Friday, November 12, 2010

Top 10 Books on Wealth

BRW 26th May 2000 (yep from way back then)- Top 10 Books on How to Get Rich
  1. Rich Dad, Poor Dad - Robert Kiyosaki
  2. The Cashflow Quadrant - Robert Kiyosaki
  3. The Millionaire Next Door - Thomas J. Stanley
  4. Building Wealth Through Investment Property - Jan Somers
  5. Your Mortgage and How to Pay it off in 5 Years - Anita Bell
  6. Making Money - Paul Clitheroe
  7. The 7 Habits of Highly Effective People - Stephen Covey
  8. Think and Grow Rich - Napoleon Hill
  9. Share Trading - Daryl Guppy
  10. The Richest Man in Babylon - George S. Clason Signet
If you google "top 10 how to get rich books 2010" you'll get a similar list with the same authors and same books as 10 years ago. I've read all of them with the exception of two- Paul Clitheroe's and Stephen Covey's. Provided you enjoy reading, I recommend the books by Kiyosaki, Stanley, Somers, Bell, Guppy and Signet.

Put the stuff you read into action

Reading them won't achieve that much. You have to put all those theories into practice. Putting them into practice can take years and years. There is no such thing as a get rich scheme except a scam scheme. If you want to get rich quick, it's by innovation involving the internet (eg:ebay/facebook) or being an entrepreneur and they work very hard to get to where they are.

The best classic book for anyone who wishes to have a solid foundation of understanding money - read The Richest Man in Babylon. It was written in 1926 and is still popular in print. And still very highly relevant in today's world.

Did JK Rowling know that her Harry Potter books would go on to change her life and dominate the fantasy book publication and fantasy movie world? That her written words would propel her into the Richest U.K women billionaire spot. Or that she would be the seed for other people's wealth and ambition? Afterall, Daniel Radcliffe, the main actor of the Harry Potter film is 21 years old with an estimated fortune of 42 million pounds. That's 67.8 million AUD and he is just one actor.

Boom and Bust. The business cycle will keep repeating.

I always find these old retro articles interesting. Particularly when they show that the world keeps spinning and humans keep going through the same old cycle of boom and bust in the most fundamental sense.

This is one of the most ironically, illuminating quote that I've seen- Kinghorn, from Rams Homeloan, in 2000 was quoted as saying:

"In this market, you have to do some credit enhancement before you can issue mortgage backed-securities. That usually involves taking out mortgage insurance. In the US, investors will buy subordinated bonds that have not been made bankruptcy-proof; they are preparared to take the risk for a higher yield.
We have done bond issues in the US and Euro markets, and we may look at doing a sub-prime bond issue in the US. With that sort of financial structure in place you can do more unusual loans - investment loans, development finance and lending to impaired credits (borrowers with poor credit ratings)."
I find this rather ironic and self serving on behalf of the financial institutions and investment banks. Firstly, the investment banks were prepared to take on increased risk for higher yields because the funds weren't coming from their own hip pockets. They were using funds from investors and individuals. They knew that there were risks involved but they wanted the commissions and their cut. They didn't care about the future so much as their current bonus and what cut they would get in the immediate future.

Considering this quote is from 2000, 10 years ago, it is still relevant in today's world. Investors are always seeking higher yields and a lot have sacrificed their stable income investments in exchange for high risk investments. The cycle is always the same. Market crash in 1928/1930s and the great depression, market crash in 1987 with overgearing/over leveraging,
technology crash in 2000 (dot com boom) where the market was so crazy hot that people bought at IPOs, paying millions for IT companies that weren't producing any sales nor profits.

And of course, our recent 'global financial crisis' starting in late 2007.

  • Before the financial crises and sharemarket crashed, there was greed, euphoria and investors investing in riskier and riskier assets in the chase for high returns. Ordinary folks want a cut too, they start to move in but usually ordinary folks starts buying and investing when the market has peaked. Backyard BBQ and party conversations involving funds and sharemarkets.
  • The market crashes.
  • When the market crashes, people start to withdraw their funds from investments that have crashed, from riskier investments and start to direct them towards 'safer' more stabilised investments. Their capital is less prone to fluctuations in stable income investments (government bonds, term deposits, bank saving accounts etc)
  • Investors innovate and create more financial/investment/sucker products and start investing again once profits and yields start increasing. The market starts rising again.
  • Ordinary folks see this and want their slice of the pie.
  • If you're an investor and you start noticing that your firends, relatives and neighbours - the ones that have never been interested in the market, start talking about the markets and their investments, it would be a good idea to start looking at how you can exit the market.
It really is interesting to note that history replays itself. And the top 10 classic wealth books will probably be almost exactly the same in another 10 years. If we revisit the top 10 list from above in 2020, the list from 2000 will probably still be valid.

No comments:

Post a Comment