While high but unstable income (like tuition) is desirable, I believe the next stage would be project based work (on top of leveraging on others).
In project based work, you will have a huge amount of time spent that you will not be paid before receiving the final amount at the completion of the project. And if your project does not succeed eventually, all your efforts would have gone down the drain (in monetary terms).
But project based work can at times be very rewarding in the monetary sense. If you are talented and work fast, the estimated per hourly rate could likely be higher than most other jobs!
He came back a few days later with his tools and his son helping, and started working on the projects. This took about 1 hour. He got paid $1000. {He's really good. The other contractors had no idea what happened, but this person knew, and fixed it immediately. No problems after that.}
A short summary of the time taken....
Inspection: 0.5 hrs
Repairing: 1 hr
Travelling: 1 hr
Preparing of materials: 1 hrs {let's say he needed to order some other materials... but as a business, he should have everything ready... We take into account his logistics time here too.}
A total of 3.5 hrs, and $1000 was paid. Let's divide it among two people.
$500 / 3.5 hrs = $142 per hour!
It might not be a lot to some pple (*ahem... if you are one, you won't really be reading this I guess), but it's more than most. This is an example of a successful project undertaking.
But if you failed in your project like the earlier contractors who had no idea what was happening to the leaks... they probably spent 1+ hour of their time on inspection and travelling, and do not get paid in the end.
Other examples of being paid for projects/results would be salesmen, bankers, traders, insurance agents, property agents, etc... These people could be working for days or weeks or months on end without an income, to finally earn a $100k commission at the end of say... 6 months... That would probably exceed the annual income of most.
Some other less common examples would be freelance artists, programmers, authors, etc... You could spend lots of time to write a whole article, to find it being rejected by paying customers in the end...
But of course, it's not easy in the beginning to be working without salary for months on end without feeling any tinge of perplexity, as compared to being paid for your time by the month.
Both sounds the same to me.
ReplyDeleteUltimately, you are being paid $$ in exchange for your labour & time. You still need to be spending time to be physically there to service the customers.
In cashflow quandrant, one is in the employee quandrant, the other is in the employer quandrant. But both are dependent on the person being well to meet his obligations to generate the income.
It's better to be in the business quandrant and ultimately the investor quandrant. You can be sick but the business sytem continues or the invested properties/stocks/business continues generating profits as it is leveraging on other people's time, effort and expertise.
Hi JW,
ReplyDeleteI only like the idea of money going into my pockets even while I sleep. Yah, I'm a slacker. ;-p
Hi JW,
ReplyDeleteI was surfing through SIAS when I came across this article:-
http://sias.org.sg/index.php?option=com_content&view=category&layout=blog&id=105&Itemid=83
Talks about whether fundamental and technical analysis can co-exist and be "merged"? I don't have SIAS subscription so I can't read it, but perhaps u know of someone who does.
Just FYI.
Cheers!
Hi WJ,
ReplyDeletethanks for dropping by! You are right in a way. My point was, at times, we are too concerned about our per hourly rate.... rather than being paid for the results...
I'm planning to move into the business quadrant one day as well....
Ok... I WILL! :)
Hi AK71,
ReplyDeleteme too! But I did think that being who I am, I will pretty bored by slacking too much....
During the transition from uni life to working life...., I was so bored at home at night every day that I started teaching tuition.... Nothing to do at all!
Hi MW,
ReplyDeleteunfortunately, I don't know anyone who has it. But personally, I believe they can co-exist when done properly.
The mindsets are different, but some disciplines and thoughts from TA can be applied to FA to enhance our entry...
I mean, even if we are wrong in our TA, we are still "protected" by our FA :)
Anthony Bolton (born 7 March 1950) is one of the UK's best known investment fund managers and most successful investors, having managed the Fidelity Special Situations fund from December 1979 to December 2007. Over this 28-year period the fund achieved annualised growth of 19.5%, far in excess of the 13.5% growth of the wider stock exchange, turning a £1,000 investment into £147,000
ReplyDeleteMr Bolton is mainly a fundamentalist, but uses technical analysis which helps in timing and size decisions. 'If I'm looking at a stock that has done well for seven years, I look at it differently from one that hasn't done well,' he says. 'A stock that has done well has most of the good news in the price. If things change, there are lots of profits that people can take so investors are likely to suffer on the downside.'
http://createwealth8888.blogspot.com/2009/11/why-do-we-still-need-to-read-charts.html
Well, bro8888 is right. I've read Anthony's book. He is a remarkable flexible investor who had over 5 methods of investing his money, according to different times/season. His job as a money manager is to determine when to use which method, as all the methods are good, given the right 'timing'.
ReplyDeleteHe did say something that makes me think. It goes somewhat like this: You can win money using TA alone, but you cannot win money with just FA alone.
I suppose he has his own reasons for saying that.
I think it is possible to make money with TA alone or with FA alone. The methods are different but they will work if there is rigour in their correct application.
ReplyDeleteHowever, I believe that FA + TA is a better way to go and I've blogged about it:
http://singaporeanstocksinvestor.blogspot.com/2010/01/risk-and-rewards-ta-and-fa.html
Warren Buffett makes money from FA alone.
ReplyDeleteShould read how he got a number of Burlington's stock at a percentage discount from the market price by selling put warrants to the traders...
Warren doesn't need to liquidate his investment to meet his future expenses and can afford to wait for 20-30 years. You can or not. If you can, follow him lor.
ReplyDeleteThe Trouble With Warren Buffett’s Methods
http://createwealth8888.blogspot.com/2010/01/trouble-with-warren-buffetts-methods.html
Hi CW8888,
ReplyDeletethe trouble is people always want to be the best trader or fundamental investor.
Yet if it's possible that you can't implement Buffett's strategy properly because of the reasons you crafted, the same goes that you won't be able to implement TA properly for reasons one can craft out too.
Ghchua buys solely on FA and he eventually reached a 7 figure portfolio as well. Pure FA, zero TA.
Ultimately, the final decision on which style to use depends on the user. I don't need to liquidate my investments to meet my future expenses as well at the moment. This is the reason why I would go for dividend counters, as they provide me with a cash flow to cushion any future possible loss of income. Meanwhile, what I can do is to generate as much income as possible, and use them to help generate even more income.
No problem for anyone to reach 7 figure portfolio by keep pumping money if one has the money and reinvest all dividends back into it.
ReplyDeleteOne needs to measure his returns on capital per time unit i.e. what is annualized gain or CAGR?
Any rich man's portfolio will be at least 7 or 8 figure.
8888 is right. Don't discount the savings habit. A portfolio can grow through more than one way - capital gains, dividends reinvested and savings pumped in during periods of low valuations.
ReplyDeleteHi CW8888,
ReplyDeleteyup, there's no problem on that. Returns on capital is indeed important as well. However, that doesn't mean it cannot be achieved by following a pure FA method (although I do use TA at times to time my entries).
Just saying that Buffett's methods are still applicable if done correctly. I.e. On hindsight, someone buying SMRT shares over the long run since it's IPO would definitely profit by a ROC that could beat the market. This would be near to Buffett's method in buying Burlington.
Ultimately, it still depends on how comfortable the trader/investor feel about his/her style of making money from Mr. Market.
Hi MW,
ReplyDeletethat's right! A multi-prong approach is always the best :)
But to me, capital gains must be realised before being regarded as one... Paper gains only serve to give some safety margins...