Wealth, Success and Love

A woman came out of her house and saw three old men with long white beards sitting in her front yard. She did not recognize them.

Then she said, "I don't think I know you, but you must be hungry. Please come in and have something to eat."

"Is the man of the house home?", they asked.
"No," she said. "He's out."
"Then we cannot come in," they replied.

In the evening when her husband came home, she told him what had happened.
So, he said, "Go tell them I'm home, and invite them in!"

The woman went out and invited the men in.
"We do not go into a house together," they replied.
"Why is that?" she wanted to know.
One of the old men explained. "His name is Wealth," he said pointing to one of his friends, and pointing to another one he said, "This man is Success, and I am Love." Then he added, "Now, go and discuss with your husband which one of us you want in your home."

The woman went in and told her husband what was said.
Her husband was over-joyed. "How nice!" he said. "Since that's the case, let us invite in Wealth. Let him come in and fill our home with wealth!"

His wife disagreed. "Why don't we invite Success?"
But, their daughter was listening from the corner of the room. She jumped in with her own suggestion. "Wouldn't it be better to invite Love? Our home will then be filled with love!"

The wife agreed. "Then, let us heed our daughter's advice," said the husband to his wife. "Go out and invite Love in to be our guest."

The woman went out and asked the three old men, "Which one of you is Love? Please come in and be our guest." Love got up and started walking toward the house. Then the other two also got up and followed him.

Surprised, the lady asked Wealth and Success, "I only invited in Love, as you directed. Why are you all coming in?"

The old men replied together, "If you had invited only Wealth or Success, the other two of us would have stayed. However, since you invited Love... wherever He goes, we go with him... because wherever there is Love, there is also Wealth and Success!"

How to Measure Returns

Azizi Ali, one of our famous local millionaires not only accumulates wealth for himself, but also help others achieve the same by training and imparting his knowledge. I found this topic quite interesting as I get questions or statements from friends and family members who say that market is down, so don't invest! or I'd want to monitor my fund performances on my own (mutual funds, to be exact) so that I know how much returns I'm making..

Special Report: How to Measure Returns
by Azizi Ali

"I made fifty thousand in the stock market in 99!" an acquaintance proudly declare. In fact, it was so loud, he was practically screaming in your ear. Which kind of make you feel inadequate because you only made ten grand. So you quickly change the conversation subject to the mating rituals of extinct Sagittarian Mongolian bisons.

But hold on a second. Though it's true that you made less money than him, it does not necessarily mean that he is one up on you. Because we are only talking of straight figures so far. And that is not how return on investment are calculated.

The correct way of measuring returns is in two ways: in percentage form and on an annual basis.

Return must be expressed on a percentage term

Return expressed in straight ringgit/dollar/yen has little meaning. This is because straight ringgit amount do not reveal the amount of money that had to be invested in order to earn that return.

For example, is RM10,000 a good return? The answer is that it depends on the amount invested. If RM50,000 was invested, then RM10,000 would be an excellent return as it is a 20% return. However, if the original investment was RM500,000, then the return is a measly 2%. If his layout was five million instead, then he would have cried as his return is...0.2%! Pass the tissue paper, please.

Return must be expressed on an annual basis

But the job doesn't end there. Even after expressing the return in percentages, it must also be expressed on an annual basis. This is the universally accepted way of stating a percentage return.

Following the earlier example; if the RM10,000 return from the RM50,000 was realized after just 6 months, then the annual return is 44% (The return is 44% instead of 40% due to the compound effect). And even if the investment was cashed out after that six months, we would still consider the return as 44%.
If on the other hand, the RM10,000 was realized at the end of two years, then the return is only 9.54%. (Again, the 9.54% return instead of 10% is due to the compounding factor).

So now you know that the return of x % in y number of years - often quoted by fund managers - is not the right way of indicating return on investment. A 50% return in five years may look good but that is only 8.44% annual return.

Then we can compare

Once we have the returns expressed in percentage form and on an annual basis, only then we can compare the various returns from different investments. Only then the comparison be fair and sensible. Orange to orange, durian to durian.

Coming back to the beginning example, if the guy made RM50,000 from investing RM500,000, his return on investment is 10%. Not bad. Something to crow about, I suppose.

But since you made the ten grand by investing only RM20,000, your return is a fabulous 50%! Whaddaya know - You are the winner!

Now you can go back talking about sex and dead Sagittarian Mongolian bisons.

Impact Of Goal Setting

Another inspiring story that was delivered to my mailbox. Though the topic is on Impact of Goal Setting, the example given in on the world's greatest investor,Warren Buffet. I guess it would be useful to all investors out there, especially to those who look up to him as the Investment Guru.

In 1952, there was a research study done on the impact of goal setting on the graduating batch of students at Yale University. When asked how many of them had clearly specified and written down goals, only three percent responded. The remaining ninety-seven percent, despite being highly intelligent and hardworking, had no road map where they would be five to ten years after graduation. Twenty years later in 1972, a follow up study was done on the class of 1952. What they discovered was shocking; the combined income of the three percent who had clear goals was greater than the entire income of the ninety seven percent combined! Was it just a coincidence or does having clear goals really have an impact on a person’s personal and financial success?

One classic example is investor Warren Buffet. Does his ability to come about by chance? Absolutely not. From a very early age young Buffett was obsessed with making money and had a very clear dream of becoming the world’s greatest investor. Born during the depression when his father was close to bankruptcy, Warren learnt about the value of money and the importance of being financially secure at an early age.

Even before his teens, Warren knew that he wanted to be rich. As early as elementary school and later on in high school, he would tell his classmates that he wanted to become a millionaire before the age of 35 (when he turned 35, his net worth exceeded $6 million). It was because of his goal that he constantly thought of ways to make money, while most other kids his age would be spending their parents’ money.

He even memorized a book called ‘ A Thousand Ways to Make $1,000’. At the age of six, he started buying coke bottles at 25-cents per six-pack and selling them at 5-cents a bottle, giving him a 16% gross profit, as he would tell himself. At the age of 13, he got a job delivering newspapers and through innovative marketing and distribution strategies, he served five hundred customers a day. At the age of 11, he took all his savings and started investing in the stock market. His first investment was three shares in a company called ‘City Service’. While most kids his age were reading comic books, Warren spent his time reading company annual reports.

By the age of 14, he started a pinball business and was earning $175 a week, as much as the average 25-year old was earning in 1944. Would he have taken all those actions if he never set a goal to be rich in the first place? Of course not. It was clearly because of his focus of energy and actions that allowed him to become the best in what he does.

A Blog Posted by Singapore 's Youngest Millionaire

I just came across this article in my mail. Went through a very fast googling process looking for its source. Ended up at http://www.adam-khoo.com. Looks like this guy is from Singapore and made his 1st million at the age of 26 and currently gives lots of speeches/seminars and has written quite a number of top-selling books. His frugal lifestyle is something that all of us should aim to learn and follow.

By Adam Khoo

Some of you may already know that I travel around the region pretty frequently, having to visit and conduct seminars at my offices in Malaysia, Indonesia, Thailand and Suzhou (China). I am in the airport almost every other week so I get to bump into many people who have attended my seminars or have read my books.

Recently, someone came up to me on a plane to KL and looked rather shocked. He asked, 'How come a millionaire like you is travelling economy?' My reply was, 'That's why I am a millionaire.' He still looked pretty confused. This again confirms that greatest lie ever told about wealth (which I wrote about in my latest book 'Secrets of Self Made Millionaires'). Many people have been brainwashed to think that millionaires have to wear Gucci, Hugo Boss, Rolex, and sit on first class in air travel. This is why so many people never become rich because the moment that earn more money, they think that it is only natural that they spend more, putting them back to square one.

The truth is that most self-made millionaires are frugal and only spend on what
is necessary and of value. That is why they are able to accumulate and multiply their wealth so much faster. Over the last 7 years, I have saved about 80% of my income while today I save only about 60% (because I have my wife, mother in law, 2 maids, 2 kids, etc. to support). Still, it is way above most people who save 10% of their income (if they are lucky). I refuse to buy a first class ticket or to buy a $300 shirt because I think that it is a complete waste of money. However, I happily pay $1,300 to send my 2-year old daughter to Julia Gabriel Speech and Drama without thinking twice.

When I joined the YEO (Young Entrepreneur's Organization) a few years back (YEO is an exclusive club open to those who are under 40 and make over $1m a year in their own business) I discovered that those who were self-made thought like me. Many of them with net worths well over $5m, travelled economy class and some even drove Toyota's and Nissans (not Audis, Mercs, BMWs).

I noticed that it was only those who never had to work hard to build their own wealth (there were also a few ministers' and tycoons' sons in the club) who spent like there was no tomorrow. Somehow, when you did not have to build everything from scratch, you do not really value money. This is precisely the reason why a family's wealth (no matter how much) rarely lasts past the third generation. Thank God my rich dad (oh no! I sound like Kiyosaki) foresaw this terrible possibility and refused to give me a cent to start my business.

Then some people ask me, 'What is the point in making so much money if you don't enjoy it?' The thing is that I don't really find happiness in buying branded clothes, jewellery or sitting first class. Even if buying something makes me happy it is only for a while, it does not last. Material happiness never lasts, it just give you a quick fix. After a while you feel lousy again and have to buy the next thing which you think will make you happy. I always think that if you need material things to make you happy, then you live a pretty sad and unfulfilled life.

Instead, what make ME happy is when I see my children laughing and playing and learning so fast. What makes me happy is when I see by companies and trainers reaching more and more people every year in so many more countries. What makes me really happy is when I read all the emails about how my books and seminars have touched and inspired someone's life. What makes me really happy is reading all your wonderful posts about how this BLOG is inspiring you. This happiness makes me feel really good for a long time, much much more than what a Rolex
would do for me.

I think the point I want to put across is that happiness must come from doing your life's work (be in teaching, building homes, designing, trading, winning tournaments etc.) and the money that comes is only a by-product. If you hate what you are doing and rely on the money you earn to make you happy by buying stuff, then I think that you are living a life of meaningless.

Story Of A Little Boy

The other day I came across a very interesting story. It was a story of a little boy. A true story. This little boy picked up an interest in music. For several years, he had been learning to play the cornet. He persisted, putting in hours of practice at home each day, and there came a time, after many painful hours of practice peppered with criticism from his mother, that he was rewarded by being chosen to participate in his school's Armistice Day Ceremony.

Each year on November 11, the entire school went down to the gym for a ceremony honouring the nation's fallen soldiers. In what had become a school tradition, trumpet players stationed at doors on either side of the gym would alternate playing "Taps," one blowing the first dum da dum notes, and the other echoing dum da DUM, and so on.

That year, this boy's cornet skills had advanced enough for him to be given the part of the echo. He woke up the morning of the event, exhilarated at the prospect of performing in front of the entire school. When the big moment came, he was ready.

As the little boy stood in the doorway with his cornet, the first trumpet player sounded, Dum da DUM.

But on the second dum, he hit a wrong note.

"My whole life flashed before my eyes, because I didn't know what to do with the echo. They hadn't prepared me for this. Paralyzed - my big moment" recounted the little boy years later.

Should he copy the other trumpet player's mistake or embarrass him by contradicting what he's played? The little boy was undone. The scene scalded itself permanently into his memory. What he did next he can't remember - had become a blank.

But that little boy learned a valuable lesson that day: It might seem easier to go through life as the echo - but only until the other guy plays a wrong note.
It is a lesson that will serve all of us well. Often, either by choice, circumstances or sheer force of habit, we end up playing the 'echo'. And this was probably the lesson that made him stick to the principle 'Be Greedy When Everyone Panics, and Panic When Everyone Is Greedy'.

That little boy grew up to be the most successful investor of all time and the richest man in the world a few years running. That little boy's name is Warren Buffet.