The Next Big Crash - Are You Prepared?

[felixleong]

I know of many people who say they are interested in stocks and make a lot of money , especially those in the finance industry
surprisingly they own very little stocks, instead they load themself with tons of debt chasing after fancy cars and big condominiums.

Especially in recent years, where car loans and house loans had like below 2% teaser rates... man I wonder what happens to them when rates go up to 3-5%


I strongly agree that money management is very important too

[Wildreamz]

Hi guys, my opinion isn't worth even 2c as the maestro Mr WB has given his. I can only direct your attention to page 19 to 21 of his latest letter to shareholers.
http://www.berkshirehathaway.com/letters/2012ltr.pdf

Mr WB has no preference on dividend vs sharebuyback; or dividend income vs capital gain. He seeks total returns (capital and dividend) and has a clear idea on how the capital management decision should be made logically and consistently to maximise TSR.

Thanks for the helpful link and insightful post. That is a simple and clear summary of sound dividend policies.

[CityFarmer]

I agree with Ben... Stock picking skills and money management skills must go hand-in-hand. I didn't have any emergency funds to pick up any stocks when STI nearly fall by 10%. Feeling the opportunity lost now. Lesson learnt.

I am not quite sure it is wise to utilize emergency fund for equity investment, even during a crash.

My definition of emergency fund is the fund reserved for emergency needs e.g. accidents, lost of job etc.

Probably the emergency fund referred, is actually an equity cash reserve fund.

[paullow]

I know of many people who say they are interested in stocks and make a lot of money , especially those in the finance industry
surprisingly they own very little stocks, instead they load themself with tons of debt chasing after fancy cars and big condominiums.

Especially in recent years, where car loans and house loans had like below 2% teaser rates... man I wonder what happens to them when rates go up to 3-5%


I strongly agree that money management is very important too

one of my staff bought himself a brand new 3series n was the envy ard the others. Came in well dressed everyday, but does he know that every dollar i am paying him, i am making the same amt off him. And he uses hard work and his precious time to feed his indulgence. Likely he's blowing most of it iff servicing.his bmw loans/maintenance plus housing/food leaving little for other things.
Haha. And his boss ie myself drives a 9y old fully paid car. Pple seem to envy him more than his boss because those luxury items are staring at them.

[Temperament]

I agree with Ben... Stock picking skills and money management skills must go hand-in-hand. I didn't have any emergency funds to pick up any stocks when STI nearly fall by 10%. Feeling the opportunity lost now. Lesson learnt.

I am not quite sure it is wise to utilize emergency fund for equity investment, even during a crash.

My definition of emergency fund is the fund reserved for emergency needs e.g. accidents, lost of job etc.

Probably the emergency fund referred, is actually a equity cash reserve fund.

In fact, text book classic recommendation is money in the market is considered as long-term investment fund of at least 3 to 5 years. Longer than 5 years is even better. That's after all your "basics of life is taken care off; including your emergency fund of at least 6 months. One year is better; in case you got retrenchment mah. Touch wood.
i started like this in an "unknowingly" way. But i know from the start, money in the market the longer you don't need it the better.
i have always said,
"If you can take away the time factor in any investment, then TIME is always your friend. No more an enemy."

[kelvesy]

I agree with Ben... Stock picking skills and money management skills must go hand-in-hand. I didn't have any emergency funds to pick up any stocks when STI nearly fall by 10%. Feeling the opportunity lost now. Lesson learnt.

I am not quite sure it is wise to utilize emergency fund for equity investment, even during a crash.

My definition of emergency fund is the fund reserved for emergency needs e.g. accidents, lost of job etc.

Probably the emergency fund referred, is actually a equity cash reserve fund.

Yes. Often when I have extra cash, I'd invest into stocks that has margin of safety and entry at a sensible price. Now I think back, I could have set aside some for equity cash fund to capture any opportunities - should they arise.

[BlueKelah]

I agree with Ben... Stock picking skills and money management skills must go hand-in-hand. I didn't have any emergency funds to pick up any stocks when STI nearly fall by 10%. Feeling the opportunity lost now. Lesson learnt.

You could try balance cash vs. stock market level as some risk averse fund managers do.

Some fund manager are completely cash position when it is market peak. They take a longer term view. Since you cannot predict market bottom, it is always good to have cash level all the way down to maybe 35% of peak.

If ever goes lower than that then just reinvest any dividends you have.

[Temperament]

I know of many people who say they are interested in stocks and make a lot of money , especially those in the finance industry
surprisingly they own very little stocks, instead they load themself with tons of debt chasing after fancy cars and big condominiums.

Especially in recent years, where car loans and house loans had like below 2% teaser rates... man I wonder what happens to them when rates go up to 3-5%


I strongly agree that money management is very important too

one of my staff bought himself a brand new 3series n was the envy ard the others. Came in well dressed everyday, but does he know that every dollar i am paying him, i am making the same amt off him. And he uses hard work and his precious time to feed his indulgence. Likely he's blowing most of it iff servicing.his bmw loans/maintenance plus housing/food leaving little for other things.
Haha. And his boss ie myself drives a 9y old fully paid car. Pple seem to envy him more than his boss because those luxury items are staring at them.

Hope you don't "take any action" because of his need to boost his self esteem or to keep up with the Mr. Jones, his next door neighbour. i don't think he does it for anything to do with you. Everyone is different. Have you thought why he is your worker and not the other way round?
This remind me when i was HP and Mr. Packard came to visit. His clothing (suits) was so simple and without air at all that you will think he was just a so, so. Imagine Hewlett & Packard, and Packard the founder, the multi-millionaire many times over in front of you appeared nonchalantly and nondescript. So there, that's why he was the founder just like you is the founder of your company.

[kelvesy]

one of my staff bought himself a brand new 3series n was the envy ard the others. Came in well dressed everyday, but does he know that every dollar i am paying him, i am making the same amt off him. And he uses hard work and his precious time to feed his indulgence. Likely he's blowing most of it iff servicing.his bmw loans/maintenance plus housing/food leaving little for other things.
Haha. And his boss ie myself drives a 9y old fully paid car. Pple seem to envy him more than his boss because those luxury items are staring at them.

It boils down to the environment and people they choose to mix with. Surround yourself with people that has excessive materialistic wants, you will turn out to be like them. There is a social pressure to 'fit in'.

After my 'O' levels, there was a holiday before I entered polytechnic. I managed to secure a well-paying job at a new tuition agency. Where did all my pay go to? Branded goods - which I found it to be very stupid later on. I am glad to snapped out of that mentality.

Now, after I realised the importance of money at a young age, I do save more than previously. A car is a car, why should I pay so much more for my car to be a BMW where the main function for a car is to travel. A car is also a depreciating asset. The money could've been invested elsewhere to generate a return. But that doesn't mean torturing oneself, some money must be spent to indulge once in a while. But again, everyone feels different about money. As long as they are happy and fully aware of their decisions, so be it.

[hyom]

one of my staff bought himself a brand new 3series n was the envy ard the others. Came in well dressed everyday, but does he know that every dollar i am paying him, i am making the same amt off him. And he uses hard work and his precious time to feed his indulgence. Likely he's blowing most of it iff servicing.his bmw loans/maintenance plus housing/food leaving little for other things.
Haha. And his boss ie myself drives a 9y old fully paid car. Pple seem to envy him more than his boss because those luxury items are staring at them.

Hi Paullow,
I definitely envy the boss(you) more than him. It is not rational that our society envies people with more liabilities (cars, country clubs) than people with assets (savings).

However, I think it is to your advantage that your employees take on debt to buy these trappings of life. Debt makes slaves out of all of us. So, you don't have to worry that he will quit his job if you reprimand him