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Thursday, December 20, 2012

The Number One Career Mistake Capable People Make

By Greg McKeown via linkedin

I recently reviewed a resume for a colleague who was trying to define a clearer career strategy. She has terrific experience. And yet, as I looked through it I could see the problem she was concerned about: she had done so many good things in so many different fields it was hard to know what was distinctive about her.
As we talked it became clear the resume was only the symptom of a deeper issue. In an attempt to be useful and adaptable she has said yes to too many good projects and opportunities. She has ended up feeling overworked and underutilized. It is easy to see how people end up in her situation:
Step 1:Capable people are driven to achieve.
Step 2:Other people see they are capable and give them assignments.
Step 3:Capable people gain a reputation as "go to" people. They become "good old [insert name] who is always there when you need him." There is lots right with this, unless or until...
Step 4:Capable people end up doing lots of projects well but are distracted from what would otherwise be their highest point of contribution which I define as the intersection of talent, passion and market (see more on this in theHarvard Business ReviewarticleThe Disciplined Pursuit of Less). Then, both the company and the employee lose out.
When this happens, some of the responsibility lies with out-of-touch managers who are too busy or distracted to notice the very best use of their people. But some of the responsibility lies with us. Perhaps we need to be more deliberate and discerning in navigating our own careers.
In the conversation above, we spent some time to identify my colleague's Highest Point of Contribution and develop a plan of action for a more focused career strategy.
We followed a simple process similar to one I write about here: If You Don’t Design Your Career, Someone Else Will. My friend is not alone. Indeed, in coaching and teaching managers and executives around the world it strikes me that failure to be conscientious about this represents the #1 mistake, in frequency, I see capable people make in their careers.
Using a camping metaphor, capable people often add additional poles of the same height to their career tent. We end up with 10, 20 or 30 poles of the same height, somehow hoping the tent will go higher. I don't just mean higher on the career ladder either. I mean higher in terms of our ability to contribute.
The slightly painful truth is, at any one time there is only one piece of real estate we can "own" in another person’s mind. People can't think of us as a project manager, professor, attorney, insurance agent, editor and entrepreneur all at exactly the same time. They may all be true about us but people can only think of us as one thing first. At any one time there is only one phrase that can follow our name. Might we be better served by asking, at least occasionally, whether the various projects we have add up to a longer pole?
I saw this illustrated recently in one of the more distinctive resumes I had seen in a while. It belonged to a Stanford Law School Professor [there it is: the single phrase that follows his name, the longest pole in his career tent]. His resume was clean and concise. For each entry there was one, impressive title/role/company and a single line description of what he had achieved. Each one sentence said more than ten bullet points in many resumes I have seen. When he was at university his single line described how he had been the student body president, under "teaching" he was teacher of the year and so on.
Being able to do many things is important in many jobs today. Broad understanding also is a must. But developing greater discernment about what is distinctive about us can be a great advantage. Instead of simply doing more things we need to find, at every phase in our careers, our highest point of contribution.

Tuesday, November 20, 2012

Why did you Take a Job Outside Your Career Path?

Being prepared for interview questions is one of the best ways to make sure that you do well at an interview. One of the ways to do this is to make sure that you have practiced interview questions. Here is one that may leave you tongue tied. Why did you take a job that seems to be outside of your career path?
So what happens when your potential employer is reading through your CV and they come across the job that doesn’t make sense? You have a job in your history that doesn’t fall within the logical progression of jobs in your field. And they want to know why.
What they’re looking for here is at least some thought process, a logical explanation for you having that position. This will help them understand how you think and do your things. It can also help them predict where you are likely to go.
Why did you take that job? What they are afraid of is that you don’t know what you want to do and if they hire you, you might not want to hang around their company very long, either. The hiring process is very expansive and can be disruptive to companies. The want to mitigate their risks and make sure that they get a person that is likely to stick so they can concentrate on making money.
There are actually a lot of valid reasons you could have taken an odd job that don’t reflect badly on you and will make sense to them: Maybe you thought that industry experience was going to be really useful; maybe you thought that you could learn a lot from that boss; maybe you thought that skill set you’d pick up there would be a benefit to you. Going after additional skills is a positive. Or, maybe the truth is that you had no other choice: you needed a good job, and this was one. Sometimes practicality is reason enough. Just explain that you have worked your tail off in that job, but now it’s time to move on to one that more closely fits your skill sets or your desired outcome as far as a career path goes.
They’re looking for you to make them feel better about something that puzzles them. And unless you answer that question where they do feel better about it, you have not done a good job of presenting yourself in the interview. The best way to do this is to put yourself in the HRs shoes and think of what they are looking for.
Just explain to them what they want to know. Basically, are you being thoughtful about your career? Are you making good decisions? Are you just impulsively taking any old job that sounds good? Why did you do this? Most importantly, does that have anything to do with why you want this job? Are you going to be happy in this career long-term?
Tell them why you made that decision, tell them what you learned from it, and then come back around to why you’d be a good fit for this job.

courtesy of CareerpointKenya

Tuesday, October 30, 2012


For the last 48 hours or so, the east coast of USA has been hit by Hurricane Sandy. Life have been lost, homes, bridges and a lot of other infrastructure damaged. The damage estimates currently stands at $3 billion with no end of the hurricane in site. While all this is happening, some marketing executives at American Apparel saw this as a business opportunity. The retailer sent out an email blast Monday night, offering 20% off to customers for the next 36 hours “in case you’re bored during the storm.” It features a map highlighting the Northeastern United States, where Sandy — now categorized as a post-tropical cyclone — is hitting the hardest. The sale is only available in Connecticut, Delaware, Massachusetts, North Carolina, New Jersey, New York, Pennsylvania, Virginia and Maryland, according to the email. This received a lot of negative response on the social media platforms. One recipient of the email tweeted “Hey @americanapparel people have died and others are in need. Shut up about your #Sandy sale.”
This just underlines the company’s insensitivity to the situation. It will cost them a huge chunk of online retail shoppers unless they embark on a massive damage control campaign. By the time I wrote this, they still hadn’t responded to any tweets or issued a public statement about the matter. Marketing can be a double-edged sword and the cut is more severe when you are doing it online. What are some of your memorable online marketing gaffes that you have seen companies make over the years?

Thursday, October 25, 2012

Do Not Mix Money and Friendship!!!!!

I used to laugh at this advice. I always thought my friendships were too strong to be affected by money…
not so. Here are three ways to ruin your friendships by throwing money in the mix.

1) Lending friends money
A few years ago, one of my good friends asked me to lend him $ 8,000. He said he’d pay me back in a few weeks.  We’d been friends for so long and I hated seeing him in that situation, so I gladly lent him the money. I never saw the money again. Despite the fact that I didn’t harass him about the loan, he felt awful and couldn’t face me because he couldn’t pay me back… and then he disappeared.

I haven’t heard from him in years. I lost the money AND the friendship.

I’ve never lent friends money since. It’s just not worth losing a friendship over a loan. These days when a friends asks to borrow money, I tell them how much I can give them not lend them. If I can’t afford to give anything, I don’t. This has kept many of my friendships in tact and some have even paid that money back even though I never expected them to.

Give what you can afford and never expect to see it back. This is the only way to mix friends and money.

2) Going into business together
Being best friends is one thing, but being able to work together is something completely different. You have to be like-minded to be successful as business partners, which is why finding a good business partner is such a hard thing to do.

Think back to school projects you’ve had to work on with classmates. Didn’t you want to strangle that one girl/guy who never really pulled her weight?

The same goes for business – one may end up feeling like they’ve put in more work than the other, so they expect to get more of the profit. Unfortunately, it rarely works that way unless you’ve discussed it in advance. Even then, it can be awkward.

You can always sever relationships with business partners, you can’t do that with friends without severing your friendship as well.

3)  Co-signing loans for friends
Two years ago, a friend asked me to co-sign a SACCO loan for her. With an unpaid loan myself, I wasn’t in any position to co-sign a loan for anyone. Another friend co-signed her loan and their 12-year friendship ended 6 months later when she defaulted on the loan and the co-signer got stuck with it.

Needless to say, it’s awkward being the friend in the middle.

We love our friends, they’re our coffee buddies, wine buddies, crying buddies and party buddies… but friends and money simply do not mix. It almost always ends up badly.

Tuesday, October 23, 2012

Attaining Financial Security Before Age 35

Beginning to consider financial security when you’re younger than 35 isn’t at the top of listing of things you can do for most people. In the end you will find a number of other expenses to occupy you. For example families, purchasing a home, happening holidays, which will make it tough to consider and plan for future years. As numerous people younger than 35 understand financial insecurity is definitely an extreme supply of anxiety and stress. What this means is working towards financially security should be a greater priority. Here are a few tips to help without leading to lots of self-sacrifice.

1. Acknowledge Your Abilities and Experience-The task that you simply presently have or career you’re going after is going to be key point inside your financial security. Make time to learn new abilities and check out something totally new even when this means going outdoors your safe place. The knowledge you will get can be quite valuable and place you in a much better position for advancement. You will need to make certain you’re in a position where one can make the most of these possibilities because they become available.

2. Set Temporary Goals-These goals don’t have to be anything complex, but they must be achievable and they’ll build your long-term goals more achievable ultimately. These might be something simple like saving 15% of your salary religiously. Make certain you place a period frame of these goals as it’ll make you more devoted to achieving it. Make sure to continue making new temporary goals each time you use one individuals temporary goals. This can help help you stay on the right track to where you will need to be around you long-term goals.

3. Pay Yourself First-
Make time to begin saving occasionally it won’t be a scramble later on. This is very simple, like joining your company sacco. Having to pay yourself first will help enable you to get in to the practice of saving, and when you begin to determine how rapidly funds grow it may be quite exciting.

4. Live In Your Means-This ought to be good sense but for several people this really is easier in theory. Oftentimes it’s related to attempting to live a particular lifestyle. For instance if you achieve an increase inside your job instead of purchasing a new TV set, place the extra cash towards having to pay lower your financial troubles or maybe your savings. This can make sure that you will invariably have supplemental income and won’t enable you to get into trouble afterwards.

5. Take Risks-
This does not imply that you should not weigh your choices when taking a chance, since you should. Taking calculated risks though might have significant advantage further in the future. Yes they could be an error and can cost you a little financially, however are mistakes that you’ll study from. Additionally you are youthful enough you have time for you to recover financially quite easily.

6. Make certain you’re financially literate-
You have to become knowledgeable about financial and investment choices. Teaching yourself will help you are making up to date choices if this involves your hard gained money. Earning money may be the easy part, finding out how to allow it to be grow may take a while to understand and really should be considered a long term process.

7. Have fun-You’re youthful at this time, so make certain that you simply have fun. Make certain you are attempting to attain an account balance of your time spent with family, buddies and work. This will be significant in assisting you accomplish financially security since it will help you choose the most important thing and help you place goals on your own. No one should seem like they need to work constantly nevertheless, you can’t spend every day around the beach either.

Adopted from Career Point Kenya

Monday, October 1, 2012

Investment Options in Real Estate

The real estate investments opens a lot of avenues for prospecting investors. Real estate, as you many millionaires will attest, is the one sure way of building a massive fortune quickly. However, since it is an investment, real estate can at times be a very risky business venture. Therefore, you need to be cautious with your money. It is always advisable to do adequate research and understand any form investment before you bring in your money. Real estate has different manners of investing each having different amount of risk so you can choose one which fits your risk endurance and bring in your money in a way likely to diversify your portfolio and secure your financial future.
Commercial Real Estate is probably the best place to begin as it appears to be more secure than the other forms of real estate investments. The main drawback of commercial real estate is the huge capital required. Very few investors would want to venture in this type of investment until they have built a sizable portfolio and have enough money to risk. Commercial real estate is stable because most tenants (businesses) would want to lease, from you, on a long-term basis. This means that, once you get a client, they will stay there for quite a long period ensuring steady income. As you are aware business do not like changing locations as this may negatively impact on them.
House Flipping is fast growing into a popular form of investment among the real estate market and many individuals have also realized that this is a quick way to spend or  make some great money. Here, the risk are high, but the rewards are equally high when a flip goes well.
Pre-Construction real estate is even riskier than the house flipping business in many instances, chiefly as it has become very popular in recent years. The trick with this kind of real estate investment is finding the right property in the right market. You stand a chance of making a fortune if you can acquire a property in a town just about to face serious shortage of housing or is in the initial stages of housing shortage. The main problem with this investment option is that it is quite speculative and very competitive.
Rent or lease to own purchases can often bring comparatively better profits. Many real estate investors prefer this option to straight up renting for many reasons. First, if you are planning to own a home you are more likely to take  better care of it than when you are  just renting. This means that if you decide to move, you won’t need extensive repairs  before you can move to the next client. You may charge slightly more than rent applying a certain amount of the monthly rent to the purchase price or down payment of the home, and you can actually be helping a family that might have hit a trouble spot along the way to achieve the American dream of home ownership.
Investing in real estate is a great way to build a fortunes enroute to financial freedom. However, you will need to decide where you want to begin your journey into this lucrative field. Bear in mind that once you have begun investing in real estate it is advisable to utilize more than one investment option for the sake of portfolio diversification and risk minimization since real estate market is very volatile.

Sunday, September 23, 2012

The Seven Deadly Blunders Investors Make

In any investment option, there are several mistakes that may lead to its failure. As an investor it's important to know some of the mistakes that investors before you have made. If you wonder why some investment din't work, below are some of the greatest and most common investment blunders that could have led to  their collapse.

1. Thinking that the future performance can be predicted by past returns of an investment.
This is one of the hardest things to figure out, since, even the smartest and most experienced investors have been a victim of this mistake. Most people assume that just because an investment did well in the past, it will still do great in the future. This is not always true because of two factors.
One, the value of the good investment has already been incorporated in the asset's price and
Two, the investment success may have been due to just sheer luck.
However there are always some investments that will do better than the market.

2. Putting everything in one basket.
Every investment despite how solid it may seem always has a risk of failing. It may be hard but try to be a diverse investor to be on the safe side. A real diversification is where you invest in different types of assets; you must also make sure there is negative or no correlation between them. This means that a change in value of one product should give an opposite reaction to the other.

3. Mistaking a business for an investment.
A business will need a lot of your time, expertise and attention, while an investment less time is required. a person with a full time job is not suitable for a business since he/she does not have a lot of time to attend to it e.g. a small apartment with few units is an investment, while a large boarding house with hundreds of boarders is a business since it demands lots of your attention.

4. Not considering your investment horizon.
Investment horizon is the time duration you are expecting to liquidate your investment. A good investment is where you can access your money when you need it. This investment blunder is most experienced in the stock market. Basically stocks should be profitable after some time but this does always happen since values fluctuate. This makes you wait for years or you may even be forced to turn your assets into liquid. A minimum of ten years is the best minimum investment horizon for stocks. Before you decide your investment option study both your short-term and long-term needs and choose an investment that you can withdraw without much loss.

5. Not thinking about effects of inflation.
When setting your financial goals, keep in mind the effects of inflation. Inflation negatively affects an economy; a not so well planned investment may even collapse.

6. Getting the wrong information.
This is a common mistake some investors make; they get information from unreliable sources and jump into investing their money. Go to a professional who will accurately answer all your questions, so that you can have all the knowledge before you make any decision.

7. Greed
Greed is one important trait in investment. Warren Buffet advised that you should be greedy when others are afraid. However, too much greed can only hasten the rate at which you lose your money. When the deal is too good, think twice', you have heard this many times before. Before you invest your hard earned money in that investment that seem so good and profitable think carefully about it or you may end up losing you money. This is because some of those investments are not really good

Conduct a thorough research on the area you intend to invest, think carefully, dont rush, then make sure you avoid the above investment blunders in order to keep your investment alive.

Thursday, September 20, 2012

What are you Buying?

The annoying question investors are always asked, by their friends, is “what are you buying?” I’ m saying “annoying”  because I know how it feels when all people ask you is your opinion on which stocks to buy while yourself you are so mixed up you don’t know where to start. Obviously you are not buying anything at the moment and your investment cash is “resting” in an online brokerage accounts.

Before figuring out how to answer your friend (another stranded investor) on what to do with his/her cash he they enventually lose it, you should take care of yours first. Here are a few ways to park your money in relative safety and take home at least a small return even as you decide what to buy:

When You have $50,000 lying uninvested in an online brokerage account
Your expected return on the$50,000: zero (most brokerage firms needs much higher balances before they can give a token amount of interest)
When you put the money in high-interest savings account trading like a mutual fund
Your expected return on the $50,000: at 1.2% (Renaissance High Interest Account, fund code ATL5000)
Supposed annual return/gain: $600
Risk factor: Normally covered by deposit insurance
When you settle on a short-term bond ETF
Expected return: 1.25%
(Claymore 1-5 Year Laddered Government Bond ETF, CLF-TSX)
The theoretical annual return: $625 (assuming this ETF's share price is flat)
Risk factor: Income paid is very low risk, but unit price could decline if rates rise.
You use a one-year GIC
Expected return: 1.75% (various small banks and trust companies)
Risk factor: typically covered by deposit insurance
Hypothetical annual gain: $870

The World Money Show - 3rd to 5th October, Sheraton Chicago

Three Days in Chicago Makes You a Better Investor and Trader

This October 3-5, 2012, at the Sheraton Chicago Hotel, you'll have the chance to join over two thousand of your fellow investors and traders in Chicago for a three-day event that will have a substantial impact on your success in today's volatile markets. We're bringing together investors and traders, like you, from around the world with one goal in mind—to help you make better investing and trading decisions to help you profit in the coming months.

Summary of Events
A plethora of quality investing education to choose from with over 100 workshops, panel presentations, and special events available all under one roof! A variety of topics offer something for all investors and traders.

Experience deluxe accommodations and amenities at the Sheraton Chicago, as well as award-winning restaurants, all within easy walking distance to the best shopping and entertainment that the Windy City has to offer.
Who Should Attend
The MoneyShow provides a unique opportunity for attendees to become informed about trading and investment choices, to hear respected market specialists, to question speakers and exhibitors, and to observe, evaluate, and compare.

I would advice any (prospecting) investor to register here for free and sweeten your journey to success.

Investment Tips: How to Gauge Your Risk and Rewards

Many people dream of making it big in the investment world today. What you must always do before you make any decision regarding an investment is to weigh the risks and the rewards expected. Understanding the relationship between risk and reward is your first step, with that knowledge you can now start your investment.

People are always concerned about the amount of money they stand to gain, forgetting that investment is a risk taking endeavor. You should, at all times, gauge whether your investment is going to lose your hard earned money or grow it substantially. Therefore, before making any investment decision, understand your risk tolerance. What is more important to you? It is the safety of your investment or the growth of your money.

Determining the risks and rewards of a particular investment opportunity is mandatory and in order to do that, you will need to ask yourself the following two questions questions.

*What are your investment goals?

Consider if your investment project will meet your target. A good example is you don't want to have less retirement funds just to reach your investment ambitions.
The elements that determine whether you will achieve your investment goals are:

  1. The amount you have invested. In most cases the bigger the amount you invest the greater the reward expected.
  2. The duration invested. You need to know how long the investment will take to give its rewards.
  3. Rate of growth or return.
  4. Taxes, inflation, deduction fees etc
Some investment take years to yield profits while others are short term. If you want to increase your reward, you must increase the money you have invested and the length of time invested.
Most investors find a good amount of risk in their portfolio is a good way of increasing their potential of achieving their financial goals. They diversify their portfolios with their investments in various degrees of risk, With the hope of taking advantage of the rising market and protect themselves from great losses in a down market.

* How much risk are you willing to accept for your investment?

The thought of losing money can be the biggest nightmare to anyone. So before you start investing your money think of how much trouble you will go through if the worst happen. If you are going to spend sleepless nights worrying about your money, then that's not an advisable idea. But keep in mind the lesser the risk the lower the reward.


There is no laid down degree of risk an investor should take. This is a very personal decision that you have to make. However a young person can afford a higher risk compared to an older person, this is because a young investor has a lot of time to recover if a disaster strikes. For example if you have five years to retirement, you don't have much time left to recover if you suffer a loss.
But remember a very conservative approach to an investment may mean you will not meet your target.

Investors can have control over some risk in their portfolios by a proper mix of bonds and stocks. Experts think portfolio more heavily weighted towards stocks is much riskier than a portfolio that favors bonds
However risk is a part of investing - you cannot avoid it. As an investor you need to find your level of comfort and then build your portfolio and goals.

Tuesday, September 18, 2012

Understanding Investment and its Risk

Most of us can earn money, but saving and investments is what counts the most. In today's modern world investing has become an important thing. In this post, I will share some of the things to consider before you invest your hard earned  money.

You should always make investments in a sane and safe manner. Before you decide to invest your hard earned money, remember to set aside your daily and monthly expenditure. You should also set aside all the necessary amount of money to cater for your bills, at the end of every month. Only a certain percentage should go to investments. Your short term and long term investments should not negatively affect your daily lifestyle or even liquidity. But remember you will have to cut down your spending, if you really want to meet your investment goals every month.

Investments methods can be classified according to the time duration over which the yield may be expected and according to the degree of risk involved.
This means you have an option to either choose between high risk and low risk or between short term and long term investment risk.
The different types of investments and their risk
Generally, investment can be categorized under financial and non-financial instruments.
*Financial instruments:Equities. They are traded in the stock market. When you buy your stocks you become a partial owner of that business. This is a good long term investment option.Bonds. When you buy a bond, it's like you are lending money to government or a private company. You will receive your interest on money. Bonds are safe, with a stable income and a low risk.Deposits. A common way of getting surplus funds is by investing in government schemes, recurring deposits ,banks etc. however the return is low since the risk is low

*Non-financial instruments
Real Estate. It's a profitable investment option since markets have been predicted to go up in the near future.Gold. Despite the market's going down gold prices have risen making it a good investment option.

Note: All investments should always be done keeping in mind the age of the investor. A younger person can take a bigger risk compared to an older person. However, "never risk more than you can afford to loose."
You must always do a comprehensive research and study on the options available before you invest in them. As I always say, invest your time before you invest your money. Investment is a risky undertaking, but again, you can't get anything if you don't risk. This applies to money and life in general.

Why you Should Consider Buying Index Funds Instead of Stocks

Index funds investment is often referred to as a passive investment. Funds invested do not need an active management like other funds. There are many reasons as to why an investor may opt for one particular form of investment as opposed to another. However, if you are considering investing and is torn between investing in Stocks and buying Index funds, below are a few reasons why you should  consider buying index funds instead of stocks.
Lower costs of investment
Analysis of historical data is just enough to make you as an investor realize that to get the best out of an investment, you should minimize costs. Buying an Index fund is a convenient way to lower these costs. A good choice in this case is a passive index fund investment; the active stock investment is quite costly.
Buying stocks require a great deal of research, this results in a a higher turnover. Indexed funds have low turnover which means reduced brokerage and trading fees unlike in stocks. The limited research costs and lower trading fee associated with indexed funds is one good reason you should buy an index fund. In the long run, this lowers the cost of investment translating to a higher ROI.
Lower risks involved
Buying index funds sounds a safer investment, because your portfolio can be invested in different companies. This will translate into translation a well-diversified portfolio of your stocks. You can invest in ten companies or have your stock portfolio investment spread in several in thousands of other companies from the ten companies. This provides an investor a chance to diversify risks associated with single stocks by constructing your investment from index funds. In overall, buying index funds lower the overall risks of your investment portfolio.
Lower tax base
Index funds have lower turnover compared to stocks and other mutual funds. This passive investment buys and sells within the portfolio than actively managed stock funds. Because of the lower turnover, index funds attract lower tax rates. This is accrued to the long term distribution of capital gains and minimized distribution of capital.
Additional bonuses
With index funds, you will understand what you own; you will know exactly what your investing manager is investing in unlike an active stock. This will earn you a lot of bonuses

Friday, September 14, 2012

Are You Saving or Investing?

There are usually two kinds of people – those who have something extra after paying all their monthly expenses and those who don’t.
Let me assume that you belong to the former; otherwise the discussion which follows may be a bit advanced. Now, what do with the left over cash?
  1. Do you stash it in your bank account and spend it whenever you need to buy something big like an iPod, a camera, an LCD TV?
  2.  Do you make a fixed deposit once you get that lump sum payment?
  3.  Do you buy houses, shares, mutual funds or other investments?
3.  is an Investment, 1. is a Saving 2. is, according to me, a Saving  but others will think that it is a form of investment. There are some differences.
The difference between saving and investment is quite clear to comprehend but with citation of relevant examples to support the aspect of each case. It could be simpler than ever imagined even though some people still equate savings to investments. However, given their intrinsic value makes them very distinct financial disciplines.
First, when you invest you create a greater chance of losing what you have invested in case of a calamity unlike when you save, your money remains in banks and federal securities. Money in an investment receives no compensation as a result of a calamity that may lead to loss of your principal. However, saved money must be fully compensated for inclusive of interests if a loss occurs.
In an investment, your money become unavailable to you for use in an emergency unlike in a saving plan where the cash saved is readily accessible. If you are not going to need money in the nearest future, invest in stock markets etc. But if you are going to need the money, don't invest. Instead save it.
Investments generally yield high rate of returns depending on the nature of the activity you have invested in. On the other hand, savings have low rate returns as it relies on bank interest rates or returns on deposit securities.
What you are doing with that extra cash will only be considered as an investment if, and only if, it can significantly grow your money above inflation, after taxation. Remember, when inflation is quoted at around 5%, it’s actually around 6.5% per annum. Therefore, to realize any real returns on your investment, your money will need to grow above that.
I know someone is ready to present evidence that some financial institutions pay around 8% interest on fixed deposit. Reduce that interest by 30% (tax) and you will notice you are only having 5.6%. This still falls below benchmark (6.5% inflation rates).
The focus of every investment is increasing your net worth and achieving financial goals in the long term basis. It offers an opportunity for a greater ROI. However, as the amount of ROI increases and so is the risk of potential loss of the principal invested. This is quite the opposite to your savings i.e. the risks involved with the amount saved are minimal. Majority of savings are insured with the federal deposit security insurance companies.
Value appreciation is quite evident with investments like purchase of market bonds and securities. These investments earn some intrinsic value with time depending on how much you invest. (Note iPods, cars, computers etc, are not investments, they depreciate rather than grow in value.)
Equity/balanced mutual fund units and shares are investments. Their risks are high, but have the potential to grow far beyond inflation. Gold and other commodities are investments too, and so is paintings (art), real estate etc.
Investment can also give returns in terms of cash flows, which are earned on a regular basis. Cash flows are often described as “passive investments” as you do not have to work for it. Dividends (from shares), royalties from books, rent (from real estate) etc are some sources of regular income.
Savings, however, depend on currency value which in reality depreciates with time.
In a nutshell, savings are all that money you have stashed in your bank account, under your pillow and in fixed deposit accounts. The money is often easy to access, are less risky, earn little or no interest and gradually eaten away by inflation.
Savings are your present. Investments are your future. Bestride the two – invest around 40 – 60% of your earning and save the rest. You will always need your savings for your heavy purchases and to help you pay those extraordinary bills (like hospitalization, wedding, pregnancy etc), but do not do without investment either.
For a stable future, invest more. So how do you know that what you are doing is investment no saving? Checks:
  1. It should be able to grow above inflation
  2. It should have some element of risk
  3. It should appreciate in value – through value appreciation or cash flows
  4. It should have limited access
More on investment and savings: Differences Between Saving and Investing:

Monday, September 10, 2012

How to go Through an Interview Process?

 Following our graduation and the immediate introduction into the "Job-search Market", many questions crossed our minds, which is the best way to apply for a job? How do you write that killer CV? Who is employing inexperienced graduates e.t.c And when all these are said and done, the one major challenge we faced was "how to go through an interview process?", in case you get called for one (which was very rare).

The interview process is a new one to many of us but we are at that stage that they shall start coming in fast and furious. So what should you expect in an interview? I have attended only one interview after sending out a blanket application. But before I went I spoke to some of the people I know who have attended interviews before (including my attachment boss who was seeking a promotion in the company) and this is what they told me to expect:

1. Aptitude tests:
These are general-knowledge questions that are used to ‘gauge your IQ.’ These may cover a broad range of areas such as numerical prowess, word tests, reasoning tests and current affairs. Aptitude tests are common with firms such as PwC, Unilever, EABL, Bamburi and Deloitte who have an elaborate recruitment program. There are some online resources which offer practice on common aptitude tests.

2. Technical questions.
If you are called for an interview to a road construction company, best go fishing for Dr. Ndegwa’s (or whoever your lecturer was) Road Notes and read them! In an interview several questions will be thrown at you in regards to engineering. You may be asked for example, to “describe the several layers in constructing a road.” You may also be asked more technical things like what is the difference between a laterite and murram, but often it is the basics.

3. Your academics:
Remember the Chief Justice interviews? During interviews you will be placed on the hot seat. They will ask you why you got a D in structural dynamics. They will ask you why you had a straight A in high school and downgraded to Ds in campus and you expect to land the job. Kaa radar! You may also be asked how your training suits the company and answering this relates to No. 5 below. You may also be asked if you have undergone other training (computers, CPA, EIA etc). Another common question is “what new ideas/thing will you bring to the company if given the position?”

4. Trick questions:
These are usually just intended to knock you off balance and to see how you respond under pressure. I spoke to someone who went to an interview and was asked; “You have a 3 litre water bottle and a 5 litre water bottle, you want to fetch only 4 litres. How do you measure exactly five litres without pouring any water?” There is a right answer, yet depending on how sharp you are, you really do not have to give them the right answer. But DO NOT give a wrong answer, go round the bush and explain that you are nervous but if they gave you five minutes with a pen and paper you will answer it. Other common trick questions are the famous Google Interview Questions (Google this up for more).

5. What you know about the company:
Before you go for an interview go to the About Us page of the company if they have a website. Look up all the activities they do and how they do them. If they do water sewers, Google the process of water sewer design and be ready to explain it. Find out the directors, organization structure, date of formation of the fir, client profile etc. These questions will show you have an interest in working at the firm and it was not just a blanket application.

6. Salary expectations:
I still do not know how to answer this one! I mean, how much money do I want? Like ten million a month dammit! But my attachment boss advised me that you should first state “within your salary scale for entry level engineers”. If they insist you give them a figure, you say that you need to be comfortable at night; to cover your lunch and to pay for fare to work every morning so based on the current economy, X amount would be fine.

Watch out, you may get a call or email inviting you for a “small discussion” as it happened to me, but do not forget your papers (originals). Good luck in your interviews (they always end by saying we will contact you!)

==Courtesy of Bjey

Friday, September 7, 2012

Investment Option: Investing in Penny Stocks

What are Penny Stocks?

Perhaps you have asked yourself this question and many others in your quest to understand this investment option, penny stocks. Are they for first time investors or not? What is the risk of this investment options? And most importantly, are penny stocks for me?

Penny stocks, as the name suggests, is a stock with a value of $5 or less per share. Unlike regular stocks, penny stocks are not traded in the New York Stock Exchange.  They are, instead, traded through on over-the-counter markets via pink sheets (electronic quotation systems). Smaller companies with less than $5 million in assets or those that do not possess tangible assets like equipment and buildings are more likely to issue penny stocks than larger more established corporations.


When dealing in regular stocks, you are more likely to find their trading prices in your daily newspapers or online. However, determination of penny stock’s share prices is a bit complicated. In an archetypal transaction, your agent (broker dealer) , arranges a trade for you based on the bid price (the amount you are willing to pay for that particular stock) and the ask price (the price the seller is willing to sell the stock). The difference between the ask price and the bid price is the spread and it determines how much money you lose or make.

Risk and Profitability

The major risk with penny stocks is the complexity of the transaction. The fact that the commission to the broker is determined by the amount of spread can make it difficult for you to make money through penny stocks. For instance, the broker my further his/her own interest, not yours. Another risk is the fact that penny stocks are offered by start-up companies with no proven track record. This is risky, as you can lose your money faster than you invested it. Surprisingly, the gambling nature of penny stocks attracts investors who are eager to make some quick bulk cash and move out.

Why Invest in Penny stocks?

The reasons why a trader may want to get involved in penny stock trading is as diverse as the traders themselves.

Sometimes you are a new investor who would want to learn the basics of trading shares, and the low-priced penny stock investment seem to be the best starting place.

Advanced investors may also try their luck in this investment option to play pay with some risk money or hedge a position.

Maybe you have an inside information of the potential and prospects of a company you work at, and you want to invest in their stock before the business takes off.

Penny Stocks are exciting and fun, which is another motivating factor for others. It is kind of high-stakes hobby.

Despite all these varied reasons and ambitions, the main reason investors get involved in penny stock trading is to make some money to get rich or richer.

A combination of the above reasons may act together to push you into the penny stock market.

Why would you get involved in Penny Stock Trading?

  • To make money

  • Enjoyment/excitement

  • You have inside information of the profitability of the issuing company

  • To increase your portfolio risk/reward exposure

  • To hedge strategies

  • To diversify your portfolio

  • The ones big stock you held took a price drive forcing you into unintended penny stock holder

  • To learn how to trade in penny stocks or just stock trading in general

  • You do not want to be left out, penny stock is the talk of town

  • You strongly believe the issuing company’s value will explode

So, are Penny Stocks Suitable for Me?

The suitability of penny stocks as an investment option will depend on many factors, and you are the sole person who can ascertain if you need them in your investment portfolio.

Factors to consider include, but not entirely limited to:

  • Your investment and financial position

  • Your risk tolerance

  • Your investment experience level

  • Your expectations as far as returns are concerned.

My take

As the famous saying goes, a penny saved is a penny earned. However, when it comes to the high-risk penny stocks world, a penny invested can turn into a penny easily lost. If you don't have sufficient amount of money to invest in big stocks, you may be tempted by the low cost and invest penny stocks. However, you should do so with extreme caution.

Thursday, September 6, 2012

Financial Independence: How Much Money you Require to Retire?

Everybody is wishing to reach the ‘illusionary’ state of financial independence. I say illusion because, to some, we do not see it coming soon.
A few different paths can deliver you there, and I have always stayed focused on the fastest, straightforward path, which has reserved it top of my mind. I have stayed focused on reaching financial freedom. I look forward to that day I will simple say “I have made enough”. That day I will stop going to the office. The day I will sit down to ponder, not how to make more money, but how to spend the much I have. I long for this day, I really do.
It is not that I dislike my job and I am desperately seeking an escape route. Rather, I am a number-focused, goal-driven individual who enjoys and acknowledges the value of thrifty lifestyle. I truly believe that the world we live in would be a much better place if more individuals could achieve financial independence, allowing them to arrive at their full potential in the society by having more time to focus on their passion. If that involve keeping their present job, more power to them.
People often react differently whenever we discuss this topic, financial independence. Each time I initiate this discussion with family and friends (any gender and age) and tell them my aspiration to achieve financial independence at any age before 50, I regularly face a whole lot of doubt, a healthy dose of mockery, discomfort and even a bit of anger. And whenever you reach the part “around how much should have to retire?” the discussion heats up more.  Therefore, I sat down and thought, “why not bring up this topic in my blog and hear other people’s opinions?”
How Much Money Should I Have to Retire?
I know you are scratching your head, thinking of what you want and what you may need in the future. Relax! The math behind retirement is very simple – if you know some of these variables:
  • Your expenses
  • Your income
  • Your savings
  • Your age
  • The average inflation rate
Now you can come up with some rational estimate of how much money you should have to retire (or attain financial independence if you are so much scared of this word, “retirement”. To remain palatable to all the audience, let’s use these two phrases interchangeably). Retirement calculators like CNN Money’s retirement calculator or Firecalc will make your calculations simpler. What these resources help you solve is basically the quantitative computation of financial independence.
The Retirement Reality
Regardless of the hard numbers suggesting an objective amount of money to retire, reaching that number simply do not satisfy most of us (if not all). We (humans) keep our noses to the grindstone, and very few retire when they reach that number.
But why? It is often one or some combination of these factors:
  1. Ignorance or Disbelief: I may be poking into the eyes of some but, truth be said, the idea of early retirement or financial independence is not something have always considered. This mainly because, more often than not, we see people only retire when their reach the mandatory retirement age.
  2. Addiction: We are consumption addicts. We cannot split wants from needs and foresee our retirement years focused on expensive SUVs, golf courses, pricey travel, and whatever else we suppose we deserve.
  3. Fear: We have done the math and got the number, but we remain scared that we will still run out of money, the expenses for healthcare will blow up, inflation will speed up, or we may live to be ludicrously old. This has been fueled by some scary examples we have witnessed or playing the worst-case scenario in our heads.
  4. Contentment: We have done the math, and we have accumulated enough, but our jobs don’t suck that awful. A few of us in fact like them. Why not keep pegging away to put together that safety margin?
How Much Money do you require to Retire?
This begs the knowledge of:
“What you REQUIRE to retire, the savings level you want to ACTUALLY retire at, and what brings the difference between the two?”
By using the scary word “retire” all I mean is walking away from your current career/job. After that, what you choose to do with yourself is entirely up to you – whether it sitting at home, basking at the beach or starting your business!
For instance – I may know that I will achieve financial freedom when I hit $800,000 in savings. Am I going to walk away from my career once my savings hit that level? I can easily say I will now, but my situation in life and fear of some of the aforementioned might result in me not retiring until I garner $1 million or more.
The gap between what we need to retire and what we want to actuate the move is extremely fascinating to me. It essentially takes the numbers we have computed and then say “To hell with the numbers, it’s far from enough!” We then keep plugging away so that we can build that psychological cushion that will trigger us to call it quits one day.
You can now go ahead and determine what the calculators say you need to retire, subtract it from the saving level you will actually want to retire at and then ask yourself why the difference (if any)?

Wednesday, September 5, 2012

Investment Strategy: Portfolios and Diversification

It is always necessary to understand the different forms of securities, but it is even more important to clarify how their different characteristics can be harnessed to accomplish an objective.
Portfolio is a collection of different financial assets mixed and matched by an investor for the purpose of achieving an investment goal.  Items which are considered part of your portfolio include any personally owned assets like real estate, bonds, stocks and even cash. A portfolio, like any other financial management, can be done by the individual investors or by banks, financial professionals and other institutions which are connected to the finance industry. In all cases, when making the portfolio, the investor's time frame, risk tolerance and the investment objectives are often considered. The value of an individual asset can be an influence to the risk ratio of a portfolio which is referred to as an asset allocation. In other words, a portfolio is a very important collection of files which includes the list of financial assets.
Basic Types of Investment Portfolio
The aggressive investment strategies are particularly suited for those who are willing to stomach high fluctuations in stocks value (high risk takers). It will be composed of stocks with propositions of high risk or high reward. The stocks in this type of portfolio are highly sensitive when it comes to the overall market.
The second investment strategy is the defensive strategies which are somehow the opposite of the aggressive portfolio. This strategy is not highly sensitive to the overall market and it is not usually risky. The defensive or conservative strategy is particularly suitable for risk averse investors who put safety before any prospective gain. Conservative portfolios will generally consist mainly of cash and cash equivalents, or high-quality fixed-income instruments.
The income portfolio is more focused on the ways in making money via dividends or other kinds of distributions to the stakeholders. The companies which are included here are somehow the same to the companies in the defensive portfolio. However, they should be able to offer higher yields. Income portfolio is meant for individuals with a longer time horizon and an average risk tolerance. Investors who find these types of portfolios attractive are seeking to balance the amount of risk and return contained within the fund.
The speculative investment strategy is the riskiest investment portfolio. It is often considered as the closest kind of portfolio to pure gambling. This kind of finance portfolio is known to have more risk than all the other types of portfolios. A typical speculative portfolio would consist of high risk stocks and forex trading.
Portfolio Diversification
More often, investors do not usually employ a single investment strategy. They tend to mix and match their investment to come up with a hybrid portfolio which includes combination of various investments strategies. The hybrid portfolio is known to be the most flexible investment strategy.

Portfolio diversification involves the distribution of an individual's wealth to other various classes of asset such as debt, cash, property, equity, gold and more. Portfolio diversification can provide both benefits and risk to an individual. Now, many people would ask why they should use portfolio diversification. One major advantage of this is that they will not experience much loss if ever one of their portfolios experienced a problem because it will be counterbalanced by their other portfolio.
Different securities perform differently at any point in time, so with a mix of asset types, your entire portfolio does not suffer the impact of a decline of any one security. When your stocks go down, you may still have the stability of the bonds in your portfolio.