Monday, December 19, 2011
Thursday, September 22, 2011
Sunday, August 28, 2011
Gold - What is it for?
What’s Wrong With Gold
In one scene in the James Bond film "Goldfinger", the gold-intoxicated villain - the film's namesake - watches delightedly as a laser inches closer to a gold-topped table to which Bond is tied at the ankles and wrists. Before bidding farewell, Goldfinger leaves Bond with this thought: "This is gold Mr. Bond. All my life I have been in love with its color, its brilliance, its divine eminence." Movies like this epitomize the human fascination with this precious metal and the greed that it sometimes inspires. Contrary to what Goldfinger thought, gold may not be the most valuable investment in the world - it may be nothing more than a form of insurance.
Here we look at the major issues facing gold, such as its demand/supply imbalance and its potential to share the same fate as silver, and we examine what gold really means as an investment.
Gold's Unique Demand/Supply Imbalance
The biggest factor influencing gold's price is the staggering amount of it held by central banks around the world. This is a legacy from the days of the gold standard, which existed in one form or another between 1821 and 1971. (For more on this history, see The Gold Standard Revisited.) During this period, U.S. and European central banks hoarded massive amounts of gold (see graph below).
According to the World Gold Council, in 2003 this stockpile consisting of 33,000 metric tons accounted for nearly 25% of all the gold ever mined. In that same year, a total of only 3,200 metric tons of gold was supplied to the marketplace through mining and scrap - this means the central banks' stockpile of 33,000 tons could overwhelm the market if it were sold. In other words, there is enough gold in the vaults of central banks to satisfy world demand for 10 years without another ounce being mined! What other commodity has this kind of demand/supply imbalance?
Furthermore, without a gold standard, this precious metal has limited strategic use for these central banks. Because gold does not earn any investment interest, some central banks - like that of Canada during 1980-2003 - have already eliminated their gold stock. The potential for gold supply to dwarf its demand poses a hindrance to the metal's potential return well into the future.
Figure 1: Note the gradual decline of the central banks' reserves since the fall of the gold standard. As this decline continues, the price of gold also faces a continual downward stress. Sixty percent of the current gold reserves are held by U.S., Germany, France, Switzerland and Italy. Data provided by the World Gold Centre.
Does Silver Foreshadow Gold's Future?
Silver and gold have shared a common history over the past five millennia. Prior to the 20th century, silver was also a monetary standard, but it has long since faded from this monetary scene and from the vaults of central banks around the world. According to the Economist article "Goldbears" (May 30, 2002), silver's elimination from the central banks' reserves may help explain why its return has not exceeded inflation rates over the past 200 years. If the current stockpile of gold were to be sold off, the downward pressure on its price could result in it having the same fate as silver.
Perhaps history demonstrates that it is just too difficult for the world to work under a monetary standard based on a commodity because the demand for these metals depends on more than monetary needs. When these metals were used as monetary standards, the divergence of the market price and mint price for these metals seemed to be in continual flux. (The mint price refers to the price a mint would pay someone to bring gold or silver in to be melted down into coinage.) And continual arbitrage opportunities between market and mint prices created havoc on economies. The rise and fall of the silver standard - which just happened to be the first victim - perhaps demonstrates how gold's price as a commodity cannot absorb the demand/supply distortions created by its past position as a monetary standard.
The Real Meaning of Gold
So how should an investor really view gold? For the most part, it is a commodity, just like soybeans or oil. So, when making any buy or sell decision, an investor should put future supply and demand issues at the forefront.
At the same time, gold can be seen as a form of insurance against a catastrophic event hitting the global financial markets. However, if that were ever to happen, it's possible that gold would be of use only to those investors who held it physically. The attacks on the World Trade Center in 2001 demonstrated this point all too well. Hundreds of millions of dollars worth of gold may have been stored in vaults underneath these towers, but these vaults became inaccessible after the towers collapsed.
Gold also may be helpful during periods of hyperinflation as it can hold its purchasing power much better than paper money during these periods. However, this is true for most commodities. Hyperinflation has never occurred in the U.S., but some countries are all too familiar with it. Argentina, for example, saw one of its worst periods of hyperinflation from 1989-90, when inflation reached a staggering 186% in one month alone. In such situations, gold has the capacity to protect the investor from the ill effects of hyperinflation.
Conclusion
Gold means many things to many people. Its history alone has lured some investors. One of gold's most important historical roles has been as a monetary standard, functioning much like today's U.S. dollar. However, with the gold standard no longer in place and industrial demand representing only 10% of its overall demand, gold's luster - as an investment - is not quite as bright.
Until the fate of the gold stockpile accumulated by governments is determined, the price of it will have difficulty surpassing the US$850 per ounce reached in 1980. According to the "Goldbears" article, if gold undergoes the same monetary fate as silver, gold will trade around $68 per ounce.
Therefore, holding gold as an investment is really a form of insurance against a period of hyperinflation or a catastrophic event hitting our global financial system. Insurance comes at a price, though. Is that price worth it?
by Investopedia Staff
Read more: http://www.investopedia.com/articles/05/033105.asp#ixzz1WJCuPScG
In one scene in the James Bond film "Goldfinger", the gold-intoxicated villain - the film's namesake - watches delightedly as a laser inches closer to a gold-topped table to which Bond is tied at the ankles and wrists. Before bidding farewell, Goldfinger leaves Bond with this thought: "This is gold Mr. Bond. All my life I have been in love with its color, its brilliance, its divine eminence." Movies like this epitomize the human fascination with this precious metal and the greed that it sometimes inspires. Contrary to what Goldfinger thought, gold may not be the most valuable investment in the world - it may be nothing more than a form of insurance.
Here we look at the major issues facing gold, such as its demand/supply imbalance and its potential to share the same fate as silver, and we examine what gold really means as an investment.
Gold's Unique Demand/Supply Imbalance
The biggest factor influencing gold's price is the staggering amount of it held by central banks around the world. This is a legacy from the days of the gold standard, which existed in one form or another between 1821 and 1971. (For more on this history, see The Gold Standard Revisited.) During this period, U.S. and European central banks hoarded massive amounts of gold (see graph below).
According to the World Gold Council, in 2003 this stockpile consisting of 33,000 metric tons accounted for nearly 25% of all the gold ever mined. In that same year, a total of only 3,200 metric tons of gold was supplied to the marketplace through mining and scrap - this means the central banks' stockpile of 33,000 tons could overwhelm the market if it were sold. In other words, there is enough gold in the vaults of central banks to satisfy world demand for 10 years without another ounce being mined! What other commodity has this kind of demand/supply imbalance?
Furthermore, without a gold standard, this precious metal has limited strategic use for these central banks. Because gold does not earn any investment interest, some central banks - like that of Canada during 1980-2003 - have already eliminated their gold stock. The potential for gold supply to dwarf its demand poses a hindrance to the metal's potential return well into the future.
Figure 1: Note the gradual decline of the central banks' reserves since the fall of the gold standard. As this decline continues, the price of gold also faces a continual downward stress. Sixty percent of the current gold reserves are held by U.S., Germany, France, Switzerland and Italy. Data provided by the World Gold Centre.
Does Silver Foreshadow Gold's Future?
Silver and gold have shared a common history over the past five millennia. Prior to the 20th century, silver was also a monetary standard, but it has long since faded from this monetary scene and from the vaults of central banks around the world. According to the Economist article "Goldbears" (May 30, 2002), silver's elimination from the central banks' reserves may help explain why its return has not exceeded inflation rates over the past 200 years. If the current stockpile of gold were to be sold off, the downward pressure on its price could result in it having the same fate as silver.
Perhaps history demonstrates that it is just too difficult for the world to work under a monetary standard based on a commodity because the demand for these metals depends on more than monetary needs. When these metals were used as monetary standards, the divergence of the market price and mint price for these metals seemed to be in continual flux. (The mint price refers to the price a mint would pay someone to bring gold or silver in to be melted down into coinage.) And continual arbitrage opportunities between market and mint prices created havoc on economies. The rise and fall of the silver standard - which just happened to be the first victim - perhaps demonstrates how gold's price as a commodity cannot absorb the demand/supply distortions created by its past position as a monetary standard.
The Real Meaning of Gold
So how should an investor really view gold? For the most part, it is a commodity, just like soybeans or oil. So, when making any buy or sell decision, an investor should put future supply and demand issues at the forefront.
At the same time, gold can be seen as a form of insurance against a catastrophic event hitting the global financial markets. However, if that were ever to happen, it's possible that gold would be of use only to those investors who held it physically. The attacks on the World Trade Center in 2001 demonstrated this point all too well. Hundreds of millions of dollars worth of gold may have been stored in vaults underneath these towers, but these vaults became inaccessible after the towers collapsed.
Gold also may be helpful during periods of hyperinflation as it can hold its purchasing power much better than paper money during these periods. However, this is true for most commodities. Hyperinflation has never occurred in the U.S., but some countries are all too familiar with it. Argentina, for example, saw one of its worst periods of hyperinflation from 1989-90, when inflation reached a staggering 186% in one month alone. In such situations, gold has the capacity to protect the investor from the ill effects of hyperinflation.
Conclusion
Gold means many things to many people. Its history alone has lured some investors. One of gold's most important historical roles has been as a monetary standard, functioning much like today's U.S. dollar. However, with the gold standard no longer in place and industrial demand representing only 10% of its overall demand, gold's luster - as an investment - is not quite as bright.
Until the fate of the gold stockpile accumulated by governments is determined, the price of it will have difficulty surpassing the US$850 per ounce reached in 1980. According to the "Goldbears" article, if gold undergoes the same monetary fate as silver, gold will trade around $68 per ounce.
Therefore, holding gold as an investment is really a form of insurance against a period of hyperinflation or a catastrophic event hitting our global financial system. Insurance comes at a price, though. Is that price worth it?
by Investopedia Staff
Read more: http://www.investopedia.com/articles/05/033105.asp#ixzz1WJCuPScG
Comparison With Other Investment Products 5 Sept 2011
Hi OV team members,
There is a special sharing on how to handle current challenges in present market conditions on 05 sept 2011.
Do not miss it!
There is a special sharing on how to handle current challenges in present market conditions on 05 sept 2011.
Do not miss it!
Friday, August 26, 2011
The History Of Gold - The Yellow Precious Metal
ARTICLE HIGHLIGHTS
• Before investing in gold, you must understand its history.
• Around 700 B.C., gold was made into coins for the first time.
• Gold hasn't always been a guarantee of wealth.
"We have gold because we cannot trust governments." President Herbert Hoover's statement in 1933 to Franklin D. Roosevelt foresaw one of the most draconian events in U.S. financial history: the Emergency Banking Act occurred that same year, forcing all Americans to convert their gold coins, bullion and certificates into U.S. dollars. While the Act successfully stopped the outflow of gold during the Great Depression, it did not change the conviction of gold bugs, those who are forever confident in gold's stability as a source of wealth.
Before investing in gold, you must understand its history - a history that, like that of no asset class, has a unique influence on its own demand and supply today. Gold bugs still cling to a past when gold was king. But gold's past includes also a fall, which must be understood to properly assess its future.
A Love Affair That Has Lasted 5,000 Years
For 5,000 years, gold's combination of luster, malleability, density and scarcity has captivated humankind like no other metal. According to Peter Bernstein's book "The Power of Gold: The History of Obsession", gold is so dense that one ton of it can be packed into a cubic foot.
At the start of this obsession, gold was used solely for worship. A trip to any of the world's ancient sacred sites demonstrates this. Today, gold's most popular use in the manufacture of jewelry.
Around 700 B.C., gold was made into coins for the first time, enhancing its usability as a monetary unit: before this, gold, in its use as money, had to be weighed and checked for purity when settling trades.
Gold coins, however, were not a perfect solution since a common practice for centuries to come was to clip these slightly irregular coins to accumulate enough gold that could be melted down into bullion. But in 1696, the Great Recoinage in England introduced a technology that automated the production of coins, and put an end to clipping.
Since it could not always rely on additional supplies from the earth, the supply of gold expanded only through deflation, trade, pillage or debasement.
The discovery of America in the 15th century brought the first great gold rush. Spain's plunder of treasures from the New World raised Europe's supply of gold five-fold in the 16th century. Subsequent gold rushes in the Americas, Australia and South Africa took place in the 19th century.
Europe's introduction of paper money occurred in the 16th century, with the use of debt instruments issued by private parties. While gold coins and bullion continued to dominate the monetary system of Europe, it was not until the 18th century that paper money began to dominate. The struggle between paper money and gold would eventually result in the introduction of a gold standard.
The Rise of the Gold Standard
The gold standard is a monetary system in which paper money is freely convertible into a fixed amount of gold. In other words, in such a monetary system gold backs the value of money. Between 1696 and 1812, the development and formalization of the gold standard began as the introduction of paper money posed some problems. (Learn more in What Is Money?)
In 1797, due to too much credit being created with paper money, the Restriction Bill in England suspended the conversion of notes into gold. Also, constant supply imbalances between gold and silver created tremendous stress to England's economy. A gold standard was needed to instill the necessary controls on money.
By 1821, England became the first country to officially adopt a gold standard. The century's dramatic increase in global trade and production brought large discoveries of gold, which helped the gold standard remain intact well into the next century. As all trade imbalances between nations were settled with gold, governments had strong incentive to stockpile gold for more difficult times. Those stockpiles still exist today.
The international gold standard emerged in 1871 following the adoption of it by Germany. By 1900, the majority of the developed nations were linked to the gold standard. Ironically, the U.S. was one of the last countries to join. (A strong silver lobby prevented gold from being the sole monetary standard within the U.S. throughout the 19th century.)
From 1871 to 1914, the gold standard was at its pinnacle. During this period near-ideal political conditions existed in the world. Governments worked very well together to make the system work, but this all changed forever with the outbreak of the Great War in 1914.
The Fall of the Gold Standard
With the Great War, political alliances changed, international indebtedness increased and government finances deteriorated. While the gold standard was not suspended, it was in limbo during the war, demonstrating its inability to hold through both good and bad times. This created a lack of confidence in the gold standard that only exacerbated economic difficulties. It became increasingly apparent that the world needed something more flexible on which to base its global economy.
At the same time, a desire to return to the idyllic years of the gold standard remained strong among nations. As the gold supply continued to fall behind the growth of the global economy, the British pound sterling and U.S. dollar became the global reserve currencies. Smaller countries began holding more of these currencies instead of gold. The result was an accentuated consolidation of gold into the hands of a few large nations.
The stock market crash of 1929 was only one of the world's post-war difficulties. The pound and the French franc were horribly misaligned with other currencies; war debts and repatriations were still stifling Germany; commodity prices were collapsing; and banks were overextended. Many countries tried to protect their gold stock by raising interest rates to entice investors to keep their deposits intact rather than convert them into gold. These higher interest rates only made things worse for the global economy, and finally, in 1931, the gold standard in England was suspended, leaving only the U.S. and France with large gold reserves.
Then in 1934, the U.S. government revalued gold from $20.67/oz to $35.00/oz, raising the amount of paper money it took to buy one ounce, to help improve its economy. As other nations could convert their existing gold holdings into more U.S dollars, a dramatic devaluation of the dollar instantly took place. This higher price for gold increased the conversion of gold into U.S. dollars effectively allowing the U.S. to corner the gold market. Gold production soared so that by 1939 there was enough in the world to replace all global currency in circulation.
As World War II was coming to an end, the leading western powers met to put together the Bretton Woods Agreement, which would be the framework for the global currency markets until 1971. At the end of WWII, the U.S. had 75% of the world's monetary gold, and the dollar was the only currency still backed directly by gold.
But as the world rebuilt itself after WWII, the U.S. saw its gold reserves steadily drop as money flowed out to help war-torn nations as well as to pay for its own high demand for imports. The high inflationary environment of the late 1960s sucked out the last bit of air from the gold standard. (Learn more in An Introduction To The International Monetary Fund.)
In 1968, a gold pool (which dominated gold supply), which included the U.S and a number of European nations stopped selling gold on the London market, allowing the market to freely determine the price of gold. From 1968 to 1971, only central banks could trade with the U.S. at $35/oz. Finally, in 1971, even this bit of gold convertibility died. Gold was free at last. There was no further reason for central banks to hold it.
Summary
While gold has fascinated humankind for 5,000 years, it hasn't always been a guarantee of wealth. A true international gold standard existed for less than 50 years (1871 to 1914) - in a time of world peace and prosperity that coincided with a dramatic increase in the supply of gold. But the gold standard was the symptom and not the cause of this peace and prosperity.
The events of the Great War changed the political, financial and social fabric of the world - the international gold standard would be no more. While a gold standard continued in a lesser form until 1971, the death of it had started centuries before with the introduction of paper money - a much more flexible instrument for our complex financial world.
by Investopedia.com
Read more: http://www.investopedia.com/articles/05/030705.asp#ixzz1W5jkx5kE
• Before investing in gold, you must understand its history.
• Around 700 B.C., gold was made into coins for the first time.
• Gold hasn't always been a guarantee of wealth.
"We have gold because we cannot trust governments." President Herbert Hoover's statement in 1933 to Franklin D. Roosevelt foresaw one of the most draconian events in U.S. financial history: the Emergency Banking Act occurred that same year, forcing all Americans to convert their gold coins, bullion and certificates into U.S. dollars. While the Act successfully stopped the outflow of gold during the Great Depression, it did not change the conviction of gold bugs, those who are forever confident in gold's stability as a source of wealth.
Before investing in gold, you must understand its history - a history that, like that of no asset class, has a unique influence on its own demand and supply today. Gold bugs still cling to a past when gold was king. But gold's past includes also a fall, which must be understood to properly assess its future.
A Love Affair That Has Lasted 5,000 Years
For 5,000 years, gold's combination of luster, malleability, density and scarcity has captivated humankind like no other metal. According to Peter Bernstein's book "The Power of Gold: The History of Obsession", gold is so dense that one ton of it can be packed into a cubic foot.
At the start of this obsession, gold was used solely for worship. A trip to any of the world's ancient sacred sites demonstrates this. Today, gold's most popular use in the manufacture of jewelry.
Around 700 B.C., gold was made into coins for the first time, enhancing its usability as a monetary unit: before this, gold, in its use as money, had to be weighed and checked for purity when settling trades.
Gold coins, however, were not a perfect solution since a common practice for centuries to come was to clip these slightly irregular coins to accumulate enough gold that could be melted down into bullion. But in 1696, the Great Recoinage in England introduced a technology that automated the production of coins, and put an end to clipping.
Since it could not always rely on additional supplies from the earth, the supply of gold expanded only through deflation, trade, pillage or debasement.
The discovery of America in the 15th century brought the first great gold rush. Spain's plunder of treasures from the New World raised Europe's supply of gold five-fold in the 16th century. Subsequent gold rushes in the Americas, Australia and South Africa took place in the 19th century.
Europe's introduction of paper money occurred in the 16th century, with the use of debt instruments issued by private parties. While gold coins and bullion continued to dominate the monetary system of Europe, it was not until the 18th century that paper money began to dominate. The struggle between paper money and gold would eventually result in the introduction of a gold standard.
The Rise of the Gold Standard
The gold standard is a monetary system in which paper money is freely convertible into a fixed amount of gold. In other words, in such a monetary system gold backs the value of money. Between 1696 and 1812, the development and formalization of the gold standard began as the introduction of paper money posed some problems. (Learn more in What Is Money?)
In 1797, due to too much credit being created with paper money, the Restriction Bill in England suspended the conversion of notes into gold. Also, constant supply imbalances between gold and silver created tremendous stress to England's economy. A gold standard was needed to instill the necessary controls on money.
By 1821, England became the first country to officially adopt a gold standard. The century's dramatic increase in global trade and production brought large discoveries of gold, which helped the gold standard remain intact well into the next century. As all trade imbalances between nations were settled with gold, governments had strong incentive to stockpile gold for more difficult times. Those stockpiles still exist today.
The international gold standard emerged in 1871 following the adoption of it by Germany. By 1900, the majority of the developed nations were linked to the gold standard. Ironically, the U.S. was one of the last countries to join. (A strong silver lobby prevented gold from being the sole monetary standard within the U.S. throughout the 19th century.)
From 1871 to 1914, the gold standard was at its pinnacle. During this period near-ideal political conditions existed in the world. Governments worked very well together to make the system work, but this all changed forever with the outbreak of the Great War in 1914.
The Fall of the Gold Standard
With the Great War, political alliances changed, international indebtedness increased and government finances deteriorated. While the gold standard was not suspended, it was in limbo during the war, demonstrating its inability to hold through both good and bad times. This created a lack of confidence in the gold standard that only exacerbated economic difficulties. It became increasingly apparent that the world needed something more flexible on which to base its global economy.
At the same time, a desire to return to the idyllic years of the gold standard remained strong among nations. As the gold supply continued to fall behind the growth of the global economy, the British pound sterling and U.S. dollar became the global reserve currencies. Smaller countries began holding more of these currencies instead of gold. The result was an accentuated consolidation of gold into the hands of a few large nations.
The stock market crash of 1929 was only one of the world's post-war difficulties. The pound and the French franc were horribly misaligned with other currencies; war debts and repatriations were still stifling Germany; commodity prices were collapsing; and banks were overextended. Many countries tried to protect their gold stock by raising interest rates to entice investors to keep their deposits intact rather than convert them into gold. These higher interest rates only made things worse for the global economy, and finally, in 1931, the gold standard in England was suspended, leaving only the U.S. and France with large gold reserves.
Then in 1934, the U.S. government revalued gold from $20.67/oz to $35.00/oz, raising the amount of paper money it took to buy one ounce, to help improve its economy. As other nations could convert their existing gold holdings into more U.S dollars, a dramatic devaluation of the dollar instantly took place. This higher price for gold increased the conversion of gold into U.S. dollars effectively allowing the U.S. to corner the gold market. Gold production soared so that by 1939 there was enough in the world to replace all global currency in circulation.
As World War II was coming to an end, the leading western powers met to put together the Bretton Woods Agreement, which would be the framework for the global currency markets until 1971. At the end of WWII, the U.S. had 75% of the world's monetary gold, and the dollar was the only currency still backed directly by gold.
But as the world rebuilt itself after WWII, the U.S. saw its gold reserves steadily drop as money flowed out to help war-torn nations as well as to pay for its own high demand for imports. The high inflationary environment of the late 1960s sucked out the last bit of air from the gold standard. (Learn more in An Introduction To The International Monetary Fund.)
In 1968, a gold pool (which dominated gold supply), which included the U.S and a number of European nations stopped selling gold on the London market, allowing the market to freely determine the price of gold. From 1968 to 1971, only central banks could trade with the U.S. at $35/oz. Finally, in 1971, even this bit of gold convertibility died. Gold was free at last. There was no further reason for central banks to hold it.
Summary
While gold has fascinated humankind for 5,000 years, it hasn't always been a guarantee of wealth. A true international gold standard existed for less than 50 years (1871 to 1914) - in a time of world peace and prosperity that coincided with a dramatic increase in the supply of gold. But the gold standard was the symptom and not the cause of this peace and prosperity.
The events of the Great War changed the political, financial and social fabric of the world - the international gold standard would be no more. While a gold standard continued in a lesser form until 1971, the death of it had started centuries before with the introduction of paper money - a much more flexible instrument for our complex financial world.
by Investopedia.com
Read more: http://www.investopedia.com/articles/05/030705.asp#ixzz1W5jkx5kE
Comparison With Other Investment Products 5 Sept 2011
There is a special highlight on how to handle the current challenges in present market conditions on the above mentioned date. Do not miss it!
Friday, August 19, 2011
RECRUITMENT FOR DYNAMIC GROWTH
The contents of the sharing
The highlight! Wow, the market is huge!
The commitment & cooperation amongst team members during workshop
GAMs also participate to give ideas & guidance during workshop discussion
The fun of workshop to come out with more solutions!
Hey, team members always have chance to speak out!
Wednesday, August 10, 2011
7 Common Investor Mistakes
Of the mistakes made by investors, seven of them are repeat offenses. In fact, investors have been making these same mistakes since the dawn of modern markets, and will likely be repeating them for years to come. You can significantly boost your chances of investment success by becoming aware of these typical errors and taking steps to avoid them.
1. No Plan
As the old saying goes, if you don't know where you're going, any road will take you there. Solution?
Have a personal investment plan or policy that addresses the following:
Goals and objectives - Find out what you're trying to accomplish. Accumulating $100,000 for a child's college education or $2 million for retirement at age 60 are appropriate goals. Beating the market is not a goal.
Risks - What risks are relevant to you or your portfolio? If you are a 30-year-old saving for retirement, volatility isn't (or shouldn't be) a meaningful risk. On the other hand, inflation - which erodes any long-term portfolio - is a significant risk.
Appropriate benchmarks - How will you measure the success of your portfolio, its asset classes and individual funds or managers?
Asset allocation - What percentage of your total portfolio will you allocate to U.S. equities, international stocks, U.S. bonds, high-yield bonds, etc. Your asset allocation should accomplish your goals while addressing relevant risks.
Diversification - Allocating to different asset classes is the initial layer of diversification. You then need to diversify within each asset class. In U.S. stocks, for example, this means exposure to large-, mid- and small-cap stocks.
Your written plan's guidelines will help you adhere to a sound long-term policy, even when current market conditions are unsettling. Having a good plan and sticking to it is not nearly as exciting or as much fun as trying to time the markets, but it will be more profitable in the long term.
2. Too Short of a Time Horizon
If you are saving for retirement 30 years hence, what the stock market does this year or next shouldn't be the biggest concern. Even if you are just entering retirement at age 70, your life expectancy is likely 15 to 20 years. If you expect to leave some assets to your heirs, then your
3. Too Much Attention Given to Financial Media
There is almost nothing on financial news shows that can help you achieve your goals. Turn them off. There are few newsletters that can provide you with anything of value. Even if there were, how do you identify them in advance?
Think about it - if anyone really had profitable stock tips, trading advice or a secret formula to make big bucks, would they blab it on TV or sell it to you for $49 per month? No - they'd keep their mouth shut, make their millions and not have to sell a newsletter to make a living.
Solution? Spend less time watching financial shows on TV and reading newsletters. Spend more time creating - and sticking to - your investment plan.
4. Not Rebalancing
Rebalancing is the process of returning your portfolio to its target asset allocation as outlined in your investment plan. Rebalancing is difficult because it forces you to sell the asset class that is performing well and buy more of your worst performing asset classes. This contrarian action is very difficult for many investors.
In addition, rebalancing is unprofitable right up to that point where it pays off spectacularly (think U.S. equities in the late 1990s), and the underperforming assets start to take off.
However, a portfolio allowed to drift with market returns guarantees that asset classes will be overweighted at market peaks and underweighted at market lows - a formula for poor performance. The solution? Rebalance religiously and reap the long-term rewards.
5. Overconfidence in the Ability of Managers
From numerous studies, including Burton Malkiel's 1995 study entitled, "Returns From Investing In Equity Mutual Funds", we know that most managers will underperform their benchmarks. We also know that there's no consistent way to select - in advance - those managers that will outperform. We also know that very, very few individuals can profitably time the market over the long term. So why are so many investors confident of their abilities to time the market and select outperforming managers?
Fidelity guru Peter Lynch once observed, "There are no market timers in the 'Forbes' 400'." Investors' misplaced overconfidence in their ability to market-time and select outperforming managers leads directly to our next common investment mistake.
6. Not Enough Indexing
There is not enough time to recite many of the studies that prove that most managers and mutual funds underperform their benchmarks. Over the long-term, low-cost index funds are typically upper second-quartile performers, or better than 65-75% of actively managed funds.
Despite all the evidence in favor of indexing, the desire to invest with active managers remains strong. John Bogle, the founder of Vanguard, says it's because, "Hope springs eternal. Indexing is sort of dull. It flies in the face of the American way [that] 'I can do better.'"
Index all or a large portion (70-80%) of all your traditional asset classes. If you can't resist the excitement of pursuing the next great performer, set aside a portion (20-30%) of each asset class to allocate to active managers. This may satisfy your desire to pursue outperformance without devastating your portfolio.
7. Chasing Performance
Many investors select asset classes, strategies, managers and funds based on recent strong performance. The feeling that "I'm missing out on great returns" has probably led to more bad investment decisions than any other single factor. If a particular asset class, strategy or fund has done extremely well for three or four years, we know one thing with certainty: We should have invested three or four years ago. Now, however, the particular cycle that led to this great performance may be nearing its end. The smart money is moving out, and the dumb money is pouring in. Stick with your investment plan and rebalance, which is the polar opposite of chasing performance.
Conclusion
Investors who recognize and avoid these seven common mistakes give themselves a great advantage in meeting their investment goals. Most of the solutions above are not exciting, and they don't make great cocktail party conversation. However, they are likely to be profitable. And isn't that why we really invest?
1. No Plan
As the old saying goes, if you don't know where you're going, any road will take you there. Solution?
Have a personal investment plan or policy that addresses the following:
Goals and objectives - Find out what you're trying to accomplish. Accumulating $100,000 for a child's college education or $2 million for retirement at age 60 are appropriate goals. Beating the market is not a goal.
Risks - What risks are relevant to you or your portfolio? If you are a 30-year-old saving for retirement, volatility isn't (or shouldn't be) a meaningful risk. On the other hand, inflation - which erodes any long-term portfolio - is a significant risk.
Appropriate benchmarks - How will you measure the success of your portfolio, its asset classes and individual funds or managers?
Asset allocation - What percentage of your total portfolio will you allocate to U.S. equities, international stocks, U.S. bonds, high-yield bonds, etc. Your asset allocation should accomplish your goals while addressing relevant risks.
Diversification - Allocating to different asset classes is the initial layer of diversification. You then need to diversify within each asset class. In U.S. stocks, for example, this means exposure to large-, mid- and small-cap stocks.
Your written plan's guidelines will help you adhere to a sound long-term policy, even when current market conditions are unsettling. Having a good plan and sticking to it is not nearly as exciting or as much fun as trying to time the markets, but it will be more profitable in the long term.
2. Too Short of a Time Horizon
If you are saving for retirement 30 years hence, what the stock market does this year or next shouldn't be the biggest concern. Even if you are just entering retirement at age 70, your life expectancy is likely 15 to 20 years. If you expect to leave some assets to your heirs, then your
3. Too Much Attention Given to Financial Media
There is almost nothing on financial news shows that can help you achieve your goals. Turn them off. There are few newsletters that can provide you with anything of value. Even if there were, how do you identify them in advance?
Think about it - if anyone really had profitable stock tips, trading advice or a secret formula to make big bucks, would they blab it on TV or sell it to you for $49 per month? No - they'd keep their mouth shut, make their millions and not have to sell a newsletter to make a living.
Solution? Spend less time watching financial shows on TV and reading newsletters. Spend more time creating - and sticking to - your investment plan.
4. Not Rebalancing
Rebalancing is the process of returning your portfolio to its target asset allocation as outlined in your investment plan. Rebalancing is difficult because it forces you to sell the asset class that is performing well and buy more of your worst performing asset classes. This contrarian action is very difficult for many investors.
In addition, rebalancing is unprofitable right up to that point where it pays off spectacularly (think U.S. equities in the late 1990s), and the underperforming assets start to take off.
However, a portfolio allowed to drift with market returns guarantees that asset classes will be overweighted at market peaks and underweighted at market lows - a formula for poor performance. The solution? Rebalance religiously and reap the long-term rewards.
5. Overconfidence in the Ability of Managers
From numerous studies, including Burton Malkiel's 1995 study entitled, "Returns From Investing In Equity Mutual Funds", we know that most managers will underperform their benchmarks. We also know that there's no consistent way to select - in advance - those managers that will outperform. We also know that very, very few individuals can profitably time the market over the long term. So why are so many investors confident of their abilities to time the market and select outperforming managers?
Fidelity guru Peter Lynch once observed, "There are no market timers in the 'Forbes' 400'." Investors' misplaced overconfidence in their ability to market-time and select outperforming managers leads directly to our next common investment mistake.
6. Not Enough Indexing
There is not enough time to recite many of the studies that prove that most managers and mutual funds underperform their benchmarks. Over the long-term, low-cost index funds are typically upper second-quartile performers, or better than 65-75% of actively managed funds.
Despite all the evidence in favor of indexing, the desire to invest with active managers remains strong. John Bogle, the founder of Vanguard, says it's because, "Hope springs eternal. Indexing is sort of dull. It flies in the face of the American way [that] 'I can do better.'"
Index all or a large portion (70-80%) of all your traditional asset classes. If you can't resist the excitement of pursuing the next great performer, set aside a portion (20-30%) of each asset class to allocate to active managers. This may satisfy your desire to pursue outperformance without devastating your portfolio.
7. Chasing Performance
Many investors select asset classes, strategies, managers and funds based on recent strong performance. The feeling that "I'm missing out on great returns" has probably led to more bad investment decisions than any other single factor. If a particular asset class, strategy or fund has done extremely well for three or four years, we know one thing with certainty: We should have invested three or four years ago. Now, however, the particular cycle that led to this great performance may be nearing its end. The smart money is moving out, and the dumb money is pouring in. Stick with your investment plan and rebalance, which is the polar opposite of chasing performance.
Conclusion
Investors who recognize and avoid these seven common mistakes give themselves a great advantage in meeting their investment goals. Most of the solutions above are not exciting, and they don't make great cocktail party conversation. However, they are likely to be profitable. And isn't that why we really invest?
Saturday, July 30, 2011
How to Reach Your Goals
Outlining a goal increases the probability it will be accomplished. Here are some guidelines and techniques to help you accomplish your goals:
- Focus on results and opportunities.
- Use positive, meaningful language.
- Personalize to your values and purpose.
- Write it down with a deadline.
- Use clear, simple and specific words.
- Make it exciting or challenging.
- Build in reminders and milestones.
- Create a contract with yourself or others.
- Craft a way to visualize the goal.
- Set short and long-term objectives.
- Analyze for problems and solutions.
Tuesday, July 19, 2011
Business Opportunity Preview Night on 18 July 20114e
 |
| Chit Chatting while having the refreshment ... |
 |
| GAM, Cindy Ong & her associates .. |
 |
| Fancy door gifts for prospect UTCs.. |
 |
| The Most Handsome MC in OV |
 |
| Registration Counter |
 |
| GAM Ang, explaining the multi sources of income for UTCs |
 |
| Interesting words by Ang to the audience ... |
 |
| Invited Speaker, Wendy Cheong, gave an inspiring talk via her experience in PMB |
 |
| Token of appreciation from OV President to Guest Speaker |
 |
| Fill up stomach before listen to the talk ... |
Sunday, July 10, 2011
OV-Mid Year Review (4 July 2011)
 |
| GAM Cindy Ong - the 1st speaker to share her tips |
 |
| |
 |
| Deanna, Yvonne, CP Tan, Cindy and Lee Peng - The Super Achievers |
 |
| Henry, Melissa, Gillian, Marry, CK, Linda, Lianne & Susan - The Achievers |
 |
| Sharing by Gillian |
 |
| Participants listne attentively to the success story of Gillian : ) |
 |
| Sharing by Marry - Full of action and motivation!! |
Tuesday, July 5, 2011
Something nice to share "A tale of Two Seas"
Sitting in the Geography class in school, I remember how fascinated I was when we were being taught all about the Dead Sea. As you probably recall, the Dead Sea is really a Lake, not a sea (and as my Geography teacher pointed out, if you understood that, it would guarantee 4 marks in the term paper!)
Its so high in salt content that the human body can float easily. You can almost lie down and read a book! The salt in the Dead Sea is as high as 35% - almost 10 times the normal ocean water. And all that saltiness has meant that there is no life at all in the Dead Sea. No fish. No vegetation. No sea animals. Nothing lives in the Dead sea.
Its so high in salt content that the human body can float easily. You can almost lie down and read a book! The salt in the Dead Sea is as high as 35% - almost 10 times the normal ocean water. And all that saltiness has meant that there is no life at all in the Dead Sea. No fish. No vegetation. No sea animals. Nothing lives in the Dead sea.
And hence the name: Dead Sea.
While the Dead Sea has remained etched in my memory, I don't seem to recall learning about the Sea of Galilee in my school Geography lesson. So when I heard about the Sea of Galilee and the Dead Sea and the tale of the two seas - I was intrigued. Turns out that the Sea of Galilee is just north of the Dead Sea. Both the Sea of Galilee and the Dead Sea receive their water from river Jordan. And yet, they are very, very different.
Unlike the Dead Sea, the Sea of Galilee is pretty, resplendent with rich, colorful marine life. There are lots of plants. And lots of fish too. In fact, the sea of Galilee is home to over twenty different types of fishes.
Same region, same source of water, and yet while one sea is full of life, the other is dead. How come?
Here apparently is why. The River Jordan flows into the Sea of Galilee and then flows out. The water simply passes through the Sea of Galilee in and then out - and that keeps the Sea healthy and vibrant, teeming with marine life.
But the Dead Sea is so far below the mean sea level, that it has no outlet. The water flows in from the river Jordan, but does not flow out. There are no outlet streams. It is estimated that over a million tons of water evaporate from the Dead Sea every day. Leaving it salty. Too full of minerals. And unfit for any marine life.
The Dead Sea takes water from the River Jordan, and holds it. It does not give. Result? No life at all.
Think about it.
Life is not just about getting. Its about giving. We all need to be a bit like the Sea of Galilee.
We are fortunate to get wealth, knowledge, love and respect. But if we don't learn to give, we could all end up like the Dead Sea. The love and the respect, the wealth and the knowledge could all evaporate. Like the water in the Dead Sea.
If we get the Dead Sea mentality of merely taking in more water, more money, more everything the results can be disastrous. Good idea to make sure that in the sea of your own life, you have outlets. Many outlets. For love and wealth - and everything else that you get in your life. Make sure you don't just get, you give too. Open the taps. And you'll open the floodgates to happiness.
Make that a habit. To share. To give.
And experience life. Experience the magic!
Sunday, July 3, 2011
China Stocks to Soar 20% in Second-Half: HSBC
This week, Goldman Sachs joined banks including JP Morgan in lowering their outlook for China's growth, but HSBC says the recent trend of softening commodity prices could actually help boost mainland equities by 20 percent in the second-half.
Read more.....
http://www.cnbc.com/id/
Read more.....
http://www.cnbc.com/id/
Friday, July 1, 2011
Why are reserves of central banks so big?
Trade protection is an ever present threat in the current economic climate. Politicians have become animated about currency "manipulation", unlevel playing fields and other obstacles to export led recoveries. One barometer that is often watched closely is the level of foreign exchange reserves accumulated by central banks around the world.
Because foreign exchange reserve accumulation is (broadly) a consequence of intervention in markets, the accumulation of foreign exchange reserves is often used as a proxy for "unfair" competitive practices.
The accumulation of foreign exchange reserves is often cited by European and American politicians in their complaints against Asian trade and foreign exchange market practices. That global foreign exchange reserves have increased significantly is beyond doubt - though in a higher risk environment, this may simply reflect the realities of modern international trade.
One reason central banks may want to hold more reserves simply to protect themselves and their economies against the risks of problems with trade finance or problems in short-term foreign currency funding.
It makes sense for a central bank to hold a higher level of foreign exchange reserves than has been considered normal in the past, if there is an increased risk that the domestic economy will need foreign cash. Looking at other possible drivers for this reserve accumulation, however, it produces some interesting results.
The obvious place to start in looking at foreign exchange reserves is with current account surpluses. Countries that run fixed or managed exchange rate regimes (including many Asian economies) have collectively increased their foreign exchange rate reserves significantly in recent years.
Those countries that chose not to operate managed regimes are unlikely to have significantly added to their stock of reserves (barring shocks to the system, as with Japan recently). Therefore it is the managed exchange rate regimes of the world that are of most concern.
When we look at the countries with managed or fixed exchange rates, we find that they were running a collective current account surplus of around half a trillion dollars in 2009 (which was, generally speaking, a bad year for trade - which makes the size of the surplus all the more remarkable).
This would seem to support the contention of trade protectionists, who argue that central banks are building reserves in order to suppress the value of their currencies and boost their current account surpluses.
However, current account surpluses are not the only motive for accumulating foreign exchange reserves. Monetary authorities that are seeking to manage their exchange rates will have to offset not only the current account position, but also any capital inflows which are directed towards their countries.
To some extent, capital controls can contribute to the manipulation of capital flows by changing the risks and incentives to invest in a specific economy, but that may not be sufficient.
Capital flows into those countries with fixed and managed exchange rate regimes have been significant in the recent past. In 2009, portfolio flows (buying financial instruments, like shares) and foreign direct investment (for instance, investing in factories) accounted for roughly half a trillion dollars.
In other words, the capital inflows into countries that manage their exchange rates are exactly as important as the current account surpluses of those countries.
Of course, private sector outflows by local investors buying overseas assets may offset these capital inflows to some extent, but there is still a need for these capital flows to be compensated for if the monetary authorities wish to maintain a fixed or semi-fixed exchange rate regime.
Only half of the reason for building foreign exchange reserves is the current account surplus. The other half of the reason for building foreign exchange reserves in those countries than manage their exchange rates is that international investors want to invest in those countries.
This highlights a critical issue for the debate surrounding foreign exchange reserves, exchange rate regimes and trade protection: current account surpluses are not the overwhelming cause of reserve accumulation by those countries that seek to manage their foreign exchange rates. Capital inflows into fixed and managed exchange rate regimes assume as much importance as current account balances.
Foreign exchange reserve accumulation may still be a signal that a currency is undervalued - but it might be undervalued from a capital account perspective, rather than a current account perspective.
That is to say, controlling the exchange rate may make assets appear cheap to foreign investors, which may be more important than making domestically made goods appear cheap to foreign consumers.
It is perfectly possible that the accumulation of foreign exchange reserves could be curtailed through capital controls or shifts in expectations about asset market returns, without there being any noticeable rebalancing of current account positions.
The writer is managing director of global economics, UBS Investment Bank.
The accumulation of foreign exchange reserves is often cited by European and American politicians in their complaints against Asian trade and foreign exchange market practices. That global foreign exchange reserves have increased significantly is beyond doubt - though in a higher risk environment, this may simply reflect the realities of modern international trade.
One reason central banks may want to hold more reserves simply to protect themselves and their economies against the risks of problems with trade finance or problems in short-term foreign currency funding.
It makes sense for a central bank to hold a higher level of foreign exchange reserves than has been considered normal in the past, if there is an increased risk that the domestic economy will need foreign cash. Looking at other possible drivers for this reserve accumulation, however, it produces some interesting results.
Those countries that chose not to operate managed regimes are unlikely to have significantly added to their stock of reserves (barring shocks to the system, as with Japan recently). Therefore it is the managed exchange rate regimes of the world that are of most concern.
When we look at the countries with managed or fixed exchange rates, we find that they were running a collective current account surplus of around half a trillion dollars in 2009 (which was, generally speaking, a bad year for trade - which makes the size of the surplus all the more remarkable).
This would seem to support the contention of trade protectionists, who argue that central banks are building reserves in order to suppress the value of their currencies and boost their current account surpluses.
However, current account surpluses are not the only motive for accumulating foreign exchange reserves. Monetary authorities that are seeking to manage their exchange rates will have to offset not only the current account position, but also any capital inflows which are directed towards their countries.
To some extent, capital controls can contribute to the manipulation of capital flows by changing the risks and incentives to invest in a specific economy, but that may not be sufficient.
Capital flows into those countries with fixed and managed exchange rate regimes have been significant in the recent past. In 2009, portfolio flows (buying financial instruments, like shares) and foreign direct investment (for instance, investing in factories) accounted for roughly half a trillion dollars.
In other words, the capital inflows into countries that manage their exchange rates are exactly as important as the current account surpluses of those countries.
Of course, private sector outflows by local investors buying overseas assets may offset these capital inflows to some extent, but there is still a need for these capital flows to be compensated for if the monetary authorities wish to maintain a fixed or semi-fixed exchange rate regime.
Only half of the reason for building foreign exchange reserves is the current account surplus. The other half of the reason for building foreign exchange reserves in those countries than manage their exchange rates is that international investors want to invest in those countries.
This highlights a critical issue for the debate surrounding foreign exchange reserves, exchange rate regimes and trade protection: current account surpluses are not the overwhelming cause of reserve accumulation by those countries that seek to manage their foreign exchange rates. Capital inflows into fixed and managed exchange rate regimes assume as much importance as current account balances.
Foreign exchange reserve accumulation may still be a signal that a currency is undervalued - but it might be undervalued from a capital account perspective, rather than a current account perspective.
That is to say, controlling the exchange rate may make assets appear cheap to foreign investors, which may be more important than making domestically made goods appear cheap to foreign consumers.
It is perfectly possible that the accumulation of foreign exchange reserves could be curtailed through capital controls or shifts in expectations about asset market returns, without there being any noticeable rebalancing of current account positions.
The writer is managing director of global economics, UBS Investment Bank.
Tuesday, June 28, 2011
Tuesday, June 14, 2011
理財三點式‧保險＋定存＋基金
2011-06-13 (Sin Chew Daily)
甫踏入社會的新鮮人，對於銀行櫃台前，琳瑯滿目的投資商品，肯定不知從何下手。銀行財富管理部門主管建議，新鮮人可把握“保險不可少、保留部份現金、定期定額投資”三項基本原則，依自己的風險承受度，從保險、定存和基金三種商品著手。
新鮮人拿到第一份薪水後，記得進行規劃，保險是不可或缺的一環，銀行主管說，愈年輕時投保，保費愈便宜，所以基本的醫療險、壽險一定要先投保。
保留急用金
不跳腳
不跳腳
接下來，也要保留一部份現金在手，才不會臨時有資金需求時捉襟見肘。
因此，每個月拿到薪水時，記得將手頭一部份的資金，存放在定期或活期存款中，以備不時之需。不過，目前一年期的定期存款，利率大約只有2%，所以存放的金額不用太多，以免利息，全都被通膨吃光。
銀行主管說，一般而言，要保留可供三個月生活費的現金，以免青黃不接時，還得和家人、朋友調頭寸。
銀行主管認為，新鮮人不用急著一領到薪水就拿去投資，應該先進行儲蓄，準備好緊急預備金，並做好保險規劃後，再考慮股票、基金等投資工具。
在挑選保險工具部份，新鮮人應選擇低保費、高保障的險種，小錢也可買到大保障。
舉例而言，如定期壽險、意外險，終身壽險搭配意外險、醫療險附約，先建立起最基本的保障。
另外，保單的內容應當依照個人工作內容與風險程度來規劃，例如，工作內容屬外勤、業務性質，或是經常出差、騎乘摩哆車上下班，就應考慮提高意外險，以及意外醫療的額度，若是屬於內勤，就不一定需要提高意外險。
定期買基金
賺複利
賺複利
在投資部份，缺乏時間關注股市的新鮮人，可以考慮透用銀行的定期定額機制，購買海外基金，每月最低只要3,000元，就可以逐步累積財富，存下自己的第一桶金。
銀行主管指出，若是能承受較大風險的積極型投資人，可以購買新興市場的股票型基金，若是擔心風險，可以購買股票和債券兼而有之的平衡型基金。
銀行主管指出，一天只要省出一杯咖啡的錢50元，一個月就有1,500元，一年就有18,000元，看起來不過是一筆小錢，但是經過複利的時間魔法，小錢也能滾成大錢。（星洲日報／投資致富‧財富教室）
Monday, June 6, 2011
Subscribe to:
Posts (Atom)