If you are honest this tells the truth - it's pretty good
Write your answers on a piece of paper. No cheating!!
The answers are at the bottom of this page.
1. Write the name of a person of the opposite sex.
2. Which is your favourite colour out of red, black, blue, and green, yellow?
3. Your first initial?
4. Your month of birth?
5. Which colour do you like more, black or white?
6. Name of a person of the same sex as yours.
7. Your favourite number?
8. Do you like Sydney or Brisbane more?
9. Do you like a lake or the ocean more?
10. Write down a wish (a realistic one).
When you're done, scroll down. (Don't cheat)
Answers
1. You are completely in love with this person.
2. If you choose:
Red - You are alert and your life is full of love. Black - you are conservative and aggressive. Green - your soul is relaxed and you are laid back Blue - you are spontaneous and love kisses and affection from the ones you love. Yellow- you are a very happy person and give good advice to those who are down.
3. If your initial is:
A-K You have a lot of love to give in friendships in your life.
L-R You try to enjoy your life to the maximum and your love life is soon to blossom.
S-Z You like to help others and your future love life looks very good.
4. If you were born in: Jan-Mar: The year will go very well for you and you will discover that you fall in love with someone totally unexpected.
April-June: You will have a strong love relationship that will last long and the memories will last forever.
July-Sep: You will have a great year and will experience a major life-changing experience for the good.
Oct-Dec: Your love life will not be too great, but eventually you will find your soul mate.
5. If you chose..... Black: Your life will take on a different direction, it will be the best thing for you, and you will be glad for the change.
White: You will have a friend who completely confides in you and would do anything for you, but you may not realize it.
6. This person is your best friend.
7. This is how many close friends you have in your lifetime.
8. If you chose: Sydney: You like adventure. Brisbane: You are a laid back person.
9. If you chose:
Lake: You are loyal to your friends and your lover and are very reserved.
Ocean: You are spontaneous and like to please people.
10. This wish will come true only if you send this to five people in one hour. Send it to ten people, and it will come true before your next birthday!
30.6.08
Birthstones!
Most gem scholars agree that the tradition of birthstones
arose from the Breastplate of Aaron: a ceremonial religious garment
set with twelve gemstones that represented the twelve tribes of Israel.
Many found a correspondence with the twelve signs of the zodiac.
In later times, the stones became associated with the
twelve months of the year and many believed that the stones
possessed power when worn or owned.
Thus, the tradition of giving and wearing birthstones began!
January!
Birthstone: Garnet
Legend has it, that Noah hung a large garnet in the ark
for illumination!
The garnet was believed to protect from nightmares
and give guidance at night.
The Crusaders used them as protection against
wounds and accidents during their journeys.
Today, it is a symbol for
guidance and constancy.
February!
Birthstone: Amethyst
The Greeks believed that if an amethyst was
placed under the tongue while drinking
it would prevent intoxication!
For many years the amethyst has been a symbol
of peace and tranquility!
It is also said to be the stone of Saint Valentine,
who wore an amethyst engraved with the figure
of his assistant, Cupid.
Saint Valentine's Day is still observed in February.
March!
Birthstone: Aquamarine
People believed this stone had the ability
to aid seafarers.
It was also believed that if you dreamed aquamarine
it meant you were going to
meet a new friend!
Aquamarine has also been a symbol for youth
and health for many years!
April!
Birthstone: Diamond
The diamond is the hardest of all gems.
In ancient times they were believed to be
hardened dewdrops or splinters of lightning
and stars that fell to the earth.
Warriors believed if they wore diamonds into
battle that the gems would give them
strength and courage.
In ancient times, only men wore diamonds.
The tradition of giving diamond engagement rings
came much later.
Today, the gem is a symbol that reflects
the strength of love!
Birthstone: Emerald
The Emeralds magnificent color has
been said to rest and relieve the eye.
Romans dedicated the gem to the
goddess Venus because it symbolized
the reproductive forces of nature.
Early Christians considered the gem
a symbol of the resurrection of Christ!
In present time, the emerald is a
symbol for happiness and fertility.
Birthstone: Pearl
According to Indian mythology,
a pearl was formed when dew drops
during a full moon
fell from the heavens into the sea
and were captured by shellfish.
Warriors in India encrusted pearls
into the handles of their swords
to symbolize the tears a sword can bring.
In present time, the pearl
is a universal symbol of purity.
Birthstone: Ruby
The ruby is known as
"The Lord of the Gems"!
In the Orients it was believed to be the
spark of life and was thought to be drops of
blood from the heart of Mother Earth!
In other parts of the world, the ruby was perceived
as self-luminous and was called
glowing stone or lamp stone.
During medieval times, many thought the
ruby could warn of misfortune or illness to its owner
by turning a deeper red.
Today, it is a symbol for nobility.
August!
Birthstone: Peridot
The peridot is formed by a
volcanic action.
Greeks believed it brought
royal dignity upon its wearer
and it was also considered
a symbol for the sun.
Ancient legends considered the
peridot as a powerful amulet
that warded off evil.
Birthstone: Sapphire
It is a common theory
that the Ten Commandments were written on
tablets made of Sapphire.
In ancient times, the sapphire was believed
to hold special powers.
Many felt the gem gave its owner the ability
to foretell the future.
It has been a symbol for wisdom ever since!
October!
Birthstone: Opal
Throughout history, there are as many different legends about the opal as there are colors in this precious gem. There is an Indian legend about the origin of the opal. Quoted from "Gemstones" by Willard Heaps: "...the gods Brahma, Vishnu and Shiva once vied in jealous love for a beautiful woman. This angered the Eternal, who changed the fair mortal into a creature made of mist. Thereupon each of the three gods endowed her with his own colorso as to be able to recognize her. Brahma gave her the glorious blue of the heavens, Vishnu enriched her with the splendor of gold, and Shiva lent her his flaming red. But all this was in vain, since the lovely phantom was whisked away by the winds. Finally, the Eternal took pity on her and transformed her into a stone,the opal, that sparkles in all the colors of the rainbow." In Australia,a legend existed of a huge opal that governs the stars and guides human love, as well as controls the gold in all the mines. The Aborigines have an altogether different legend concerning the opal. They believed it to be the devil that lurks in the ground made up of half man and half serpent that lures men to destruction. Arabs believed the wearer of an opal had the power of invisibility, hence it became a popular talisman of thieves and spies. The Romans considered the gem to be a symbol of love and hope. In the orients, it was called the anchor of hope. The two beliefs of love and hope, above all the others has carried over into today's beliefs.
Birthstone: Topaz
The name Topaz is derived from the
Sanskrit word meaning "fire".
In ancient lore, it was believed that
topaz could control heat and cool
boiling water, as well as
calm excessive anger.
During the Middle Ages, the topaz
was used mostly by royalty and clergy.
A 13th century belief held that a topaz engraved
with a falcon helped its wearer cultivate
the goodwill of kings and princes.
Topaz was once thought to
strengthen the mind, prevent mental disorders,
and increase wisdom.
December!
Birthstone: Turquoise
Turquoise was used in some of the earliest jewelry
known to man. Pharaohs in Egypt have been
unearthed wearing turquoise jewelry that date
back to 55oo B.C.
Native Americans in the southwest
called turquoise "Chal-cui-hui-ta" which means
"The highest and most valued thing in the world."
They believed the blue represented heaven and
the green earth.
Turquoise was considered by some as a symbol of
good fortune and success.
It was also believed to bring prosperity to its wearer.
arose from the Breastplate of Aaron: a ceremonial religious garment
set with twelve gemstones that represented the twelve tribes of Israel.
Many found a correspondence with the twelve signs of the zodiac.
In later times, the stones became associated with the
twelve months of the year and many believed that the stones
possessed power when worn or owned.
Thus, the tradition of giving and wearing birthstones began!
January!
Birthstone: Garnet
Legend has it, that Noah hung a large garnet in the ark
for illumination!
The garnet was believed to protect from nightmares
and give guidance at night.
The Crusaders used them as protection against
wounds and accidents during their journeys.
Today, it is a symbol for
guidance and constancy.
February!
Birthstone: Amethyst
The Greeks believed that if an amethyst was
placed under the tongue while drinking
it would prevent intoxication!
For many years the amethyst has been a symbol
of peace and tranquility!
It is also said to be the stone of Saint Valentine,
who wore an amethyst engraved with the figure
of his assistant, Cupid.
Saint Valentine's Day is still observed in February.
March!
Birthstone: Aquamarine
People believed this stone had the ability
to aid seafarers.
It was also believed that if you dreamed aquamarine
it meant you were going to
meet a new friend!
Aquamarine has also been a symbol for youth
and health for many years!
April!
Birthstone: Diamond
The diamond is the hardest of all gems.
In ancient times they were believed to be
hardened dewdrops or splinters of lightning
and stars that fell to the earth.
Warriors believed if they wore diamonds into
battle that the gems would give them
strength and courage.
In ancient times, only men wore diamonds.
The tradition of giving diamond engagement rings
came much later.
Today, the gem is a symbol that reflects
the strength of love!
Birthstone: Emerald
The Emeralds magnificent color has
been said to rest and relieve the eye.
Romans dedicated the gem to the
goddess Venus because it symbolized
the reproductive forces of nature.
Early Christians considered the gem
a symbol of the resurrection of Christ!
In present time, the emerald is a
symbol for happiness and fertility.
Birthstone: Pearl
According to Indian mythology,
a pearl was formed when dew drops
during a full moon
fell from the heavens into the sea
and were captured by shellfish.
Warriors in India encrusted pearls
into the handles of their swords
to symbolize the tears a sword can bring.
In present time, the pearl
is a universal symbol of purity.
Birthstone: Ruby
The ruby is known as
"The Lord of the Gems"!
In the Orients it was believed to be the
spark of life and was thought to be drops of
blood from the heart of Mother Earth!
In other parts of the world, the ruby was perceived
as self-luminous and was called
glowing stone or lamp stone.
During medieval times, many thought the
ruby could warn of misfortune or illness to its owner
by turning a deeper red.
Today, it is a symbol for nobility.
August!
Birthstone: Peridot
The peridot is formed by a
volcanic action.
Greeks believed it brought
royal dignity upon its wearer
and it was also considered
a symbol for the sun.
Ancient legends considered the
peridot as a powerful amulet
that warded off evil.
Birthstone: Sapphire
It is a common theory
that the Ten Commandments were written on
tablets made of Sapphire.
In ancient times, the sapphire was believed
to hold special powers.
Many felt the gem gave its owner the ability
to foretell the future.
It has been a symbol for wisdom ever since!
October!
Birthstone: Opal
Throughout history, there are as many different legends about the opal as there are colors in this precious gem. There is an Indian legend about the origin of the opal. Quoted from "Gemstones" by Willard Heaps: "...the gods Brahma, Vishnu and Shiva once vied in jealous love for a beautiful woman. This angered the Eternal, who changed the fair mortal into a creature made of mist. Thereupon each of the three gods endowed her with his own colorso as to be able to recognize her. Brahma gave her the glorious blue of the heavens, Vishnu enriched her with the splendor of gold, and Shiva lent her his flaming red. But all this was in vain, since the lovely phantom was whisked away by the winds. Finally, the Eternal took pity on her and transformed her into a stone,the opal, that sparkles in all the colors of the rainbow." In Australia,a legend existed of a huge opal that governs the stars and guides human love, as well as controls the gold in all the mines. The Aborigines have an altogether different legend concerning the opal. They believed it to be the devil that lurks in the ground made up of half man and half serpent that lures men to destruction. Arabs believed the wearer of an opal had the power of invisibility, hence it became a popular talisman of thieves and spies. The Romans considered the gem to be a symbol of love and hope. In the orients, it was called the anchor of hope. The two beliefs of love and hope, above all the others has carried over into today's beliefs.
Birthstone: Topaz
The name Topaz is derived from the
Sanskrit word meaning "fire".
In ancient lore, it was believed that
topaz could control heat and cool
boiling water, as well as
calm excessive anger.
During the Middle Ages, the topaz
was used mostly by royalty and clergy.
A 13th century belief held that a topaz engraved
with a falcon helped its wearer cultivate
the goodwill of kings and princes.
Topaz was once thought to
strengthen the mind, prevent mental disorders,
and increase wisdom.
December!
Birthstone: Turquoise
Turquoise was used in some of the earliest jewelry
known to man. Pharaohs in Egypt have been
unearthed wearing turquoise jewelry that date
back to 55oo B.C.
Native Americans in the southwest
called turquoise "Chal-cui-hui-ta" which means
"The highest and most valued thing in the world."
They believed the blue represented heaven and
the green earth.
Turquoise was considered by some as a symbol of
good fortune and success.
It was also believed to bring prosperity to its wearer.
मनी Control
Learn self control now, not later.
If you're lucky, your parents taught you this skill when you were a kid. If not, keep in mind that the sooner you learn the fine art of delaying gratification, the sooner you'll find it easy to keep your finances in order. Although you can effortlessly purchase an item on credit the minute you want it, it's better to wait until you've actually saved up the money. Do you really want to pay interest on a pair of jeans or a box of cereal? (To learn more about credit, check out Understanding Credit Card Interest and our Debt Management feature.)
If you make a habit of putting all your purchases on credit cards, regardless of whether you can pay your bill in full at the end of the month, you might still be paying for those items in 10 years. If you want to keep your credit cards for the convenience factor or the rewards they offer, make sure to always pay your balance in full when the bill arrives, and don't carry more cards than you can keep track of.
Don't put your financial future in someone else's hands.
If you don't learn to manage your own money, other people will find ways to (mis)manage it for you. Some of these people may be ill-intentioned, like unscrupulous commission-based financial planners. Others may be well-meaning, but may not know what they're doing, like Grandma Betty who really wants you to buy a house even though you can only afford a treacherous adjustable-rate mortgage.
Instead of relying on others for advice, take charge and read a few basic books on personal finance. Once you're armed with personal finance knowledge, don't let anyone catch you off guard - whether it's a significant other that slowly siphons your bank account or friends who want you to go out and blow tons of money with them every weekend.
Understanding how money works is the first step toward making your money work for you. (To find out how to have fun and still save money, see Budget Without Blowing Off Your Friends.)
Pay attention to where your money goes.
Once you've gone through a few personal finance books, you'll realize how important it is to make sure your expenses aren't exceeding your income. The best way to do this is by budgeting. Once you see how your morning java adds up over the course of a month, you'll realize that making small, manageable changes in your everyday expenses can have just as big of an impact on your financial situation as getting a raise.
In addition, keeping your recurring monthly expenses as low as possible will also save you big bucks over time. If you don't waste your money on a posh apartment now, you might be able to afford a nice condo or a house before you know it. (Read more on budgeting in our Budgeting 101 special feature.)
Start an emergency fund.
One of personal finance's oft-repeated mantras is "pay yourself first". No matter how much you owe in student loans or credit card debt and no matter how low your salary may seem, it's wise to find some amount - any amount - of money in your budget to save in an emergency fund every month.
Monopolies: Corporate triumph and treachery
Having money in savings to use for emergencies can really keep you out of trouble financially and help you sleep better at night. Also, if you get into the habit of saving money and treating it as a non-negotiable monthly "expense", pretty soon you'll have more than just emergency money saved up: you'll have retirement money, vacation money, and even money for a home down payment.
Don't just sock away this money under your mattress; put it in a high-interest online savings account, a certificate of deposit, or a money market account. Otherwise, inflation will erode the value of your savings.
Start saving for retirement now.
Just as you headed off to kindergarten with your parents' hope to prepare you for success in a world that seemed eons away, you need to prepare for your retirement well in advance. Because of the way compound interest works, the sooner you start saving, the less principal you'll have to invest to end up with the amount you need to retire, and the sooner you'll be able to call working an "option" rather than a "necessity".
Company-sponsored retirement plans are a particularly great choice because you get to put in pretax dollars and the contribution limits tend to be high (much more than you can contribute to an individual retirement plan). Also, companies will often match part of your contribution, which is like getting free money. (To learn more, see Understanding The Time Value Of Money and Retirement Savings Tips For 18- To 24-Year-Olds.)
Get a grip on taxes.
It's important to understand how income taxes work even before you get your first paycheck. When a company offers you a starting salary, you need to know how to calculate whether that salary will give you enough money after taxes to meet your financial goals and obligations. Fortunately, there are plenty of online calculators that have taken the dirty work out of determining your own payroll taxes, such as Paycheck City. These calculators will show you your gross pay, how much goes to taxes and how much you'll be left with (also known as net, or take-home pay).
For example, $35,000 a year in California will leave you with about $27,600 after taxes in 2008, or about $2,300 a month. By the same token, if you're considering leaving one job for another in search of a salary increase, you'll need to understand how your marginal tax rate will affect your raise and that a salary increase from $35,000 a year to $41,000 a year won't give you an extra $6,000, or $500 per month - it will only give you an extra $4,200, or $350 per month (again, the amount will vary depending on your state of residence). Also, you'll be better off in the long run if you learn to prepare your annual tax return yourself, as there is plenty of bad tax advice and misinformation floating around out there.
Guard your health.
If meeting monthly health insurance premiums seems impossible, what will you do if you have to go to the emergency room, where a single visit for a minor injury like a broken bone can cost thousands of dollars? If you're uninsured, don't wait another day to apply for health insurance: it's easier than you think to wind up in a car accident or trip down the stairs. You can save money by getting quotes from different insurance providers to find the lowest rates.
Also, by taking daily steps now to keep yourself healthy, like eating fruits and vegetables, maintaining a healthy weight, exercising, not smoking, not consuming alcohol in excess, and even driving defensively, you'll thank yourself down the road when you aren't paying exorbitant medical bills.
Guard your wealth.
If you want to make sure all your hard-earned money doesn't vanish, you'll need to take steps to protect it. If you rent, get renter's insurance to protect the contents of your place from events like burglary or fire. Disability insurance protects your greatest asset: the ability to earn an income, by providing you with a steady income if you ever become unable to work for an extended period of time due to illness or injury.
If you want help managing your money, find a fee-only financial planner to provide unbiased advice that's in your best interest, rather than a commission-based financial advisor, who earns money when you sign up with the investments his or her company backs.
You'll also want to protect your money from taxes, which is easy to do with a retirement account, and inflation, which you can do by making sure that all of your money is earning interest through vehicles like high-interest savings accounts, money market funds, CDs, stocks, bonds, and mutual funds. (Find out all you need to know about insurance in Understand Your Insurance Contract, Five Insurance Policies Everyone Should Have and Insurance 101 For Renters.)
A financial basis for life
Remember, you don't need any fancy degrees or special background to become an expert at managing your finances. If you use these eight financial rules for your life, you can be as personally prosperous as the guy with the hard-won MBA.
10 great investing rules to become RICH
An old saying goes, "You can't build wealth by buying things you don't need, with money you don't have, to impress people you don't like." So how do you build wealth? Read on...
There are basically only four roads to wealth:
• You can marry it (don't laugh, some do);
• You can inherit it (others do that);
• You can get a windfall (from a lawsuit settlement, lottery, or some other unexpected good fortune); or
• You can accumulate it.
Most of us are stuck with option #4 - accumulate it. To do so, you need to understand how to manage cash flow. First, look at your annual earnings and multiply that figure by your working years. Not counting inflation (that is, pay raises along the way), the result may total several million dollars.
Whether you will have that several million dollars by retirement, though, depends on how you manage your cash flow - and how you answer the following questions: What do you need now, what do you want now, and what can you save and invest for the future?
Here are ten time-tested rules that can weather the stormiest market cycles.
Rules #1: Live within your means
This includes managing debt and learning to budget. Such boring topics may not be the most exciting things about becoming wealthy, but they may be the most critical.
Consumer-driven economies relentlessly hammer away at why we must buy this item or that gadget so we can have the appearance of being successful, happy, and altogether "with it." So it takes financial discipline and sensible behavior to successfully accumulate money and grow wealthy.
Possibly the biggest trap out there is easy credit, which lets us buy numerous things we might not need. Comedians have pointed out the foolishness: "You buy something that's 10 per cent off and charge it on a 20 per cent interest credit card!" And US newspaper columnist Earl Wilson opined, "Nowadays there are three classes of people - the Haves, the Have-Nots, and the Have-Not-Paid-For-What-They-Haves."
Learning to live within your means leads to a freer life - debt can be a mean master instead of a worthy servant. Save first, spend second. If you do so, building wealth will be a lot easier for you.
Rule #2: Save aggressively
This does not mean "invest aggressively." Rather, it means making it an absolute priority to set aside 10 per cent of your income right off the top, and even more if your goals tell you to do that. The longer you wait to start saving, the larger the percentage of your current pay you will have to save to reach your goal.
If you can save aggressively, you will be surprised how that "nest egg" will start to compound. Look at any chart of compounding. It has been said that it's the last compounding that makes you wealthy.
In other words, $20,000 becoming $40,000 doesn't seem like a lot of headway, but when the $40,000 compounds to $80,000, and the $80,000 to $160,000, and finally the $160,000 to $320,000, we're now talking about some serious money. Two more "doublings" and this account will be worth over $1.2 million. Those who spend first and save later inevitably end up working for those who have learned to save first, spend second.
Rule #3: Dollar-cost average
When buying shares, remove emotions from your investing by automatically buying more shares or equity mutual fund units when they are cheap. Emotional investing gets too many people in trouble. Statistics continue to show that we tend to buy when things are going up and sell when they are going down - in other words, we tend to buy high and sell low. Dollar-cost averaging not only removes emotions from investing, but it helps you buy low. Here's how:
By putting a constant amount into the market, as the price slips, you buy more and more number of cheaper shares or fund units and thereby reduce your average cost.
For example, let's say you are investing $100 a month into a fund. In the first month, the price of the fund is $10 per share and you buy 10 shares. The next month, the price has dropped to $8 per share, so your $100 buys you 12.5 shares. The next month, the price has fallen again, to $5 a share, and you buy 20 shares. In the fourth month, the price ticks back up to $7 per share. Your total investment so far is $400.
If you're like most people, though, when you look at your statement and see that by the end of the third month the price has fallen to half, you would probably think you were losing money hand over fist. Especially after a fund continues to decline month after month, investors lose patience and start to bail. They're looking for "better returns," but they don't understand what's going on with the math.
At $5 a share, it feels as though you're down 50 per cent (because the price started at $10 per share). However, you own 42.5 shares, which, when multiplied by $5 a share, equals $212.50 - and you've invested $300. In the fourth month, the price gets back up to $7 per share. Although it might feel as though you're still down because the price started at $10 per share, you're actually within a couple of dollars of your break-even point. You own 56.79 shares, which when multiplied by $7 equals $397.53, on an investment of $400.
Of course, if the fund or market continues to go down and never comes back up, you can't be guaranteed a profit. But this would happen rarely, if ever. Dollar-cost averaging - by investing a fixed amount in regular intervals - is the best way to make money in a variable market over time.
The most difficult part is having the discipline to keep doing it. Investors should be willing to consider their ability to invest over an extended period of time. Remember, you need a longer time horizon when investing in the stock market.
Rule #4: Diversify
No investment is risk free; only a diversified portfolio can mitigate the risks of market cycles. We've all been warned against putting all our eggs in one basket; even Warren Buffett said, "It's better to be approximately right than definitely wrong." By "approximately right," he was referring to diversification.
If one piece of your portfolio is doing substantially better than other parts, the natural inclination is to load up on the part doing the best and forsake those not doing well. But the result will be an under-diversified portfolio that will probably be much more volatile - and the risks may be on the downward side.
Also, proper diversification does not mean any old bunch of mutual funds or stocks, but a proper allocation among stocks, bonds, real estate, fixed assets, and other investments. It also means diversifying within those investment categories.
For example, your stocks should include a mix of midcap, large-, and small-cap stocks as well as growth, blend, and value stocks. You should have bonds that are long, medium, and short term, as well as high grade, mid grade, and low grade.
A mutual fund may offer more diversification than you could afford by owning the same stocks individually. But owning a handful of mutual funds may not offer the diversification you seek unless you research the funds' holdings carefully. That's because many funds have substantial "overlap." In other words, fund A from mutual fund family X may have many of the same stocks as fund B from fund family Y.
Rule #5: Be patient
Warren Buffet says, "The market has a very efficient way of transferring wealth from the impatient to the patient."
But waiting is very hard to do. How long are you willing to hold an asset that is not performing well? One year? Two, three, or four? If you look at the history of asset classes over time, you will see that an asset can be "out of favor" for several years in a row.
You have to be prepared to wait. Don't think you can time when bonds will perform and stocks will get hot. If someone really could do that, he would own the world by now. So remember: Time in the market is more important than timing the market.
Rule #6: Understand volatility
Very few people truly understand the risk and volatility inevitably baked into every investment portfolio. Without getting into its complexity, every variable investment has produced a range of returns over its lifetime, and this range, or deviation, can be plotted on a chart.
So, it's important to understand what the investment category's "average" annual return means in order to prepare yourself for its volatility. For example, does a 10 per cent average mean the investment was up 73 per cent and down 30 per cent and happened to average 10 per cent? Or was it up 15 per cent, and then down 5 per cent to average 10 per cent?
Many investors are fooled by averages - they chase the 70 per cent return after it has happened, when the likelihood of a repeat performance is slim (which we'll discuss more in Rule #7). Yogi Berra is rumored to have said, "Averages don't mean nuthin". If they did, you could have one foot in the oven and the other in a bucket of ice and feel perfectly comfortable."
Over time, returns from investments regress to a mean. "Regression to the mean" simply means that highs and lows will average out so that your return regresses to a certain number or range. Understand an investment's range of returns so you know what to expect annually, and over time.
Markets move from fear to greed, and back to fear. So there are times when the market is "overvalued" and other times when it is "undervalued." Warren Buffett said of the stock buying and selling decisions made at his company, Berkshire Hathaway, "We strive to be fearful when others are greedy, and greedy only when others are fearful."
Rule #7: Don't chase returns
If we know from Rule #6 that a 10 per cent average annual return does not really mean a 10 per cent return each year, why do we still fall for an ad touting a fund that produces 20 per cent annually or some other phenomenal return?
Human nature. And maybe we even convince ourselves that for the chance to experience a year or two of 70 per cent gains, we're willing to stomach the years of 30 per cent losses that also fall within the fund's range of returns.
So, before chasing that incredible return, find out how the investment did during the last bad market for that asset class. Find out its risk, and ask yourself whether you can stomach a bumpy ride over the long term.
Another Buffettism: "The dumbest reason in the world to buy a stock is because it is going up." So before chasing a return, always consider how likely it is that the investment will continue to produce that return - and whether it's really worth the cost of cashing out of another, perhaps only temporarily depressed, investment to do so.
Rule #8: Periodically rebalance your portfolio
You may decide that your investment mix should be, for example, 50 per cent growth stocks, 20 per cent value stocks, and 30 per cent bonds. But asset classes vary in performance over time, so after a year or so, the portfolio balance will start to shift as one asset "overperforms" and another one "underperforms."
Emotions would tell you to sell the underperformers and buy the overachievers. If you want to remain adequately diversified, however, you would rebalance by selling some of the overperformers and buying some of the underachievers - probably just the opposite of what your emotions will tell you.
So, if you strive to put your portfolio back to its original allocations from time to time (annually, semi-annually, or possibly even quarterly), you will be taking gains from the best-performing assets (selling high) and buying those temporarily out of favor (buying low). But it takes discipline to keep your emotions in check.
Rule #9: Manage your taxes
Have you ever considered how taxes are your biggest expense in life - more than mortgage expense, education expense, or any other expense? So, you must take advantage of all tax breaks available - each and every single one of them.
Rule #10: Get advice
Never underestimate the value of good advice. Someone who manages investments full time certainly will find things you have overlooked or done wrong. A good financial adviser is like a personal trainer for your finances and can get you on track and keep you there until your goals are met.
And even more critical than getting the advice is being sure you consistently follow your game plan. The greatest problem for most people is procrastination and erratic investment behavior. So get started, get advice, and get going down the road to wealth - and steadfastly follow through.
(Excerpt from the book, Investing Under Fire)
If you're lucky, your parents taught you this skill when you were a kid. If not, keep in mind that the sooner you learn the fine art of delaying gratification, the sooner you'll find it easy to keep your finances in order. Although you can effortlessly purchase an item on credit the minute you want it, it's better to wait until you've actually saved up the money. Do you really want to pay interest on a pair of jeans or a box of cereal? (To learn more about credit, check out Understanding Credit Card Interest and our Debt Management feature.)
If you make a habit of putting all your purchases on credit cards, regardless of whether you can pay your bill in full at the end of the month, you might still be paying for those items in 10 years. If you want to keep your credit cards for the convenience factor or the rewards they offer, make sure to always pay your balance in full when the bill arrives, and don't carry more cards than you can keep track of.
Don't put your financial future in someone else's hands.
If you don't learn to manage your own money, other people will find ways to (mis)manage it for you. Some of these people may be ill-intentioned, like unscrupulous commission-based financial planners. Others may be well-meaning, but may not know what they're doing, like Grandma Betty who really wants you to buy a house even though you can only afford a treacherous adjustable-rate mortgage.
Instead of relying on others for advice, take charge and read a few basic books on personal finance. Once you're armed with personal finance knowledge, don't let anyone catch you off guard - whether it's a significant other that slowly siphons your bank account or friends who want you to go out and blow tons of money with them every weekend.
Understanding how money works is the first step toward making your money work for you. (To find out how to have fun and still save money, see Budget Without Blowing Off Your Friends.)
Pay attention to where your money goes.
Once you've gone through a few personal finance books, you'll realize how important it is to make sure your expenses aren't exceeding your income. The best way to do this is by budgeting. Once you see how your morning java adds up over the course of a month, you'll realize that making small, manageable changes in your everyday expenses can have just as big of an impact on your financial situation as getting a raise.
In addition, keeping your recurring monthly expenses as low as possible will also save you big bucks over time. If you don't waste your money on a posh apartment now, you might be able to afford a nice condo or a house before you know it. (Read more on budgeting in our Budgeting 101 special feature.)
Start an emergency fund.
One of personal finance's oft-repeated mantras is "pay yourself first". No matter how much you owe in student loans or credit card debt and no matter how low your salary may seem, it's wise to find some amount - any amount - of money in your budget to save in an emergency fund every month.
Monopolies: Corporate triumph and treachery
Having money in savings to use for emergencies can really keep you out of trouble financially and help you sleep better at night. Also, if you get into the habit of saving money and treating it as a non-negotiable monthly "expense", pretty soon you'll have more than just emergency money saved up: you'll have retirement money, vacation money, and even money for a home down payment.
Don't just sock away this money under your mattress; put it in a high-interest online savings account, a certificate of deposit, or a money market account. Otherwise, inflation will erode the value of your savings.
Start saving for retirement now.
Just as you headed off to kindergarten with your parents' hope to prepare you for success in a world that seemed eons away, you need to prepare for your retirement well in advance. Because of the way compound interest works, the sooner you start saving, the less principal you'll have to invest to end up with the amount you need to retire, and the sooner you'll be able to call working an "option" rather than a "necessity".
Company-sponsored retirement plans are a particularly great choice because you get to put in pretax dollars and the contribution limits tend to be high (much more than you can contribute to an individual retirement plan). Also, companies will often match part of your contribution, which is like getting free money. (To learn more, see Understanding The Time Value Of Money and Retirement Savings Tips For 18- To 24-Year-Olds.)
Get a grip on taxes.
It's important to understand how income taxes work even before you get your first paycheck. When a company offers you a starting salary, you need to know how to calculate whether that salary will give you enough money after taxes to meet your financial goals and obligations. Fortunately, there are plenty of online calculators that have taken the dirty work out of determining your own payroll taxes, such as Paycheck City. These calculators will show you your gross pay, how much goes to taxes and how much you'll be left with (also known as net, or take-home pay).
For example, $35,000 a year in California will leave you with about $27,600 after taxes in 2008, or about $2,300 a month. By the same token, if you're considering leaving one job for another in search of a salary increase, you'll need to understand how your marginal tax rate will affect your raise and that a salary increase from $35,000 a year to $41,000 a year won't give you an extra $6,000, or $500 per month - it will only give you an extra $4,200, or $350 per month (again, the amount will vary depending on your state of residence). Also, you'll be better off in the long run if you learn to prepare your annual tax return yourself, as there is plenty of bad tax advice and misinformation floating around out there.
Guard your health.
If meeting monthly health insurance premiums seems impossible, what will you do if you have to go to the emergency room, where a single visit for a minor injury like a broken bone can cost thousands of dollars? If you're uninsured, don't wait another day to apply for health insurance: it's easier than you think to wind up in a car accident or trip down the stairs. You can save money by getting quotes from different insurance providers to find the lowest rates.
Also, by taking daily steps now to keep yourself healthy, like eating fruits and vegetables, maintaining a healthy weight, exercising, not smoking, not consuming alcohol in excess, and even driving defensively, you'll thank yourself down the road when you aren't paying exorbitant medical bills.
Guard your wealth.
If you want to make sure all your hard-earned money doesn't vanish, you'll need to take steps to protect it. If you rent, get renter's insurance to protect the contents of your place from events like burglary or fire. Disability insurance protects your greatest asset: the ability to earn an income, by providing you with a steady income if you ever become unable to work for an extended period of time due to illness or injury.
If you want help managing your money, find a fee-only financial planner to provide unbiased advice that's in your best interest, rather than a commission-based financial advisor, who earns money when you sign up with the investments his or her company backs.
You'll also want to protect your money from taxes, which is easy to do with a retirement account, and inflation, which you can do by making sure that all of your money is earning interest through vehicles like high-interest savings accounts, money market funds, CDs, stocks, bonds, and mutual funds. (Find out all you need to know about insurance in Understand Your Insurance Contract, Five Insurance Policies Everyone Should Have and Insurance 101 For Renters.)
A financial basis for life
Remember, you don't need any fancy degrees or special background to become an expert at managing your finances. If you use these eight financial rules for your life, you can be as personally prosperous as the guy with the hard-won MBA.
10 great investing rules to become RICH
An old saying goes, "You can't build wealth by buying things you don't need, with money you don't have, to impress people you don't like." So how do you build wealth? Read on...
There are basically only four roads to wealth:
• You can marry it (don't laugh, some do);
• You can inherit it (others do that);
• You can get a windfall (from a lawsuit settlement, lottery, or some other unexpected good fortune); or
• You can accumulate it.
Most of us are stuck with option #4 - accumulate it. To do so, you need to understand how to manage cash flow. First, look at your annual earnings and multiply that figure by your working years. Not counting inflation (that is, pay raises along the way), the result may total several million dollars.
Whether you will have that several million dollars by retirement, though, depends on how you manage your cash flow - and how you answer the following questions: What do you need now, what do you want now, and what can you save and invest for the future?
Here are ten time-tested rules that can weather the stormiest market cycles.
Rules #1: Live within your means
This includes managing debt and learning to budget. Such boring topics may not be the most exciting things about becoming wealthy, but they may be the most critical.
Consumer-driven economies relentlessly hammer away at why we must buy this item or that gadget so we can have the appearance of being successful, happy, and altogether "with it." So it takes financial discipline and sensible behavior to successfully accumulate money and grow wealthy.
Possibly the biggest trap out there is easy credit, which lets us buy numerous things we might not need. Comedians have pointed out the foolishness: "You buy something that's 10 per cent off and charge it on a 20 per cent interest credit card!" And US newspaper columnist Earl Wilson opined, "Nowadays there are three classes of people - the Haves, the Have-Nots, and the Have-Not-Paid-For-What-They-Haves."
Learning to live within your means leads to a freer life - debt can be a mean master instead of a worthy servant. Save first, spend second. If you do so, building wealth will be a lot easier for you.
Rule #2: Save aggressively
This does not mean "invest aggressively." Rather, it means making it an absolute priority to set aside 10 per cent of your income right off the top, and even more if your goals tell you to do that. The longer you wait to start saving, the larger the percentage of your current pay you will have to save to reach your goal.
If you can save aggressively, you will be surprised how that "nest egg" will start to compound. Look at any chart of compounding. It has been said that it's the last compounding that makes you wealthy.
In other words, $20,000 becoming $40,000 doesn't seem like a lot of headway, but when the $40,000 compounds to $80,000, and the $80,000 to $160,000, and finally the $160,000 to $320,000, we're now talking about some serious money. Two more "doublings" and this account will be worth over $1.2 million. Those who spend first and save later inevitably end up working for those who have learned to save first, spend second.
Rule #3: Dollar-cost average
When buying shares, remove emotions from your investing by automatically buying more shares or equity mutual fund units when they are cheap. Emotional investing gets too many people in trouble. Statistics continue to show that we tend to buy when things are going up and sell when they are going down - in other words, we tend to buy high and sell low. Dollar-cost averaging not only removes emotions from investing, but it helps you buy low. Here's how:
By putting a constant amount into the market, as the price slips, you buy more and more number of cheaper shares or fund units and thereby reduce your average cost.
For example, let's say you are investing $100 a month into a fund. In the first month, the price of the fund is $10 per share and you buy 10 shares. The next month, the price has dropped to $8 per share, so your $100 buys you 12.5 shares. The next month, the price has fallen again, to $5 a share, and you buy 20 shares. In the fourth month, the price ticks back up to $7 per share. Your total investment so far is $400.
If you're like most people, though, when you look at your statement and see that by the end of the third month the price has fallen to half, you would probably think you were losing money hand over fist. Especially after a fund continues to decline month after month, investors lose patience and start to bail. They're looking for "better returns," but they don't understand what's going on with the math.
At $5 a share, it feels as though you're down 50 per cent (because the price started at $10 per share). However, you own 42.5 shares, which, when multiplied by $5 a share, equals $212.50 - and you've invested $300. In the fourth month, the price gets back up to $7 per share. Although it might feel as though you're still down because the price started at $10 per share, you're actually within a couple of dollars of your break-even point. You own 56.79 shares, which when multiplied by $7 equals $397.53, on an investment of $400.
Of course, if the fund or market continues to go down and never comes back up, you can't be guaranteed a profit. But this would happen rarely, if ever. Dollar-cost averaging - by investing a fixed amount in regular intervals - is the best way to make money in a variable market over time.
The most difficult part is having the discipline to keep doing it. Investors should be willing to consider their ability to invest over an extended period of time. Remember, you need a longer time horizon when investing in the stock market.
Rule #4: Diversify
No investment is risk free; only a diversified portfolio can mitigate the risks of market cycles. We've all been warned against putting all our eggs in one basket; even Warren Buffett said, "It's better to be approximately right than definitely wrong." By "approximately right," he was referring to diversification.
If one piece of your portfolio is doing substantially better than other parts, the natural inclination is to load up on the part doing the best and forsake those not doing well. But the result will be an under-diversified portfolio that will probably be much more volatile - and the risks may be on the downward side.
Also, proper diversification does not mean any old bunch of mutual funds or stocks, but a proper allocation among stocks, bonds, real estate, fixed assets, and other investments. It also means diversifying within those investment categories.
For example, your stocks should include a mix of midcap, large-, and small-cap stocks as well as growth, blend, and value stocks. You should have bonds that are long, medium, and short term, as well as high grade, mid grade, and low grade.
A mutual fund may offer more diversification than you could afford by owning the same stocks individually. But owning a handful of mutual funds may not offer the diversification you seek unless you research the funds' holdings carefully. That's because many funds have substantial "overlap." In other words, fund A from mutual fund family X may have many of the same stocks as fund B from fund family Y.
Rule #5: Be patient
Warren Buffet says, "The market has a very efficient way of transferring wealth from the impatient to the patient."
But waiting is very hard to do. How long are you willing to hold an asset that is not performing well? One year? Two, three, or four? If you look at the history of asset classes over time, you will see that an asset can be "out of favor" for several years in a row.
You have to be prepared to wait. Don't think you can time when bonds will perform and stocks will get hot. If someone really could do that, he would own the world by now. So remember: Time in the market is more important than timing the market.
Rule #6: Understand volatility
Very few people truly understand the risk and volatility inevitably baked into every investment portfolio. Without getting into its complexity, every variable investment has produced a range of returns over its lifetime, and this range, or deviation, can be plotted on a chart.
So, it's important to understand what the investment category's "average" annual return means in order to prepare yourself for its volatility. For example, does a 10 per cent average mean the investment was up 73 per cent and down 30 per cent and happened to average 10 per cent? Or was it up 15 per cent, and then down 5 per cent to average 10 per cent?
Many investors are fooled by averages - they chase the 70 per cent return after it has happened, when the likelihood of a repeat performance is slim (which we'll discuss more in Rule #7). Yogi Berra is rumored to have said, "Averages don't mean nuthin". If they did, you could have one foot in the oven and the other in a bucket of ice and feel perfectly comfortable."
Over time, returns from investments regress to a mean. "Regression to the mean" simply means that highs and lows will average out so that your return regresses to a certain number or range. Understand an investment's range of returns so you know what to expect annually, and over time.
Markets move from fear to greed, and back to fear. So there are times when the market is "overvalued" and other times when it is "undervalued." Warren Buffett said of the stock buying and selling decisions made at his company, Berkshire Hathaway, "We strive to be fearful when others are greedy, and greedy only when others are fearful."
Rule #7: Don't chase returns
If we know from Rule #6 that a 10 per cent average annual return does not really mean a 10 per cent return each year, why do we still fall for an ad touting a fund that produces 20 per cent annually or some other phenomenal return?
Human nature. And maybe we even convince ourselves that for the chance to experience a year or two of 70 per cent gains, we're willing to stomach the years of 30 per cent losses that also fall within the fund's range of returns.
So, before chasing that incredible return, find out how the investment did during the last bad market for that asset class. Find out its risk, and ask yourself whether you can stomach a bumpy ride over the long term.
Another Buffettism: "The dumbest reason in the world to buy a stock is because it is going up." So before chasing a return, always consider how likely it is that the investment will continue to produce that return - and whether it's really worth the cost of cashing out of another, perhaps only temporarily depressed, investment to do so.
Rule #8: Periodically rebalance your portfolio
You may decide that your investment mix should be, for example, 50 per cent growth stocks, 20 per cent value stocks, and 30 per cent bonds. But asset classes vary in performance over time, so after a year or so, the portfolio balance will start to shift as one asset "overperforms" and another one "underperforms."
Emotions would tell you to sell the underperformers and buy the overachievers. If you want to remain adequately diversified, however, you would rebalance by selling some of the overperformers and buying some of the underachievers - probably just the opposite of what your emotions will tell you.
So, if you strive to put your portfolio back to its original allocations from time to time (annually, semi-annually, or possibly even quarterly), you will be taking gains from the best-performing assets (selling high) and buying those temporarily out of favor (buying low). But it takes discipline to keep your emotions in check.
Rule #9: Manage your taxes
Have you ever considered how taxes are your biggest expense in life - more than mortgage expense, education expense, or any other expense? So, you must take advantage of all tax breaks available - each and every single one of them.
Rule #10: Get advice
Never underestimate the value of good advice. Someone who manages investments full time certainly will find things you have overlooked or done wrong. A good financial adviser is like a personal trainer for your finances and can get you on track and keep you there until your goals are met.
And even more critical than getting the advice is being sure you consistently follow your game plan. The greatest problem for most people is procrastination and erratic investment behavior. So get started, get advice, and get going down the road to wealth - and steadfastly follow through.
(Excerpt from the book, Investing Under Fire)
26.6.08
25.6.08
You are in love.
When you are together with that special someone, you pretend to ignore that person. But when that special someone is not around, you might look around to find them. At that moment, you are in love.
Although there is someone else who always makes you laugh, your eyes and attention might go only to that special someone. Then, you are in love.
Although that special someone was supposed to have called you long back, to let you know of their safe arrival,your phone is quiet. You are desperately waiting for the call! At that moment, you are in love.
If you are much more excited for one short e-mail from that special someone than other many long e-mails, you are in love.
When you find yourself as one who cannot erase all the emails or SMS messages in your phone because of one message from that special someone, you are in love.
When you get a couple of free movie tickets, you would not hesitate to think of that special someone. Then, you are in love.
You keep telling yourself, "that special someone is just a friend", but you realize that you can not avoid that person's special attraction. At that moment, you are in love.
While you are reading this mail, if someone appears in your mind, then you are in love with that person...
Being sad with the right people is better than being happy with the wrong ones.
Although there is someone else who always makes you laugh, your eyes and attention might go only to that special someone. Then, you are in love.
Although that special someone was supposed to have called you long back, to let you know of their safe arrival,your phone is quiet. You are desperately waiting for the call! At that moment, you are in love.
If you are much more excited for one short e-mail from that special someone than other many long e-mails, you are in love.
When you find yourself as one who cannot erase all the emails or SMS messages in your phone because of one message from that special someone, you are in love.
When you get a couple of free movie tickets, you would not hesitate to think of that special someone. Then, you are in love.
You keep telling yourself, "that special someone is just a friend", but you realize that you can not avoid that person's special attraction. At that moment, you are in love.
While you are reading this mail, if someone appears in your mind, then you are in love with that person...
Being sad with the right people is better than being happy with the wrong ones.
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