October 2007

probate1.jpgClients often ask me, “Why do I need a will?” Many people share common misconceptions — that only the wealthiest need a will, or that the process of making one is complicated or costly. What I have learned through the years is that everyone needs a will and that it is far more costly to avoid making one.

Without a will, you leave important decisions to someone else to make after your death. Make a Will now for real peace of mind. I have noticed that people generally manage their lives quite well but leave things in an utter mess when they die.

A will lets you specify how your assets will be distributed and how taxes, if any, will be paid. You can select whomever you wish to administer your affairs. Without such a plan, your state of residence determines who receives your assets and how the taxes will be paid. The courts may become actively involved in administering your affairs, and they may award property to relatives you would never include, but overlook friends or charities you want to remember.

It is a strange fact that around 70% of people have not made a Will, but the consequences of dying without one can be serious. Everyone urgently needs a Will; If you don’t make a Will you die intestate, which means that everything you own is distributed under rules laid down by law irrespective of the wishes of your family.

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india_mukesh-ambani-11.jpg“Recently, there have been several reports in the media on my personal wealth. Frankly, I am amused by these reports. I measure my success by the value that I create for my shareholders and the assets that we, as a company, create for the nation as a whole. My wealth and your wealth are inevitably linked to our growth.”

Mukesh Ambani the Indian Billionaire today became the richest person in the world, surpassing Mexican business tycoon Carlos Slim Helu, American software king Bill Gates,and famous investment guru Warren Buffett, following the latest the Bull run in the stock market.

Following a strong share price rally on in his three group company, India’s most valued firm Reliance Industries, Reliance Petroleum and Reliance Industrial Infrastructure Ltd, the net worth of Mukesh Ambani rose to $63.2 billion. A historical landmark for the nation’s economy, thus pushing Ambani to the top of the list. Mukesh Ambani owns Reliance Industries, India’s largest private sector enterprise with businesses in the energy and materials value chain. His personal stake in Reliance is 48 per cent.

In comparison, the net worth of both Gates and Slim is estimated to be slightly lower.

I wonder where his brother Anil Ambani stands. For those who don’t know, Mukesh and Anil Ambani are brothers who jointly owned Reliance Industries, before they broke up. I am inclined to believe that they would have made it to the top had they not split.

Given below are the five richest men in the world and their net worth:

1. Mukesh Ambani ($63.2 billion)

2. Carlos Slim Helu ($62.2993 billion)

3. William (Bill) Gates ($62.29 billion)

4. Warren Buffett ($55.9 billion)

5. Lakshmi Mittal ($50.9 billion)

Earlier on September 26, Ambani had overtaken steel czar Lakshmi Mittal to become the richest Indian in the world.

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user.jpgOnce again, investors are in a manic-depressive mood. They undergo bouts of wild joy when they see where the markets are heading and how the value of their investments has increased. At the same time, they are sick with worry about whether they should stay invested and whether they should invest more.

The stock markets have reached higher than they have ever done before. This is a good thing for investors but is also a dangerous one. Remember, more bad investment decisions are made when the markets are at a high than at any other time. All-time highs may be exciting, but all savvy investors know that at times like these one’s thoughts should be on what not to do rather than on what to do.

We know it’s difficult to control one’s excitement, but this is the right time to get back to basics and reaffirm one’s knowledge and faith in the basics of investing. Here are some simple rules and principles that will ensure that you can prevent yourself from making the worse mistakes that the stratospheric heights of the stock markets can induce.

1. It isn’t different this time, not really:
Every bull run brings out the chronic optimist in investors. This time, we feel, things have changed fundamentally and the markets will go on rising up for a long time. Sure, we feel, they may pause a bit, but surely they won’t fall ever again. Every great bull run that the Indian markets have seen in living memory has come complete with a set of reasons ‘proving’ why it was different this time.

2. Bulls are no substitute for knowledge and understanding:
As the stock markets rise, most people appear to need fewer and fewer justifications for investing. A couple of years ago, when the markets were down in the dumps, hardly anyone would make an investment without putting it under a magnifying glass.

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28slim600.jpgCarlos Slim, the Mexican tycoon and the world’s richest man, scoffed at Bill Gates and Warren Buffett for “playing Santa Claus” to cure poverty’s ills. But that’s where we are. Our guys—Bill Gates and Warren Buffett—are all about giving it away. Carlos Slim? Not a chance.

A few months earlier Carlos Slim, the richest man in the world, made an assertion. In an interview that was widely reported, he stated, “Our concept is more to accomplish and solve things, rather than giving; that is, not going around like Santa Claus…. Poverty isn’t solved with donations.” In a recent two-hour interview in his office, Mr. Slim promised that there would be no ceiling on his donations. “We want to get to the root of problems, no limits,” he said.

Because Mexico’s income distribution is severely skewed, Mr. Slim has come to personify the small elite who control vast sections of the economy. So he has been feeling the pressure to give much of his enormous fortune away. Some time ago, he pledged to increase the endowments of his companies’ foundations to $10 billion from $4 billion in the next four years. He promises to spend money on education and health.

Very few would argue with Mr. Slim’s assertion that poverty cannot be ended by donations. Slim wants to build huge hospitals in northern Mexico where the country-region can ship tens of thousands of Medicare patients for health care that can be delivered at much cheaper costs.

Slim was unimpressed at how Buffett and Gates vowed late last year to combine their entire fortunes into the world’s largest foundation to do good works.

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030707_fear_greed.PNGGreed and fear are the major players in the stock market. These two emotions are the driving force behind almost all market participants – Institutional mangers, stockbrokers, Investors, traders and yourself.

You might be saying to yourself that greed and fear will never get in the way of my trading, but believe it or not they will be. It is not something to be ashamed of. It is something you have to admit to, come face to face with, If you are to become a successful stock trader or investor.

What do greed and fear look like in the stock market trading arena? “We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful.” Warren Buffet

Fear doesn’t form in a vacuum. It is a learned response to a particular event or probability. In the case of trading, when you have a trade that goes bad, the regret and frustration can carry over into the NEXT trade. Or worse, the fear is so consuming, that you don’t enter your next trade. This particular problem is fueled by the expectation that every trade you enter should be profitable. If you truly believe that, then here is an important piece of information for you – not every trade will be profitable!

Greed creates the opposite problem. With a couple of consecutive winning trades, the ego can enlarge and feeling invincible overcomes being logical. This will ultimately lead you to trades that you normally would not have entered.

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nestegg1.jpgIn simple economics, there is little distinction between savings and investments. One saves by reducing present consumption, while he invests in the hope of increasing future consumption.

Therefore, a fisherman who spares a fish for the next catch reduces his present consumption in the hope of increasing it in the future.

Most of the people probably have savings accounts with ATMs to access their hard-earned cash and be able to store away any extra cash in a place a little safer than a mattress. A few of you may even have some stocks or bonds.

Let me explain why while a savings account in the bank may seem like a safer place than the mattress to store your money, in the long-term it is a losing proposition! If you open a savings account at the bank, they will pay you interest on your savings. So you think that your savings are guaranteed to grow and that makes you feel extremely good! But wait until you see what inflation will do to your investment in the long-term!

The bank may pay you 5 percent interest a year on your money, if inflation is at 4 percent though; your investment is only growing at a mere 1 percent annually.

Saving and investing are often used interchangeably, but they are quite different! Saving is storing money safely, such as in a bank or money market account, for short-term needs such as upcoming expenses or emergencies.

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main.jpgAlthough we don’t like to admit it, fear can often motivate our investment decisions. That’s understandable — the thought of losing even a portion of your savings can be scary. But unfortunately, fear can distort reason and sound analysis, causing investors to ignore both risks and opportunities of investing. It can also lead to “financial paralysis” — when an investor is so afraid of making the wrong decisions, they fail to make any decisions at all.

On Tuesday, February 27 this year, the Dow Jones Industrial Average dropped 416 points—the markets sharpest drop in three years. Two emotions—fear and greed—can lead to bad investment decisions

Here are some quick tips to help overcome anxiety and fear, and allow you to take control of your investment future.

Investing can be dangerous yet profitable endeavor. Many people have been burnt and decide not to ever invest again. This is the primary fear for investing in anything. They may give you excuse such as ‘I don’t have enough money’ or ‘I don’t know where to invest’. But the number one fear is always the fear of losing money. If a novice investor knows that he won’t lose money, he must have used all means necessary (such as loan) to buy as much investment opportunity possible.

Investing here can mean a lot of things from buying gold coin to real estate. There are several ways of how to reduce your fear of investing in common stock.

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andresr050700039.jpgEveryone has a unique situation, and there are no concrete financial numbers that define success, but there are some rules of thumb that can help you gauge your progress. While following these rules won’t guarantee success, they will put you on the right track.

Keep in mind, these rules represent guidelines, not gospel. Life doesn’t always stay inside the lines, and what may work for some may not work for you. Nevertheless, these are worth aiming at if you’re ready for some target practice and want to build a serious financial cushion.

How much Debt should I have?

Ideally, no debt would be the best answer, but you have to realize that for some assets it is almost required you borrow money, such as buying a house. If you have taken more debt than you can handle, don’t be discouraged. It doesn’t matter how much money you make. If you can’t live within your means, you become a slave to your creditors. Most experts agree that your total monthly debt payments shouldn’t exceed one third of your gross monthly income.

How Much Worth House Can I Buy?

So how much should you spend on a house? The traditional way to calculate that is to add up all your income and make sure that your housing expenses — mortgage payment, homeowners insurance and property taxes — don’t exceed a certain amount of that total. The traditional limit, still used by many lenders, is 28% to 32% of gross monthly income. For example, if you and your spouse together earn $100,000 per year, you shouldn’t spend more than $250,000 on a home.

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warren-buffet-791235.jpg There was a one hour interview on CNBC with Warren Buffet, the third richest man in the world who has donated $37 billion to charity. (The richest now is Carlos Slim and Bill Gates is the second richest.) Here are some very interesting aspects of his life:

1. He bought his first share of stock at age 11 and he now regrets that he started too late!
2. He bought a small farm at age 14 with savings from delivering newspapers.
3. He still lives in the same, small 3-bedroom house in midtown Omaha that he bought after he got married 50 years ago. He says that he has everything he needs in that house. His house does not have a wall around it nor a fence.
4. He drives his own car everywhere and does not have a driver or security people around him.
5. He never travels by private jet, although he owns the world’s largest private jet company.
6. His company, Berkshire Hathaway, owns 63 companies. He writes only one letter each year to the CEOs of these companies, giving them goals for the year. He never holds meetings or calls them on a regular basis. He has given his CEO’s only two rules. Rule number 1: Do not lose any of your shareholder’s money. Rule number 2: Do not forget rule number 1.
7. He does not socialize with the high society crowd. His pastime after he gets home is to make himself some popcorn and watch television.
8. Bill Gates, the world’s richest man, met him for the first time only 5 years ago. Bill Gates did not think he had anything in common with Warren Buffet (other than money!). So, he had scheduled his meeting only for half hour. But when Gates met him, the meeting lasted for ten hours and Bill Gates became a devotee of Warren Buffet.
9. Warren Buffet does not carry a cell phone, nor has a computer on his desk.

His advice to younger people:


Stay away from credit cards, Invest in yourself. He is prepared, however, and does so regularly, to outline general principles of sound investment. These have a consistent theme and can be summed up like this.

A. Money doesn’t create man, but it is the man who created money.
B. Live your life as simple as you are.
C. Don’t do what others say. Just listen to them, but do what makes you feel good.
D. Don’t go on brand name. Wear those things in which you feel comfortable.
E. Don’t waste your money on unnecessary things. Spend on those who really are in need.
F. After all, it’s your life. Why give others the chance to rule your life.
G Never invest in a business you cannot understand.
H Always invest for the long term.
I Wall Street is the only place that people ride to in a Rolls-Royce to get advice from those who take the subway.
J If you’re doing something you love, you’re more likely to put your all into it, and that generally equates to making money.
K Most people get interested in stocks when everyone else is. The time to get interested is when no one else is. You can’t buy what is popular and do well.
L In the short run, the market is a voting machine but in the long run it is a weighing machine.’

lending1.jpg“If there’s anything I can do, just let me know.”

Admit it. You’ve said that at least once to someone going through a rough time–we all have. Matter of fact, it’s much more than a well-worn, well-meaning phrase that we instinctively say before hanging up the phone, anxious to our friendship duty. Do we ever question if we’re doing the routine rounds or do we feel a pull in our heart?

Let’s face it–how many of us, while in the midst of a crisis, can really get it together to tell exactly what we need? Unless of course it is an injection of a dose of money. So that brings us to the million dollar question–How do you deal with friends who need Financial help?

This could be a delicate situation that can perhaps degenerate itself into a difficult situation, as compared to your own financial status at that moment. If you’d like to help a friend who’s in a financial mess, just keep in the back of your mind that “Money really is power.” And it’s your responsibility to be sensitive to that.

Should you lend money to your friends? Shakespeare said, “Lend money to a friend and you lose both, money and friend.” My dad educated me a bit on this; his advice was that if at all you must help a friend financially, never lend more than you can afford to lose. That’s also my advice for people who are out to make a killing in the stock market–never invest more than you can afford to lose. And that’s what they call the “risk capital.” How much risk capital do you have after all your savings for the rainy day?

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