Entrepreneurship: Words of Life

There are slow words and fast words when come to investing. The rich use the fast words and the poor use the slow words. In Sunday school we learn, the words become flesh. It is what you speak in words that reflect what you are. It is the words you speak or spoke that entice us to action on what we preach. Words can motivate and de-motivate us in doing something. Slow words make you poor and fast words make you rich.

I believe there basically 3 big words that dictate people life: (1) Security, (2) Comfortable, (3)Freedom. Each words are speak of different context and content. Each word has different reality. Therefore, people will choose different life based on which word that is the highest priority for them.

People who preach security will be put roof on the top of head, food on the table at their highest priority. Job security, high paid jobs, government pension funds, social security and other perks are at the highest priority for them. These people could not to tolerate month without paycheck. They could not associate their life with risks. They are the group who belief their future is under responsibility of government and company. They are the victim society that believe everything should come from outside of them. External factors are the one that dictate their life. Most of the middle class and poor people are fall into this group.

The second type of people is the one who preach comfortable. This group of people are the group who are smart and responsible to their life to certain extend. They believe that everything they could have today is the product of they did yesterday. But being rich are not important to them. These people can take risks, but until certain level. They have their own threshold. They love to be comfortable and love to do only what they like to do only. They are the often self-employed class people or the high paid executives. They invest some portions of their money with moderate return with moderate risks associate with. They just want to have a big house, a vacation home, 2 big cars, high standard of livings and perhaps a million dollar in bank. They are the group that may look rich, but they spend almost as high as they earned to make them self comfortable. When any new idea that introduce to them which might disturb their comfort, they will shun away, and go back to their comfort zone. This class of people are those who at the high managerial position in big A firm, professional such as doctor, lawyer and engineer. These people still working for money.

The third class of people are the rich who want only freedom. These people put freedom above anything in their life. They are the group of people who always associate with risks. They love risks, because it is the only way to achieve freedom. Freedom is the product of being financially free. Financial free is a byproduct of being rich. And risks can bring you fortune people could never be able to imagined once it is managed well. Therefore, they learn how to control the risks and weight the reward ratio to the risks. If the rewards outweigh the risks, they can afford to fail as many as they could in order to success once. They love challenges and achievements. They are the one who come out of no way, no title, no money, but with passion and idea of rich. They are the one who could create fortune from nothing. They are the riches, the one who create jobs, build buildings, and the one could make a nation prosper. The are the true capitalist.

"The true happiness is the product of achievement. The true achievement only can be realize when risks is associated. When there is no risk, there will be no achievement. And if there is no achievement, there will be no true happiness."

Quote By Ray Kroc, Founder of McDonald"

Real Estate Investment - Location, Location, Location

Location is the most important word in real estate investment. At least it is what everyone said so. But for me, location is not justify from the geographical perspective alone. Great location should be justify base on the principle of supply and demand. Regardless of physical condition, government incentive, promotion, or any rumors local opinions, all great location can add up to one and only one simple truth - low in supply & high in demand. Even in the hottest area of your near by downtown, if people just do not like to stay there (low in demand), regardless how great the site look like, or how convenient the location is, it is never consider as a great location.

A great location possess quality of drive by visibility. Drive by is the most effective and cost efficient advertisement means when come to rental property. The more cars that pass by your property and can see the "for rent" sign, the higher chances your investment to success.

The second typical attribute to great location is rare quality. Rare quality such as natural phenomena ie waterfront, great scenery & greenery can draw desirability of people to stay there. It is why, if your unit are facing a city skyscraper, often the price is higher than the one which facing a garbage dump site.

Employment is also a key to great location. People will only move to the town that has plenty of jobs. That is the fact! A place or town or city that is limited supply of jobs couldn't be any better a location compare to a stranded countryside village.

The bottom line is, any evaluation of location, do not caught into the delusion of geographical quality. In the economic term, any investment in real estate should be justified base on the most basic simple rule - Supply & demand.

SMART Goal Setting

Goal setting is very important to success. At least it is what those who been a successful person said so. It is easy to caught with lexicographical definition of goal, vision and mission. For me, goal is simply something you try to archived. And the goal must be written in clear manner. A goal that is not written and review frequently is simply a dream that could never be realized. A good goal should be included "SMART" concept which the acronym of Specify, Measurable, Attainable, Realistic, Time activated. For example, in real estate investment, "to be rich by investing in real estate" is not a good goal, simply the context is too broad and ambiguous. A good example goal pertaining real estate investment could be "to invest in 2 rental single family property (specify) that provide 10% return of investment annually each (measurable & attainable) in X community area (specify) in a year (time activated and realistic)." A SMART goal can make us focus, and by stay on your lane, you be able to shorten the race.

4 Things that Make People Poor: #4- Taxes

In today world, 2 things are guarantee when we are born - death and taxes. Taxes is the single largest expenses in our life. We are taxed when we spend, save, work, and die. For most people who are in the employee or self-employed quadrant, you have no control to your taxes. Tax is the first expense in the employee expenses column. The government will make sure that they get their shares first before you do. In most country, the more you earned, the higher percentage you are taxed. This will very difficult for most people to become rich. In America, high paid employees who are on the highest tax bracket will pay 50% in taxes of their gross income. Malaysia is about 30% to 40% range. Korea at about 35% to 45% range. This simply means, the higher your paid, you need to work almost 2 months in order to get full pay of 1 month gross salary. This single rule will make most of people who are in the employee quadrant stay poor.

4 Things that Make People Poor: #3- Inflation

Inflation is a thief to everyone. It is a thief that make most of us poor.

Inflation is simply means raising in price of goods especially the commodities such as oil, grain and rice. Another words, inflation make the value of every dollar you have in your pocket worth less. Every time, when we heard government is increase their budget, launch new social benefit program, hire more government servant during the recession, promise the citizen that there will be less taxes but more benefit to the society, they are in the context of hiring inflation. Why? Because, those program and promises are expensive, someone has to pay for it. Since there will be no additional taxes on the people, how they get the money? The answer is, they simply print it. They are printing pseudo money and flood the market. Yes! It is legal for the government to do that. In most case they called it minting. Since our current monetary system is fiat currency, it is the money back by the government, not the hard asset backing on it. So, as long as government can impose delusion to the community that they are strong and capable to pay back any debt, the currency of that country will be valid regardless how much they printed.

But the problem is when there is too much money is printed. The private sector simply could not supply or produce goods as fast as the money is printed. There are so much money suddenly being introduced in the market, making the market felt a delusion of rich. The market now can buy more goods. Yet, since the goods supply is constant, commodities could not be created (ie. gold, silver is god made money), demand of goods & commodities is now higher (since people now have more pseudo paper money printed by government), the market self-regulated law - demand & supply will automatically adjust the price for every goods higher. Since, most money that is newly printed by the government are often goes to the riches, inflation do not much have impact to them. But to the poor, who are employee or self-employed, working hard and saving hard, they money value is diluted by inflation. Every single dollar they have, is worth less, even the amount is never lost. The stuff they could buy is less than what they could buy years back. They are getting poorer the most they save. Interest rate of 1% or 2% given by the back are less than the inflation rate. Their money is been stolen every time the government increase the money supply. This is why the government do not need to taxes you, since they could take it from you by simply printing more! This is why most people now are getting poorer and poorer.

4 Things that Make People Poor: #2- Debt

The second thing that make most people today poor is the word called - "debt".

Debt is why most of people today are poor. The following is the typical story how debt (bad debt) affecting most people life. Consider a young person who just come out to work. He or she will rent a small apartment and work as an employee. Then he or she will meet someone. Times goes on, they fall to each other, then they get married. For time, life is sweet and fruitful, since now 2 person can live with 1 expenses. Now, they both able to set aside a portion of money every month as saving. Then, they finally be able to buy the dream of most of young couple, their first home from their saving as down payment and taking debt from bank. Now, they have a new home, so, they need new furniture and new toys. So, they become prey to the ads like easy payment and delusion cheap credit. Few years later, they finally got their first baby, and now they need more money to give a good life to their baby, thus, the only solution, more debt. By now, the couple will forever trap into debt, working for debt. Everything they earn, will go back to repay their never repayable debt. And they end up retire poor and destitute.

The story has illustrated the most typical bad debt that make people poor:

1. The long term debt - home mortgage
2. The short term expensive debt - unsecured debt, personal debt, credit cards

This simple one typical life pattern has cause million if not billion of people globally unable to become rich, and live poorly forever after.

4 Things that Make People Poor: #1- Retirement Plan

There are 4 main things that make most people are poor today. The first thing is:

The retirement Plan: Common known as 401k in America, EPF in Malaysia, CPF in Singapore and Superannuation Plan in Canada. These are the plan that supposingly structure by Government in many countries to enforce employer and employee to set aside a percentage of money from the pay check every months. The so called government guarantee pension fund, which can and must be withdrawn by retired at the designated age, such as 75 (America), 58 (Malaysia) And so on. The problem is, government didn't really just save the money collected from the employee and employer. They spend it. They will utilize the money for government budget. The thing become worst, when there are so much money being collected, the government then discover away to use the fund to boost the economy. Most of the Pension fund in any country are the major share holder in the public listed stock market. It means, most of the stock is been purchased by the fund. Every single cent is collected, will go into the market. It is why, we can see the market mostly are trending up, because the fund has create a figment of illusion that there are always more buyer than the seller, therefore the price goes up. This mean, the pension fund is the index of stock market. The fund today are so rich, it due to the baby booming age, who mostly made of employee. They are the major contributor to the so called public pension retirement fund. Since, the law has regulated that every retiree to withdraw the money from the fund, and people will definitely withdraw the money, this will cause a disastrous to the market. When the baby booming age started to withdraw the money, the pension fund, by law has to give the money back to the retiree by selling the stock. This will then cause the stock market to crush, since there aren't many people buying. It is not just a matter of people could get the money that been promised by the government. It is the macroeconomic problem which will cause the whole market crush, panic and ultimately social economic problem. When this do happen, most people will live their retirement age at the destitute.

The Art of Investing - Professional Gambler

Average gambler like to let "Luck" to dictate the outcome of their games. Money is often more important than the game for the average gambler. This often why, the casino across the globe is rich. Professional Gambler know it is not the "Luck" that decide who win who lose. Is the "skill" to be learned that is most concerned. The game is more important that the money. They know for every game, it is very little to do with the money. The know the odd of winning reset for every new game. The previous result of the game has very little to do with the new game result. They learn how to master the game, and use other people money to play for them. It is same apply to the concept of professional investor who use other people money to invest. The professional gambler follow the rule of the game, which is:

1. As long as the money is on the table, it is not your money, is the house money
2. The game is more important than the money
3. Put the money in the game, get your money back, continue using the house money to play, repeat the process
4. The house money is the money you win from your own money.
5. Your money is the money you take out from your pocket.
6. The ultimate goal of the professional gambler is to play the game by using house money, while their own money is off table. Which mean, their risk is zero, yet the reward could be unlimited depends how well they play the game.

The concept is simple, but the application is very wide. The same concept is very similar to the world of investing. The professional investor think like professional gambler, they like to put their money into an asset, get their initial investment money back, continue controlling the asset, use the initial money to invest into a new asset, get the money back again, repeat the process.

Leveraging Your Words

Leveraging your words is very important in the world of investing. Poor People cannot becoming rich is because they say "I can't afford it" more often than rich people. Poor people like to use poor words. Poor words create poor people. The words do become flesh. In order to become rich, we need to change our words. For instance, rather than saying "I can't afford it", the rich like to use "how can i afford it". The differences between the rich and poor, can be found significantly in their words. So, by starting to learn the rich's words, we be able to increase our chances to become rich.