Nuggets for financial wisdom (II)

4. There are more fools among buyers than sellers: This old French proverb is based on a simple imbalance of knowledge. The trading of money and goods may seem simple, but the seller of the goods usually knows pretty much all there is to know about the object or asset he is parting with. The buyer usually knows less.

Anyone who's ever sold a car or house (or a with-profits endowment policy for that matter) knows it's relatively easy to conceal a fault from the average buyer. But money, at least outside hyperinflationary economies like Zimbabwe, is of a known and certain worth.

Of course, there are exceptions. Those who sell profitable shares too soon, only to see the price race away, can certainly be called foolish. Yet there are probably fewer of them than those who bought a share just before a profit warning.

5. The best time to plant a tree is 20 years ago...the second best time is now: A twig or sapling never looks very impressive in its first year or two and neither do most investments or savings accounts. However, look at a tree after 20 years and it's already impressive. If you don't plant your acorns now, you're never going to get that mighty oak.

6. Hollow vessels make the greatest sound: The contrarian investor will recognise this one. It brings to mind the much hyped revolutionary products that fail to turn a profit, the fanfared stock market debuts that turn to disaster, and the companies with sky-high price earnings ratios which are never off the news pages, but never make a dime. Which, then, are the real investment success stories? The unsung and often unloved companies in dull businesses.

Take a classic case: Associated British Ports was privatised on Valentine's Day 1983. Margaret Thatcher thought it a strike-ridden industrial backwater compared to supposedly exciting companies like British Airways. So ABP was almost given away. Yet by the time ABP was taken over in 2006, it had returned (with dividends reinvested) more than £100 for every £1 invested by buyers.

BA, by contrast, has returned about £3 for every one over a similar period - and that's without mentioning the Terminal 5 luggage disaster.

7. A rising tide buoys all boats: In strong stock markets even bad shares rise, while in weak ones, even the best may weaken. In short, you can't tell the good from the bad when the market is in an extreme mood. As legendary investor Warren Buffett said: "Price is what you pay, value is what you get."

8. If no-one ever took risks, Michelangelo would have painted the Sistine floor: Neil Simon's witticism has many applications. However, the Byzantine complexity and risk structure of the credit markets look unlikely to have anything like the longevity of the renaissance masterpiece. So, don't look around 100 years from now for any monuments to the banking creativity we've seen in the last year or two.

Nuggets for financial wisdom

Keen observers of the international scenes in the world of finance would agree with me that these are not the best of times (if all we see, experience and hear in the news are anything to go by). Despite frantic efforts by leaders of leading economic nations to re-instate public confidence in the governments and hitherto dying financial institutions, the public seems more skeptic about government assurances now than ever. These are the days when you see stakeholders sweating in winter as they listened to the news and read their balance sheets. Even if you did not care about what happens in China in the past, you care so much now because it’s a global malady and nobody seems to be immune from it.

The news sometimes may have been exaggerated but the fact is that the main truths are real. In the midst of this financial crisis, I think one needs to learn some financial wisdom at least to keep afloat if you can’t swim. I find this article quite useful and I believe it would inspire you as well. It was written by Nick Louth on 02 April 2008.

There's plenty of folk wisdom knocking around about money, debt and savings. A lot of the advice is hundreds of years old, but is none the worse for that. After all, those sayings that have survived must have some kernel of truth.

Common sense though, is a commodity in short-supply right now, with a global banking industry that has tied itself in knots by loading up on complex securities, secured on the flimsy mortgage payment promises of America's worst credit risks.
Perhaps, then, we should turn to our forebears and some of history's greats for a little more insight into what really we should be doing with our money.

1. Look after the pennies and the pounds will look after themselves:
You can't fault this one. The surprising thing is how quickly those savings add up, once you invest them. Just 10p a day, the cost of one text message, is worth £36.50 a year, even without any interest. Invested over the course of a lifetime, that 10p a day would be worth nearly £32,000 by the age of 60, based on typical stock market returns.

2. Neither a borrower nor a lender be; for loan oft loses both itself and friend and borrowing dulls the edge of husbandry:
In Shakespeare's time they knew as much about the problems of debt as we do today, but this phrase, given to Polonius in Hamlet is more nuanced. The obligations created by lending strain relationships in both directions, disrupting the equality of friendship.

The American radio firm Clear Channel Communications must know exactly what Shakespeare was saying. It went to court in Texas this week and won a ruling that the banks which had committed to funding its $19 billion buyout cannot now withdraw the funds just because the wider debt market is shaky. Presumably there won't be too many friendly handshakes now between the firm and its reluctant lenders.

3. A stitch in time saves nine: For cutting stock market losses, this is the perfect piece of wisdom. Act quickly and decisively when your investment is looking threadbare. Don't wait until the whole thing starts to fall apart.

To be continued...

HOW TO DEAL WITH BEREAVEMENT - CONCLUSION

MOVING ON
Moving on may be a bit difficult. Sometimes it seems impossible but with God (if you believe in Him), there’s actually no such word as impossible. The easiest way to get yourself moving on is when you build up your faith and have it at the back of your mind that there is no temptation that has befallen you that is not common to man. Also, remember God’s word at all times that all things work together for our good because we love God. Remember God as the father of all comfort. Always ask the Holy Spirit, the comforter to help you when memories of the deceased makes you feel low.

Get yourself active. Occupy yourself at home, school, church or work. Always count your blessings. Try to see the ways God has turned that experience into an advantage for you. Never feel disadvantaged because the support you once had is now gone. Take responsibility for your life and learn from people. Realise that it is important for you to move on because your own destiny lies in your hands and not in the hands of your parents! They can only offer guidance but you have to make it happen whether or not they offer this guidance...