Wednesday, May 27, 2009

Twitter - Two Months On

I would consider myself to be on the lower end of the Twitter knowledge curve having created an account just two months ago. The following are some of the observations that I have made to date.

...for personal use

* Twitter is a great 'leveler'; like Texas Hold'em. You sit down with strangers and you can't predict an outcome.
* Twitter helps you mix with communicators that are better than you. This helps to lift you up a notch or two.
* It brings out the willingness in people to be helpful.
* If you are an information junkie, you're made.
* If you have addictive tendencies; you might be in trouble using Twitter.
* Fear of what to update focuses the mind, but may inhibit the content.
* Strong personalities shine through.
* Selecting people to follow, at random, is not a good idea.

...for business use

* Twitter for business should be like subliminal self-promotion. The 'in-your-face' repetitive promotion is a no-no.
* The greater the number of people that know you exist; and what business you are in, can't be a bad thing.
* The Development of a Twitter business 'relationship' has to be gradual.
* The personality behind the business usually comes to the fore.
* Twitter provides you with an opportunity to be 'busy being busy' as opposed to 'busy being productive'.

If you are also a novice to Twitter, I would be interested in your own thoughts on it. Or, if you disagree with any of the above, leave a comment.

Wednesday, May 20, 2009

Save for Retirement or Kids Education

Those of you who have kids have probably given some thought to putting aside a few bob that will go towards helping with their education. You may even have set up a specific savings or investment account for them, where children's allowance or other money gifts are put away until they are needed.

More often than not, it is likely that the accumulated value of these educational funds will be insufficient to cover the full costs that will be incurred. But, at least you have made a start and you have a plan.

It is difficult to balance your 'here-and-now' family overheads, from the limited income resources available to you, with your potential long term liabilities in terms of educational costs. You may even be tempted to elevate savings for college as a primary objective; and bury retirement planning in the back of your mind. It's only natural; as you want to what's right for your kids and it is one of those selfless acts that comes with the territory.

The decision to prioritise your kids education over a comfortable standard of living in retirement is a personal choice. However, it may be worth considering some common sense financial issues, if you are beating yourself up over one or the other.

* If you have the opportunity to contribute to a PRSA or Occupational Pension Scheme, where the employer will match some or all of what you will contribute, it's a no-brainer; take the money.

* Any tax reliefs foregone cannot be recovered in future years. If you pay tax at the highest marginal rate, it makes perfect sense to contribute to a pension. This may change in the future as the divide, between the lower and higher rate of tax relief system, may be put on a more equitable footing. It is also possible that access to limited amounts of pension funds may be available, prior to normal retirement age, at some stage.

* If you have credit card debt, or other high interest loans, pay them off before you start making any long term savings plans.

* Make your kids aware of the fact that education is not free and that compromises will have to be made in the years ahead. As they get older, try to formulate a plan with them on managing their educational funding. If a limited amount of student debt is part of the plan, so be it. It's part of life and they can learn from it. It is easier to borrow for education than it is for retirement.

* If you have the resources to start funding for educational costs in addition to retirement planning, you should begin as early as possible. It's difficult to make up for lost ground if you leave it too late, and it may influence you into making investment decisions that would not normally be within your risk profile.

* If you are a home owner and you have not re-mortgaged on a regular basis you will have equity in your property which could be freed up if the need arises.

* Protect your family by having an adequate amount of life insurance in the event of the untimely death of a parent.

* If you are a business owner, try and add some value to that business so that it will enhance your future earning capacity and make your financial situation better. We tend to forget that more lucrative job opportunities may also happen for us in the future.

* Although there may be uncertainty about Government assistance for educational purposes, it is probably fair to say that there will be some form of grant or scholarship system available in the future. Weekend or part-time jobs for the students would also help with costs.

In summary, do not sacrifice funding for your retirement over your kids education. Look after number one, first. Always remember that you will be able to offer some financial assistance and guidance to your kids but it may not be in the form that you now aspire to. Financial goals of deferred retirement, reduced standards of living or taking on second jobs in retirement should not be on your radar.

Relevant/Featured Website/s

Thursday, May 14, 2009

Competitive Business Environment

Forgive my ignorance of economics, but I just don't understand how the current reform of taxation/spending is going to get us out of predicament that we are in.

Much has been written about the economic crisis in Finland in the 1990's and how this compares with what we are going through. Okay; the stock market and property market crashed, with drops of approximately 70% and 50% respectively, but they had their own currency at that time and had the 'luxury' of devaluing it to assist with a recovery.

As a small business owner I am acutely aware of the need to be competitive. The current crisis is having the effect of weeding out uncompetitive businesses but is also pushing some viable future businesses over the edge. There are internal costs that I can control, but the majority of the larger costs are outside my control. It's basically down to survival of the fittest at the moment, if you can get through this period unscathed then you will come out the other end in a far stronger position.

The private sector is being reformed by market force and the future is bright for businesses that can develop by gradual growth. A sustainable business will be possible, but the worry is in controlling those external costs. More worrying still, is the apparent irresponsible nature of the political establishment in managing these costs.

There is little point in having an environment where competitive and sustainable businesses can thrive, if the rewards of their labour are swallowed up in carrying the burden of an uncompetitive public sector. Both public and private sectors have to work in unison and we can't have a competitive 'one', without a competitive 'other' . It is about time that employee representatives in both sectors realised this. I would consider Finland to be a competitive and fair economy. They have made it so, without a minimum wage agreement.

In the short-term, consumers will benefit from the knock on effect of the surviving competitive businesses. Incentives have to be given to entrepreneurs and possibly investors, in creating and supporting businesses that actually 'make' something. Importing 'services' businesses that can be easily relocated to up-and-coming competitively priced countries is a stop-gap measure in a country's development.

Until such time as the hard economic decisions are made on whether we want the country as a whole to be competitive, not just sections of it, the problem will not go away. Or rather, it may go for a while but it will resurface again and again and again. I am sure that, given the choice between sinking and swimming, many more business owners would prefer to try rising above the surface without an anchor tied to their leg.

Monday, May 11, 2009

Active Fund Management V's Consensus Fund

Are there any Consensus Fund lovers out there that would like to rebut the points made by the Pensions Director of Eagle Star/Zurich in favour of Active Fund Management?

The Z-Cast is available here

In short, he argues that:

a)'Consensus' (follow the herd) has had its day
b) The out performance of some active managers could be the difference between having a solvent and insolvent pension scheme
c) The 'rear view' investment approach does not capture investment opportunities due to a time lag
d) Trustees of pension schemes should reconsider their 'safe' investment decisions
e) Some Actively Managed Funds are not necessarily more volatile than Consensus Funds.

Would be very interested in any views that you may have on this debate.

PS: It's specifically to do with Consensus Funds V' Active Fund Management. Not to be confused with the Active V's Index Tracking debate.

Relevant/Featured Website

Thursday, May 7, 2009

'Sitting in a well, looking at the sky'

The title of of this post refers to a Chinese Proverb, which basically means that you need to get out of the well to see the big 'picture'.The reason that this comes to mind is in the decision by George Lee to stand in the Dublin South by-election.

To me, the political party that he runs for is irrelevant as long as he does not get swamped by the status quo . What is important, is that he would have the ability to see the big 'macro' picture, and this would be very refreshing indeed. We need to take a step back from where we're at and change way things are done in the country. Very few 'local' political decisions are made in the national interest.

When the news of his candidacy was announced I did a quick search on what would be deemed the characteristics of a 'good' politician. The following would appear to be what is expected : Be Intelligent, Reasonable, Humble, Honest & Patriotic. Have Fiscal Experience and Clear/Achievable Goals. Have the ability to Think Strategically and Listen to others. Earn Respect and Know when to Quit.

I don't know about you, but I would settle for someone that is not of the 'typical politician' persuasion. Only time will tell but I think he should be given a fair chance.

If he can bring something new to the table, it has to be welcomed.

Friday, May 1, 2009

An Insurance Product of Last Resort

Every now and again an insurance product is introduced to the market that causes me to scratch my head and ask, "Why bother?". One such product is the new '50+ Easy Life Cover' from Irish Life.

This product is aimed at the age 50+ market and is designed to provide a limited amount of 'Life Insurance' for a fixed regular premium. There are no medical questions so you are guaranteed to be issued with a policy irrespective of your state of health. The premium is payable until a claim arises or age 90, whichever is the earliest. Smokers and Non-Smokers are charged the same premium.

Sounds great, as long as the premiums charged offer good value for money. Right?

If you die in the first two years of the policy, the sum insured would not be paid out unless it's as the result of an 'accidental' death. If you die from anything other than an accident in the first two years, your estate would receive a refund of the premiums paid.

A typical example of the cost of this product would be as follows. A Female aged 60 would pay €30 per month for a Sum Insured of €7,343. At first glance that looks okay, but when you consider that the average life expectancy of an Irish Female is 81.6 years, I'm not sure where the value lies ie. €30 X 12 X 21.6 = €7,776

In my opinion it would be more prudent to apply for a 'Guaranteed Whole-Of Life Insurance' policy by completing a full proposal form. If further medical evidence is required by the insurer it is not going to cost you anything for a Medical Attendants Report or Full Medical Report. The insurance company pay for these.

A relatively healthy, non-smoking female aged 60 would expect to pay a premium of about €18 per month for a sum insured of €7,343 with this alternative type of policy. The cover would apply from the date the policy is issued.

In summary, if you have to buy the '50+ Easy Life Cover', buy it as a last resort and pay particular attention to the exclusions that go with it.