| About Us | Newsletter | Youth Support | Career | Activities | Contact |


2006 2nd Edition (Other Editions)

Financial Planning

Riding on inflation

Interest rate rose tremendously to a peak of 20% before 1980, and then dropped continuously afterwards. Over the past few years, due to the record-low interest rates, stocks, bonds and property have all benefited from the abundance of cheap credit. However, this asset-boom may not continue in the future.

Since the interest rate has been bottoming out, we are of the view that the interest rate will be significantly higher than where they are today because of inflation. It is our belief that the bond market has not factored in a significantly higher oil price. Over the coming years, we expect inflationary fears to escalate as commodities led by high oil price, the public will exchange cash for whatever tangible assets they could get their hands on in order to protect their money from depreciation.

If you want to protect your hard earned money or to grow your assets, please come to us.

Chasing the Hot Hand

Imagine you are the coach at a basketball game - it's the last shot of the match. There are 10 seconds to go and your team is losing by one basket. Your star player, who over the past five years has a 60% shooting average, has tonight scored only two shots out of 10. One of your other players is having a terrific game; he's scored 10 out of 10 – even though his career average is just 35%.

Who will you give the ball to for the deciding shot? Nobel Prize winning economist, Amos Tversky, devoted many months of his life to this question, laboriously analyzing the scoring history of professional basketball players. Conclusion was that – regardless of how many shots have been made or missed in a row – the odds of a shooter making or missing the next shot are the same as his term average. The success of the next shot is not related to the previous shot. So Tversky would correctly elect the 60% shooter who, despite his recent performance, is more likely to make any given shot.

We need to comprehend probabilities to avoid poor financial decisions. The long run odds are in favors of equities over virtually every other asset class, especially cash and bonds. For 18 months after the stock market crash of 1987, many investors ignored these odds and piled out of equities into cash and bonds. History proved the error of that action.

Be systematic and methodical; get access to a screening process while identifies those funds, which have weathered many conditions to produce consistent long-term results. Don't automatically go after the current hot performer, don't gamble on which basketball player is going to have a hot streak next. Get access to a selection methodology that reliably increases the odds of your financial success.

If you want to know the best way to pick fund managers, please feel free to contact us.

Reference: Philippa Huckle, The Myth Of The Hot Hand, Benchmark January/February 2006 Vol.4 No.2.