Ever since the CPFB introduced a colorful pie chart of our CPF savings a few years ago, I would look forward to mine every year like a teena...
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I like to keep my life simple. I try to avoid complications. Life, unfortunately, is rarely as simple as we would like it to be, isn't it? I am sure we want to keep stock investing simple as well but can it be simple?
1. Focus on values and not prices. "Price is what you pay. Value is what you get." 2. Focus on competitive advantage (economic moats). “In business, I look for economic castles protected by unbreachable moats." 3. Focus on having a margin of safety. "The dumbest reason in the world to buy a stock is because it is going up."
Not too long ago, I blogged about how anyone should have to think like a donor if he was to be a lender of money. If we are not comfortable with donating, say, $2,000 to a charity, then, we should not feel comfortable lending $2,000 to anyone! To me, it is quite simple. Why complicate things?
However, a friend who took my advice to heart, quite surprisingly, told me that he lent $10,000 to a cousin recently. Now, he worries that he will not see his money again since the cousin has been borrowing from other relatives as well in the last few months.
I asked him why does his cousin need to constantly borrow so much money. He said he didn't know. Huh? Why did he lend $10,000 to his cousin if he did not know the reason why the cousin needs to borrow? "Oh, because we are family and we are very close." I told him to write off the debt right away. He struggled with this idea and I don't know if he has managed to do this. It makes perfect sense to write off the debt and it is consistent with my belief. Imagine that the money has vaporised and gone to a better place. If it should come back one day, well, go celebrate! I am not heartless. I quite understand that there could be certain situations when we might feel obliged to lend money especially to family members. However, as a prospective lender of money, I have the right to know why a loan is required and why the would be borrower is short of money. Of course, knowing the answers to these questions will not guarantee loan repayment. Then, why ask the questions? Well, if you are asking me this question, then, my earlier point about thinking like a donor when lending money is lost on you. Just throwing money at a problem might not make it go away. If we understand the problem, we might be able to offer a better or more permanent solution. If we truly care for the borrower (why would we even contemplate lending money to the person, otherwise?), we would ask the questions that need asking. There is nothing to be embarrassed about. Related post: The difference between lending and donating.