightly biased when the company is doing business with the bank they are working in too. That said, you cannot say that all of them are bad apples too. Some of them provide us with valuable and relevant stock information that are only available/accessible to them. My stock broker is one of them, everyday he sends me the forecasts and various reports.

However, ultimately I have to make the final judgement and decide whether to invest, according to my investment style. What he is doing is just to provide the information for me as a platform to filter through the stocks i want to look at. Thus, when you make money through their recommendations, you are happy and they will be happy too. However, if things turn for the worse, you cannot blame them as they are only providing recommendations - its up to you if you want to follow; and they are protected with disclaimers.

No crystal ball

When you see two different banks' analysis on a stock with different views, one say SELL, one say BUY, which one should you listen to? The following example below depicts the question relatively well...

Well, while analyst can do a detailed analysis of the firm using the same data set, different assumptions can lead to different results/outcomes. Neither one of them is wrong down here - they are just providing their viewpoint about where the stock price is going, a target price they say.

All in all, the lesson here is to educate yourself if you wish to be successful in stocks investment. And there is the slogan that goes - there is no free lunch in this world. You cannot expect to just buy into all the stocks recommended and think that you will become a millionaire at the end.

How Small Caps can present a GREAT deal of Opportunity

Found this article from Investopedia... Worth a read... its quite interesting..

Sometimes, buying stock in small capitalization companies - those with market caps of between $300 million and $2 billion - is more profitable than buying shares in large caps. In fact, according to Ibbotson Associates, an investment-consulting firm that also tracks long-term market data, small caps have increased in value by an average of more than 12% per year between 1927 and 2007. Meanwhile, large caps have increased just over 10% during that same time period.
This performance advantage is no coincidence. In fact, small caps have several advantages that large caps simply can't match. Read on as we cover how small caps can produce big gains and how you can pick a winner.

Temporary Valuation Disconnect
Small caps may outperform larger companies over time, but the operative words here are "over time." That's because smaller companies, primarily because of their lack of visibility within the investment community, often experience a disconnect between their stock prices and their fundamentals. This discrepancy between price and fundamentals presents a tremendous opportunity that small cap investors can take advantage of.

Thin Market
Small caps tend to be thinly traded, and while this is a characteristic that can slice both ways, it often presents a huge opportunity for shrewd investors. As the company grows its revenues and earnings over time and the public becomes more aware of its existence and future growth prospects, demand for the stock inevitably perks up. And when a large number of investors start to clamor over a very limited amount of stock, this gives small cap stocks the potential to rise quite rapidly.


Lack of Analyst Coverage
According to First Call, on Jan. 8, 2007, UBS Securities raised its rating on IBM from "neutral" to "buy." The stock edged up $1.17 on the news, or about 1%. But that move was nothing compared to what happened on Sept. 6, 2005, when Brean Murray upgraded Wilson's Leather from "accumulate" to "strong buy." The day the report went out the shares moved up roughly 4%, and within a week they rose almost 12%!

Why the discrepancy between reactions?

It's simple. At the time of the IBM upgrade, about 25 different analysts were covering the stock. This meant that there was a great deal of information already in the public domain, and it would take a major news announcement or an unusually bullish report or group of reports to move the stock substantially. However, at the time, only about five different brokerage firms had disseminated research on Wilsons. As such, the investment community was more apt to react in a positive manner.

Institutional Sponsorship
With regard to the benefits of institutional ownership, a terrific example can be found in a small cap called Labor Ready, which changed its name to TrueBlue Inc. (NYSE:TBI) in 2007. Back in late 1997, the temporary employment provider was trading in the mid-single digits. However, its then Chief Executive Glen Welstad went on several road shows where he met with a number of institutions, which warmed to the stock almost immediately.

The result of Welstad's aggressive public relations campaign was nothing short of amazing. Within a year's time, a number of big-name funds got involved in the stock and the shares skyrocketed into the $25 range.

A small cap company's lack of institutional sponsorship can present a huge opportunity, particularly for investors who get in early.


Eric Schmidt, who headed up Novell and later moved on to Google, once said in a conference call that big companies were like aircraft carriers or cruise ships, "they take a long time to change direction."

In many ways, this is a perfect analogy. In fact, it can take years for a larger company to bring a new product to market because of the committees that need to review its practicality (before its introduction), the legal vetting it must receive and the work that goes into its marketing and promotion. Small companies, on the other hand, have less bureaucracy and a genuine need to push products to market just to survive.

Take, for example, a small-cap restaurant business that has operations dispersed throughout the United States. Over time, this type of company would be able to refurbish its locations and make menu changes many times within a period of weeks or months. However, similar changes would be impossible for a restaurant giant like McDonald's (NYSE:MCD), which had more than 30,000 restaurants in 2007 - not to mention a bulky senior management staff with a reputation for moving at glacial speed.

The ability to be nimble enables a small company to seize opportunities (enter new markets, release new products, etc.) in a much more efficient way than its large cap counterparts. This allows it to grow sales and earnings at a 20 or 30% rate, whereas most corporate behemoths tend to experience mere single-digit growth.

Acquisitions
While larger companies can and do merge with or acquire other large companies, it doesn't happen very often. On the other hand, smaller companies always seem to have a target on their backs.

That's why, as of 2007 companies such as Isle of Capri Casinos, a casino operator in the Southeast, or Ameristar Casinos, a casino operator in the Midwest tend to do so well even during tough economic times. The ongoing possibility that they will be bought out by larger players acts as a perpetual catalyst for the stock.

It's also much easier for a large company, which probably has pretty deep pockets, to buy a small company that's already up and running than it is for the larger company to start a comparable operation from scratch.

The fact that smaller companies often have a target on their backs and that larger companies are often willing to pay a premium to acquire them makes small caps all the more attractive.

The Bottom Line
Small caps aren't necessarily a panacea for all portfolios, but they do have operational advantages that their larger cap counterparts do not. Factors such as being thinly traded or not having many analysts cover the stock may act as a double-edged sword but, for the astute investor, these factors can actually present a great deal of opportunity.

Personal Opinion

Small caps are without a doubt attractive when it can score you home run returns of 50 - 100% in a short period! Nevertheless, they come with risks as well.

The best way to play small caps is during a stock recovery phase as their % returns will exceed their blue chips counterparts easily. 

On the other hand, when it is recession time or during periods of uncertainty, REITs and blue chips which offer stable dividend yields can be your best buddy.

8 Laws of Investing from the Millionaire Next Door

Just read an interesting article from Yahoo which i bookmarked and would like to share with you all... This author makes me think of Dennis Ng and how he scrimped and saved and invested wisely to become a millionaire through simple means Anyone can do...

Here goes the story: In the year 2000, my personal life and financials were in the toilet. I was in my early thirties, my marriage was breaking up and I had to borrow against my meager 401(k) funds to settle with my ex. My net worth was right around zero. Since 2000, I've managed to increase my net worth around $1 million during one of the worst investment periods in recent memory. And no, I didn't get lucky with company stock options, win the lottery, receive an inheritance or even rob a bank. 

I'm one of those "millionaires next door" who you may have heard about. My wife and I have two kids, ordinary white collar careers and a shared financial philosophy that has enabled us to build wealth even during difficult economic times. 

We call these our "Eight Laws of Investing." 

1. Live BELOW Your Means - With everyone under the sun sending you pre-approved credit cards and offering special financing on homes, cars, appliances and furniture, it's frighteningly easy to obtain a lifestyle that's richer than your actual income. At our house, we carry no credit card debt and make sure at least 20 percent of our net income is left over to save and invest. If that means we can't have that huge pool or we have to buy a Toyota instead of a 5-series BMW, so be it. 

2. Keep a "Rainy Day Fund" - It's almost inevitable that at some point you'll face an income disruption, whether it's from an illness, corporate downsizing, divorce or other unforeseen event. Having a rainy day fund in a liquid asset (an interest-earning money market account is a good option) that covers six months of expenses will help you avoid a nightmare scenario of racking up credit card debt to pay the electric bill or incurring huge penalties by cashing in other investments like 401(k)s, IRAs or CDs. It may take awhile to build up this fund, but when you do, you'll definitely sleep better knowing it's there. 

3. Take Advantage of Your Company's 401(k) Match - Though less companies do it these days compared to a few years ago, a 401(k) match from your employer is literally free money you should take full advantage of. At a minimum, you should contribute at the company matching level (for example, if your company matches the first 3 percent contribution dollar for dollar, your minimum contribution should be 3 percent). The compounding impact of this "free money" over time can mean tens of thousands of extra dollars in your retirement fund. 

4. Dollar Cost Averaging - Simply put, dollar-cost averaging means making measured investments consistently over time. This allows you to create a kind of built-in hedge in your portfolio so you have less exposure to short-term market fluctuations. And avoid "market timing" at all costs. You might get lucky a few times (especially during rising market periods), but in the long-term, no one's smarter than the market. 

5. Diversify! - Remember the saying about all your eggs in one basket? A good investor probably came up with that! Diversifying your investments across domestic stocks, bonds and international stocks spreads out risk and stabilizes your portfolio. There are lots of great articles on investment websites about how you can diversify based on your age and risk tolerance, one of my favorites being The Coffeehouse Investor (and just so you know, I have no financial connection to the author or the site, it's just a great common sense approach to investing). 

6. Investing in Index funds - I love index funds. You get the benefit of diversification coupled with low-cost "passive" management. The most popular index funds carry investments that track to well-known market indices (e.g., an S&P 500 Index fund carries the stock of companies that make up the S&P 500), enabling you to instantly diversify across the spectrum of companies in a particular market or industry. And many index funds these days have initial investment requirements as low as $1,000. 

7. Take a Long-Term View - Over the long-term (meaning many years, not weeks or months), a diversified, consistent and disciplined approach to investing in low-cost index funds can reap great rewards. You won't see quick results, but by following the guidelines described in this article, doing a bit of homework and living below your means, over time you can build a portfolio that will weather short-term storms in the market and build wealth and security for you and your family. 

8. Let Yourself Splurge, Within Reason - Just because you're financially responsible doesn't mean you have to live like a monk who's taken a vow of poverty! As long as you stay on track, with your spending, saving and investing reflecting your long-term goals, it's okay to splurge on the occasional ski trip, tennis lesson or new gadget from Apple you simply must have. 

So there you have it, eight simple laws. Not exactly rocket science, is it? And it shouldn't be. With a sound long-term strategy and a consistent, disciplined approach to managing your money, building wealth can be achieved even during challenging times. 

Why Selling Financial Services and Vacuum Cleaners are the same?!

I read about an article by Wilfred from his email and think it's really a good read. 

It speaks truth about why some financial advisors can only promote those products that he/she sell and the importance of selling financial products to what a person needs (and not product pushing)

Many people are too used to obtaining free financial advice because those in the banks all that are doing that to attract you to purchase their products eventually...

However, i read a quote from somewhere...
"Free things are never Good; Good things are never Free"

So let's enjoy the article below and see what you can learn from it :D...

Topic: Vacuum Cleaners and Financial Services 

By Wilfred Ling. 

A salesperson came to my house to demonstrate and sell a vacuum cleaner. It was an impressive vacuum cleaner with the following capabilities:

1.       It is a air purifier;

2.       It has the traditional vacuum cleaning function;

3.       It can mop the floor;

4.       It can remove dust mites from soft toys and pillows;

5.       It can remove dust mites from mattress as well;

6.       It can clean the air-con; and

7.       It has no air bag but uses water to "capture" the dirt and dust. It is very easy to dispose the dirt as it just simply means throwing the dirty water away. 

The machine is highly sophisticated and their four hour demonstration was highly impressive. My wife and I felt that this is a good product. The catch? It cost 10 times that of a traditional vacuum cleaner that we had bought one year ago.

The salesperson (let us call her Promoter A) was highly persistent and told us that if we decide to buy on another day, the cost will be 15% more. To get the "good" price, we must buy on the spot. Of course, my wife and I never make purchases on the spot. We would discuss privately before making a purchase. 

This person made us feel obligated because she said she is commissioned-based. If we were to make the purchase later, it becomes a direct sale and she gets no commission. After much persistency, the salesperson gave us twp days to think about it. 

My wife and I discussed and felt that it is necessary to evaluate whether the purchase of the vacuum cleaner is a need or a want. Moreover, we recognized that it may become a white elephant since we might not use it often. 

Considering its sophistication, we may not fully utilize all its functions. In fact, we discover that our need is to have a vacuum cleaner that can remove dust mites and at the same time perform the traditional vacuum function. 

The children and I have sensitive nose and so a dust mites removing machine will be useful for the family. We do not need to purify the air because our house windows are frequently opened. 

Additionally, we prefer to engage a professional air-con service person to maintain our air-con. I have no desire to clean the air-con myself for fear of damaging it.

The next day, we went to an electrical department store and asked whether they have a dust mites removing vacuum cleaner. Promoter B told us that they do not sell it. 

As we were about to leave the store, another salesperson (Promoter C) who overheard our query came to us and told us that she does sell it. Although it is the same store, apparently each salesperson only represents a certain range of products.  

She proceeded to ask us what we really need. We told her our simple needs. She recommended us the lowest range product which she said is suitable for us. I also noticed that her vacuum cleaner employs a different technology. The price is just 1.5 times that of the traditional one. 

My wife and I decided that when our present vacuum cleaner breaks down (which can be soon since electronic products do not last so long these days), we will do a thorough research in vacuum cleaners as it is apparent to us that there are many choices in the market place.

I like to highlight what I learn in this experience:

1.       Promoter A recommended her product without asking our needs. Actually we have simple needs. We do not require such sophisticated product. Promoter A did quite a lot of work demonstrating her product. I recognized the four hour of work as valid but they only earn a commission when the client makes a purchase. I personally dislike feeling obligated.

2.       Promoter B did not have the product that we asked for and thus she said that the store did not sell it. Actually what she really meant was that she herself did not sell it. Thus, the information we got was incorrect because of the products she is restricted to.

3.       Promoter C did a good job asking us for our needs and recommended a product that she had. I saw there was another product she had that was more expensive but she advised us not to buy it as it is meant for those who have carpet and pets. These we do not have. Thus, Promoter C was ethnical. 

Unfortunately, since we came to the realization that there are actually many choices in the vacuum cleaner market, it is currently unknown to me whether Promoter C's products are truly value for money. 

There are many similarities of the above to that what transpires between the financial adviser and the client.  Whether it is a private banker, an insurance agent or an independent financial adviser servicing their clients, there are similar issues that arise:

1.       Just as Promoter A did not ask us what we really need, many financial practitioners do not ask their clients what they really need. The result is hard-selling of products which may not be suitable for the client. Since their remuneration is based on commissions, clients are often pressured into purchasing a product. Some salaried financial practitioners have high quota to meet and so they may be hard pressed to close a sale.

2.       Some financial practitioners are restrictive in their product range. Frequently they are only able to represent one product manufacturer and thus cannot give accurate information just as Promoter B gave us incorrect information.

3.       There are also many financial practitioners that desire to do a good job by seeking to understand the client's needs. This is good. However, if they are restricted in their product range like Promoter C, clients may still have their doubts.

Before anyone thinks that the solution is to seek a financial practitioner who can carry products from many manufacturers, I like to highlight one more problem. 

Just as Promoters A, B and C are compensated through commissions only, the commission-only financial practitioner may not serve the interest of the client.  The client may feel obligated and the practitioner may be tempted to recommend expensive products.

The work of a financial practitioner can potentially be as short as half an hour to as long as 20 hours. This depends on the work nature. The process of setting objectives, fact finding, analysis, recommendations and product comparisons can at times involve hours of preparation and not to mention answering questions asked by the client. With this in mind, financial practitioners should charge their client a fee for this work. However, this is easier said than done.

Some time ago, I met up a person who had asked for a financial planning service. I told him that I prefer a fee-based approach. There is no obligation to buy anything from me. He hesitated. 

I asked him this question, "Would you pay your contractor for providing a renovation service? Would you pay a consultation fee to your doctor when you are ill?" He did not say "yes" but answered "I know where you are coming from." I continued, "Since you desire a financial planning service, would you then pay for that service?" His answer was: "I am not ready for it; I want a commission-based service."

Although most clients will not be that explicit, the truth is that most people expect financial practitioners to work for free. Is it any surprise that some financial practitioners make clients feel obligated to buy something?  Therefore, I suggest a fee-based approach when engaging a financial service.

By the way, did anyone wonder why I allowed Promoter A to come to my house to do so much work in demonstrating her vacuum cleaner? The reason was because the telemarketer prospected my wife stating that they are offering a cleaning service and have ceased the business of selling vacuum cleaners. My wife was keen to know more about the cleaning service. Unfortunately, it turned out to be a product sale. 

Despite being willing to engage a cleaning service for a fee, we were disappointed that it turned out to be a commission-based product sale. We are already accustomed to hourly-charge cleaning services.

Wilfred Ling
CFA, ChFC, ISO 22222 (SCI) certified.

Providing private wealth services for the sophisticated mass affluent families.
Trusts, Wills, Insurance, Retirement, Investments

371 Beach Road, Keypoint, #02-03
Singapore 199597
Tel: +65 91710940
http://www.wilfredling.com

What you can learn from Major Investment Mistakes

One of my favorite quotes comes from Black Swan author Nassim Taleb: "People focus on role models; it is more effective to find antimodels -- people you don't want to resemble when you grow up."

It pays to learn from people's mistakes as much as from their successes. And boy, do investors ever make mistakes. In the 20 years ended Dec. 2010, the S&P 500 returned 9.1% a year, while the average investor earned just 3.8% a year, according to Dalbar. 

We buy high, sell low, mismanage risk, follow the crowd, and trade too much -- rarely with doubt, and always at our own expense.

What are investors thinking when they make mistakes? What's going through their heads? The frame of mind that guides the biggest investment fumbles might be best summed up with a list of famous last words below.


"I thought I was getting guaranteed high returns."
Everyone wants that, so no one will get it. Any legitimately "guaranteed" investment will attract so much money that returns will be pushed down to zero -- and negative after inflation. You aren't entitled to anything you're not willing to pay for.

"I want to get in now before I miss more of the upside."
One of the fastest roads to poor results. Buy businesses, not regrets.


"We've come up with a new way to mitigate risk."
A line invariably muttered before meltdowns, collapses, panics, and depressions. Overconfidence is a good alternative definition for "risk."

"We seek to enhance returns with leverage."
Alas, that leverage is seeking to enhance your humility. And it usually wins.

"My broker called and said he has a special opportunity."
Read the book Where are the Customers' Yachts? If you're strapped for time, reading only the title suffices.

"This company's moat is impenetrable."
Warren Buffett once noted: "30 years ago, Eastman Kodak's moat was just as wide as Coca-Cola's moat." Companies' competitive advantages can fall anywhere between weak and strong, but they're never impenetrable.

"It looked like easy money."
If it looked easy to you, it looked easy to millions of other investors who probably bought before you did and will get out before you do. The easier it feels, the harder it will end.

"There's very little downside risk."
Rule of thumb: Take what you think is your maximum downside risk and multiply it by five. Now you're closer to reality.

"Our model has a perfect track record."
The list of models, theories, and patterns that worked until they didn't is never-ending. Nothing can predict the future with certainty -- or even rough accuracy.

"This was a one-in-a-million event."
Maybe it was. Or maybe you severely miscalculated the odds. Reality is almost always the latter.

"Analysts are predicting high growth for years to come."
People wouldn't take these predictions seriously if they knew how bad most analysts' track records are -- and how minimal the punishment for being wrong is.


"My pension is guaranteed for life."
Tragically, I have a feeling millions of Americans will learn in the coming decades how fickle the word "guaranteed" can be.


"I follow the smart money."
The vast majority of professional investors underperform a basic market index. And you rarely know why they're making a certain investment in the first place. Is it a short-term bet? Is it a hedge on another investment? If you can't answer that, you're not following. You're being led.

"How can you argue with a bull market that's been going on for 10 years?"
Because all that tells us it that we're 10 years closer to the end of it than we were when it started.

"You can't afford not to own this stock."
As close as it gets to ringing a warning bell at the top of a bubble.

"There's too much uncertainty in the world to be investing right now."
As close as it gets to ringing an opportunity bell at the bottom of a bear market.

"I'm going to wait on the sidelines until there's more clarity."
The easiest way to ensure you'll miss the bulk of bull markets.

"I invest conservatively. I can't afford to take big risks."
A good sign that you're favouring investments that are riskier than you believe (cash eroding to inflation, bonds at record low rates today, real estate in 2006).

"I'm not concerned about valuation."
An easy motto to follow during bull markets; a humbling lesson to learn thereafter. At best, high valuations rob future returns. More often, they cause irreparable losses.

"I only look at the charts."
A line never said by any successful investor, ever. Investing is about buying good businesses and holding them for a long time. Everything else is Las Vegas without free drinks.

"My brother-in-law has made a killing in these stocks. It's time I jump in."
As Charlie Munger says: "Someone will always be getting richer faster than you. This is not a tragedy." What is tragic is taking risks you don't understand and buying assets at the top of bubbles only because you view investing as a competition with others, instead of a way to secure your own financial well-being.

"It's different this time."
A cliche among famous last words, but easily the most important. Risk will never be eliminated, growth will never be limitless, and markets are never fully efficient. When it comes to big, basic principles of investing, it's never different this time. This truth explains the majority of investment blunders.

3 Simple Investing Lessons From Peter Lynch

I chanced upon a good article from Motley Fool and i am here to share with you all:

Just like my blog name [KISS Investing] suggests, investing can be Simple & Profitable.

Peter Lynch put together one of the greatest investing track records of all time, while serving as the portfolio manager of Fidelity's Magellan Fund. An ordinary investor who put $1,000 in the fund on the day Lynch took over would have had roughly $28,000 by the time Lynch stepped down 13 years later.

Despite those truly remarkable returns, Lynch was a passionate believer in the notion that the normal investor can pick stocks better than the average Wall Street professional. In fact, he argued that the retail investor had numerous advantages that might allow him or her to outperform both the experts and the market in general.

You need to do certain things
Lynch did not say, however, that it would be easy for retail investors to outperform. He believed they could do the job very well, but that they had to do certain things. Below are three simple lessons from Lynch that will assist ordinary investors in their quest to beat the market:

1. Do the work. 
Peter Lynch is very well known, of course, for recommending that investors "buy what they know." According to this principle, investors may want to invest in that busy restaurant on the corner that always seems crowded on Friday night.

Perhaps less well-known about Lynch is that he expected investors to understand their businesses before putting their money in them. In his classic book One Up On Wall Street, he recommended that you should "never invest in any company before you've done the homework on the company's earnings prospects, financial condition, competitive position, plans for expansion, and so forth."

Amazon.com (Nasdaq: AMZN) provides a great example here, I think. Many of us are dedicated users of the online retailer, so why wouldn't we want to invest our money in the company as well? Before doing so, however, investors might want to know why the company's profit margins are so low, and how the company intends to increase those margins over time. Finally, investors should feel comfortable with Amazon's valuation too before buying shares in it.

Lynch was an indefatigable worker himself, who felt that -- borrowing from Edison – "investing is ninety-nine percent perspiration." In general, he believed that you need to "know what you own" and just thinking it will go up "doesn't count." As a result of this belief, Lynch figured that a part-time stock picker probably only has time to follow eight to 12 companies. And he warned that "if you don't study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards."

2. Use your edge. 
Lynch strongly believed that everyone has an edge that can allow them to outperform the experts. The key is to utilize your edge by investing in companies or industries that you understand well.

He recommended that individuals identify three to five companies that they could know very well. You could study them; lecture on them; and understand their stories intimately. Ultimately, Lynch felt that ordinary folks need to discover their personal edge, whether it's a profession or hobby or even something else, like being a parent.

When I started out as an investor, Procter & Gamble (NYSE: PG) was a stock I felt I had a considerable edge with. My grandfather had worked for the company for over 30 years, and my grandmother held quite a few shares of the company. As a kid, I always talked with her about new products and challenges facing the business. When I first began buying stocks, I always felt extremely comfortable having P&G in my portfolio. Each of us probably knows a company or two like that, and we must use that edge to our advantage.

3. Be patient. 
Being patient and investing for the long term should be the simplest investing lesson of all. Sadly, it's one of those things that is easier said than done. In 1960, the average holding period for a stock was eight years; nowadays, it's just four months.

Lynch often said that he had no idea what the market would do in one or two years. But he was confident about what stocks would do 10, 20, or 30 years from now. He truly believed that time was on the side of the retail investor, and that's why he was an enthusiastic proponent of long-term investing.

And yes, he was aware of some long time frames where the market didn't do well. In an interview with Frontline, he referred to the period from 1966 to 1982 when the market was flat for the most part. But Lynch noted that you'd have still received dividends from your stocks. He also felt that corporate profits tend to trend upward, and that investors would eventually be rewarded for that.

McDonald's (NYSE: MCD) is perhaps a good illustration of a stock that will outperform today's market. Over the past decade, the S&P 500 has been more or less flat. Going forward, however, McDonald's -- with its growing dividend and overseas expansion -- is likely to perform very well for long-term investors. 
Similarly, I'd be very surprised if ExxonMobil(NYSE: XOM) -- with its growing dividend and rock-solid balance sheet -- didn't do well over the next decade regardless of the performance of the overall market.

Lynch believed that it "pays to be patient, and to own successful companies." He understood that there are times when there doesn't appear to be a correlation between a company's operations and its stock price. Lynch also knew, however, that "in the long term, there is a 100 percent correlation between the success of the company and the success of its stock. This … is the key to making money."

Simple is as simple does
Peter Lynch once said, "The simpler it is, the better I like it." In a world of faster trading and ever-increasing flows of information, keeping it simple might be the ultimate edge for the ordinary investor. Always remember, though, that simple doesn't necessarily mean easy. I know I have to work a lot harder on all three of those "simple" lessons mentioned above.

21 Ways Rich People Think Differently from the Poor or Average

This is a very good article worth reading, and hope to inspire all of you out there! :)

World's richest woman Gina Rinehart is enduring a media firestorm over an article in which she takes the "jealous" middle class to task for "drinking, or smoking and socializing" rather than working to earn their own fortune. 

What if she has a point? 

Steve Siebold, author of "How Rich People Think," spent nearly three decades interviewing millionaires around the world to find out what separates them from everyone else. 

It had little to do with money itself, he told Business Insider. It was about their mentality.

"[The middle class] tells people to be happy with what they have," he said. "And on the whole, most people are steeped in fear when it comes to money."

Flickr / C. Pajunen1. Average people think MONEY is the root of all evil. Rich people believe POVERTY is the root of all evil.

"The average person has been brainwashed to believe rich people are lucky or dishonest," Siebold writes.

That's why there's a certain shame that comes along with "getting rich" in lower-income communities.

"The world class knows that while having money doesn't guarantee happiness, it does make your life easier and more enjoyable." 

2. Average people think selfishness is a vice. Rich people think selfishness is a virtue.

"The rich go out there and try to make themselves happy. They don't try to pretend to save the world," Siebold told Business Insider. 

The problem is that middle class people see that as a negative––and it's keeping them poor, he writes.

"If you're not taking care of you, you're not in a position to help anyone else. You can't give what you don't have."

Getty Images3. Average people have a lottery mentality. Rich people have an action mentality.

"While the masses are waiting to pick the right numbers and praying for prosperity, the great ones are solving problems," Siebold writes.

"The hero [middle class people] are waiting for may be God, government, their boss or their spouse. It's the average person's level of thinking that breeds this approach to life and living while the clock keeps ticking away." 

4. Average people think the road to riches is paved with formal education. Rich people believe in acquiring specific knowledge.

"Many world-class performers have little formal education, and have amassed their wealth through the acquisition and subsequent sale of specific knowledge," he writes. 

"Meanwhile, the masses are convinced that master's degrees and doctorates are the way to wealth, mostly because they are trapped in the linear line of thought that holds them back from higher levels of consciousness...The wealthy aren't interested in the means, only the end."

I Love Lucy screencap5. Average people long for the good old days. Rich people dream of the future.

"Self-made millionaires get rich because they're willing to bet on themselves and project their dreams, goals and ideas into an unknown future," Siebold writes. 

"People who believe their best days are behind them rarely get rich, and often struggle with unhappiness and depression."

6. Average people see money through the eyes of emotion. Rich people think about money logically.

"An ordinarily smart, well-educated and otherwise successful person can be instantly transformed into a fear-based, scarcity driven thinker whose greatest financial aspiration is to retire comfortably," he writes.

"The world class sees money for what it is and what it's not, through the eyes of logic. The great ones know money is a critical tool that presents options and opportunities." 

7. Average people earn money doing things they don't love. Rich people follow their passion.

"To the average person, it looks like the rich are working all the time," Siebold says. "But one of the smartest strategies of the world class is doing what they love and finding a way to get paid for it."

On the other hand, middle class take jobs they don't enjoy "because they need the money and they've been trained in school and conditioned by society to live in a linear thinking world that equates earning money with physical or mental effort." 

8. Average people set low expectations so they're never disappointed. Rich people are up for the challenge.

"Psychologists and other mental health experts often advise people to set low expectations for their life to ensure they are not disappointed," Siebold writes.

"No one would ever strike it rich and live their dreams without huge expectations." 

BarackObamadotcom via YouTube9. Average people believe you have to DO something to get rich. Rich people believe you have to BE something to get rich.

"That's why people like Donald Trump go from millionaire to nine billion dollars in debt and come back richer than ever," he writes. 

"While the masses are fixated on the doing and the immediate results of their actions, the great ones are learning and growing from every experience, whether it's a success or a failure, knowing their true reward is becoming a human success machine that eventually produces outstanding results."

10. Average people believe you need money to make money. Rich people use other people's money.

Linear thought might tell people to make money in order to earn more, but Siebold says the rich aren't afraid to fund their future from other people's pockets.

"Rich people know not being solvent enough to personally afford something is not relevant. The real question is, 'Is this worth buying, investing in, or pursuing?'" he writes. 

11. Average people believe the markets are driven by logic and strategy. Rich people know they're driven by emotion and greed.

Investing successfully in the stock market isn't just about a fancy math formula.

"The rich know that the primary emotions that drive financial markets are fear and greed, and they factor this into all trades and trends they observe," Siebold writes.

"This knowledge of human nature and its overlapping impact on trading give them strategic advantage in building greater wealth through leverage."

12. Average people live beyond their means. Rich people live below theirs.

"Here's how to live below your means and tap into the secret wealthy people have used for centuries: Get rich so you can afford to," he writes.  

"The rich live below their means, not because they're so savvy, but because they make so much money that they can afford to live like royalty while still having a king's ransom socked away for the future." 

richkidsofinstagram.tumblr.com13. Average people teach their children how to survive. Rich people teach their kids to get rich.

Rich parents teach their kids from an early age about the world of "haves" and "have-nots," Siebold says. Even he admits many people have argued that he's supporting the idea of elitism. 

He disagrees.

"[People] say parents are teaching their kids to look down on the masses because they're poor. This isn't true," he writes. "What they're teaching their kids is to see the world through the eyes of objective reality––the way society really is." 

If children understand wealth early on, they'll be more likely to strive for it later in life.

14. Average people let money stress them out. Rich people find peace of mind in wealth.

The reason wealthy people earn more wealth is that they're not afraid to admit that money can solve most problems, Siebold says.

"[The middle class] sees money as a never-ending necessary evil that must be endured as part of life. The world class sees money as the great liberator, and with enough of it, they are able to purchase financial peace of mind."

Kim Bhasin / Business Insider15. Average people would rather be entertained than educated. Rich people would rather be educated than entertained.

While the rich don't put much stock in furthering wealth through formal education, they appreciate the power of learning long after college is over, Siebold says.

"Walk into a wealthy person's home and one of the first things you'll see is an extensive library of books they've used to educate themselves on how to become more successful," he writes.

"The middle class reads novels, tabloids and entertainment magazines." 

16. Average people think rich people are snobs. Rich people just want to surround themselves with like-minded people.

The negative money mentality poisoning the middle class is what keeps the rich hanging out with the rich, he says.

"[Rich people] can't afford the messages of doom and gloom," he writes. "This is often misinterpreted by the masses as snobbery.

Labeling the world class as snobs is another way the middle class finds to feel better bout themselves and their chosen path of mediocrity."

Flickr / Wei Tchou17. Average people focus on saving. Rich people focus on earning.

Siebold theorizes that the wealthy focus on what they'll gain by taking risks, rather than how to save what they have.

"The masses are so focused on clipping coupons and living frugally they miss major opportunities," he writes.

"Even in the midst of a cash flow crisis, the rich reject the nickle and dime thinking of the masses. They are the masters of focusing their mental energy where it belongs: on the big money." 

18. Average people play it safe with money. Rich people know when to take risks.

"Leverage is the watchword of the rich," Siebold writes. 

"Every investor loses money on occasion, but the world class knows no matter what happens, they will aways be able to earn more." 

Flickr / Ibrahim Iujaz19. Average people love to be comfortable. Rich people find comfort in uncertainty.

For the most part, it takes guts to take the risks necessary to make it as a millionaire––a challenge most middle class thinkers aren't comfortable living with.

"Physical, psychological, and emotional comfort is the primary goal of the middle class mindset," Siebold writes.

World class thinkers learn early on that becoming a millionaire isn't easy and the need for comfort can be devastating. They learn to be comfortable while operating in a state of ongoing uncertainty."

20. Average people never make the connection between money and health. Rich people know money can save your life.

While the middle class squabbles over the virtues of Obamacare and their company's health plan, the super wealthy are enrolled in a super elite "boutique medical care" association, Siebold says.

"They pay a substantial yearly membership fee that guarantees them 24-hour access to a private physician who only serves a small group of members," he writes.

"Some wealthy neighborhoods have implemented this strategy and even require the physician to live in the neighborhood."

Getty Images21. Average people believe they must choose between a great family and being rich. Rich people know you can have it all.

The idea the wealth must come at the expense of family time is nothing but a "cop-out", Siebold says.

"The masses have been brainwashed to believe it's an either/or equation," he writes. "The rich know you can have anything you want if you approach the challenge with a mindset rooted in love and abundance." 

From Steve Siebold, author of "How Rich People Think."