Need SWOT check on your business health !

When you are running your own business, be it small or medium enterprise, having some understanding of basics and knowledge of the financial health of your business is fundamental to helping you decide what you can and should do. It is not just leaving it to your managers to provide you the financial statement and telling you the bolts and nuts of each underlying dollar value terminology. Plenty of information on the financial health and performance of your business can be obtained by analysing your financial statements through various financial ratios. Comparing these ratios against past performance and similar businesses will help you identify the strengths and weaknesses of your business. You need to look at historical datas of your business trends and where is it moving on, you could also do better forecasting and check on your inventories looking at the overall market situation.

The SWOT analysis ( one of the "must" topics in MBA course for years and I am not sure if this theory still going to stay for long ) is a valuable step in your business situational analysis. Assessing your firm’s strengths, weaknesses, market opportunities, and threats through a SWOT analysis is a very simple process that can offer powerful insight into the potential and critical issues affecting a venture.

The SWOT analysis begins by conducting an inventory of internal strengths and weaknesses in your organization. You will then note the external opportunities and threats that may affect the organization, based on your market and the overall environment. Don’t be concerned about elaborating on these topics at this stage; bullet points may be the best way to begin. Capture the factors you believe are relevant in each of the four areas. You will want to review what you have noted here as you work through your marketing plan. The primary purpose of the SWOT analysis is to identify and assign each significant factor, positive and negative, to one of the four categories, allowing you to take an objective look at your business. The SWOT analysis will be a useful tool in developing and confirming your goals and your marketing strategy.

SWOT analysis

You should undertake a SWOT - strengths, weaknesses, opportunities and threats - analysis to determine the state of your business, its capacity to recover now the downturn is over, and what additional capacity may be needed.

When analysing opportunities and threats, you should:

·  Research changes in customer taste

·  Research how the tough times have affected your suppliers and competitors.

·  Determine what changes may need to be made, including adding capacity to your business, shifting capacity or disposing of excess capacity.

Review your business plan and rewrite where appropriate

You should review your current business plan to ensure it reflects the capacity of your business and the the ability to grow that capacity. You should consider where you want to take your business and understand any uncertainties that remain. Important areas to focus the plan on include:

·  How to expand capacity

·  How much such expansion is likely to cost

·  How the business is going to pay for such expansion.

Focus on innovation and efficiency

When a business is in recovery mode, it is likely to become more innovative while keeping a strong focus on efficiency. Areas innovation should be limited, while staff should be empowered to search for new opportunities. To ensure limited resources are focused on the most promising innovations, pre-action reviews of projects should be undertaken.

Take advantage of opportunities

Businesses that now find themselves in a strong financial position should consider opportunities to expand. Opportunities may be favourable, as some asset prices remain depressed.

Review and revise your marketing plan

You should consider reviewing and revising your marketing plan. Such a plan should reflect the likelihood of limited resources continuing to be a constraint on marketing activity. It is, therefore, important that your marketing plan be focused on helping improve the cash position of your business, its profitability and promoting any new - or revived - products and services.

A marketing plan for a business seeking to recover should:

·  Focus on sales that have high margins and bring in cash quickly

·  Reward staff for sales of higher-margin products and when payment is received

·  Avoid discounting, unless it can achieve a better gross profit margin through increased sales

·  Measure the success of each promotional activity or campaign

·  Encourage customers to pay at the point of purchase or pay early.

Remain focused on improving cash position

Focus on improving your cash position by improving working capital management - such as by reducing stock levels, increasing the percentage of cash sales and reducing the time you give debtors to pay. Such moves add to your cash reserves, which can be an important source finance.

Focus on improving profitability

Amid the recovery, discounts and other incentives introduced to improve your cash position during the tough times should be removed, so you can focus on improving profitability. Increased profitability builds retained earnings, creating another internal source of finance.

Funding recovery efforts

When considering borrowing from a bank, a business should:

·  Determine what the funds are to be used for and the time they are required

·  Be realistic about the amount of funds that can be afforded

·  Determine the level of security that can be offered

·  Start early.

Addressing weaknesses in your business

The actions a business may have taken to get through the slowdown can have negative consequences that may need to be addressed amid the recovery. Activities that may need to be undertaken to address the consequences of actions taken during tough times include:

·  Increase stock

·  Pay down high-priced external debt

·  Broaden the focus of sales

·  Revisit staffing arrangements

·  Beware of a false recovery.

Pointers for Asian business leaders

THE secret of a successful leader in Asian companies lies in the answer to four questions:
Where are we going?
How do we get there?
What is work like when we get there?
Who stays and who goes?

By answering these questions and taking the subsequent actions, an effective business leader devotes attention to a crucial set of institutional and organisational processes, two American management gurus behind a book, 'Asian Leadership: What Works' says.

If you, as a leader, only focus on a few of these factors and have not delegated the remaining factors to skilled and trusted colleagues, these blind spots will eventually pose a profound risk to your company.

Ulrich is Professor of Business at Ross School of Business at the University of Michigan, while Sutton is Professor of Management Science at Stanford Engineering School say the answer to the four questions are found in eight factors that those at the discussion deemed most essential to their success, along with the skills required to accomplish these actions.

The factors are:
1) creating customer-centric actions;
2) implementing strategy;
3) getting past the past;
4) governing through decision making;
5) inspiring collective meaning making;
6) capitalising on capability;
7) developing careers;
8) and generating leaders.

Along with the four questions, these eight factors are especially crucial to being a successful leader in Asian companies. The factors cover the distinct challenges of the Asian setting; the role of the leader; the competencies they must show; the paradoxes they manage; and the actions required to get there.
In creating customer-centric actions, leaders must spend time with customers in emerging and new markets - and find ways to understand and satisfy unmet needs of both existing and potential customers.

When it comes to implementing strategy, Asian leaders must know how to dream - and make the dream come true. Asian leaders need to have the creativity to discern an unknown future and build the agility or capacity to act to get there.
Tradition and old ways may hamper their thoughts and actions, so they must learn to manage that. But this should not amount to dumping the cultural heritage of the country they operate in.

Asian leaders would have to master the skills of respecting traditions without being so strongly bound to them that their company's performance, and their people's well-being suffer.

In making decisions - the governing through decision making factor - Asian leaders are required to do it in a way that help their organisations simultaneously leverage scale and size and deliver on a sense of small and focused. At the same time, they must also build a governance process that deals with relationships (who is involved in the decision), roles (what positions and roles shape decisions) and rationality (what are the criteria for the decisions).

To retain talent, which is an especially scarce commodity in Asia, Asian leaders need to help employees make their work meaningful or purposeful. When employees believe in their work not only for financial gain, they offer more of their discretionary energy to doing their work well. This means managing beyond skills and rationality, and making sure that employees feel emotionally connected to the company.

Other steps for building talent retention include :

- Grow competencies, situationally. Look for opportunities to put people into challenging situations where their skills and competencies will grow.


- Meet one-on-one, routinely. Conduct regular, but brief one-on-one meetings between manager/leaders and direct reports. Begin by asking, “What’s on your mind?”– then listen and act.

- Make retention everyone ’ s respon sibility. Encourage all members of the work group to feel responsible for the retention of their peers and to be alert to problems that can be fixed.

- Be a career builder. Talk to people about their long-term career aspirations and help them use or build the skills and competencies they need for the future.

- Help people get an “ A ” . Give the gift of being clear about what an “A”level performance looks like.

- Manage the meaning of change. Move toward people in uncertain times, including personal and organisational change. Be there and be open. Check in with people often.

- Walk your talk. Be aware that people are always watching and assessing you and your actions as a leader.


Helping staff to build and manage their careers and putting in place the next generation leaders, another two factors that go into making a successful Asian leader, would be in the job description of any leader.
But to manage the paradox of individual and collective action is rather a unique challenge in the Asian context.
Asian leaders have to help individual employees develop and apply their distinct talents and abilities to be productive and creative. Yet at the same time, they have to get them to work as a team.

'There are times when Asian employees submit their personal identity to the collective, but doing so undermines the ability to do creative work or to see a complex decision from multiple perspectives,' Ulrich and Sutton say. When this happens, Asian leaders need to adopt and invent ways to encourage individual thinking, constructive disagreement and solutions that weave together diverse and, perhaps, clashing perspectives.
At other times, as when collective action is called for to achieve a common goal, individual employees who put themselves above their teams can undermine performance.

Your Business Fitness check

Knowledge of the financial "fitness" of your business is necessary for you to decide what you can and should do. Alot of financial health and performance of your business can be obtained by analysing your financial statements through financial ratios, terms like ROI, ROE, EBDITA,etc.. Comparing these ratios against past performance and similar businesses could give you some relevant indications of the strengths and weaknesses of your business.

SWOT analysis ( very common in Business studies and one of the framework for business analysis )

You should undertake a SWOT - strengths, weaknesses, opportunities and threats - analysis to determine the state of your business, its capacity to recover now the downturn is over, and what additional capacity may be needed.

When analysing opportunities and threats, you should:

· Research changes in customer taste

· Research how the tough times have affected your suppliers and competitors.

· Determine what changes may need to be made, including adding capacity to your business, shifting capacity or disposing of excess capacity.

Review your business plan and rewrite where appropriate

You should review your current business plan to ensure it reflects the capacity of your business and the the ability to grow that capacity. You should consider where you want to take your business and understand any uncertainties that remain. Important areas to focus the plan on include:

· How to expand capacity

· How much such expansion is likely to cost

· How the business is going to pay for such expansion.

Focus on innovation and efficiency :

When a business is in recovery mode, it is likely to become more innovative while keeping a strong focus on efficiency. Areas innovation should be limited, while staff should be empowered to search for new opportunities. To ensure limited resources are focused on the most promising innovations, pre-action reviews of projects should be undertaken.

Take advantage of opportunities :

Businesses that now find themselves in a strong financial position should consider opportunities to expand. Opportunities may be favourable, as some asset prices remain depressed.

Review and revise your marketing plan :

You should consider reviewing and revising your marketing plan. Such a plan should reflect the likelihood of limited resources continuing to be a constraint on marketing activity. It is, therefore, important that your marketing plan be focused on helping improve the cash position of your business, its profitability and promoting any new - or revived - products and services.

A marketing plan for a business seeking to recover should:

· Focus on sales that have high margins and bring in cash quickly

· Reward staff for sales of higher-margin products and when payment is received

· Avoid discounting, unless it can achieve a better gross profit margin through increased sales

· Measure the success of each promotional activity or campaign

· Encourage customers to pay at the point of purchase or pay early.

Remain focused on improving cash position

Focus on improving your cash position by improving working capital management - such as by reducing stock levels, increasing the percentage of cash sales and reducing the time you give debtors to pay. Such moves add to your cash reserves, which can be an important source finance.

Focus on improving profitability

Amid the recovery, discounts and other incentives introduced to improve your cash position during the tough times should be removed, so you can focus on improving profitability. Increased profitability builds retained earnings, creating another internal source of finance.

Funding recovery efforts

When considering borrowing from a bank, a business should:

· Determine what the funds are to be used for and the time they are required

· Be realistic about the amount of funds that can be afforded

· Determine the level of security that can be offered

· Start early.

Addressing weaknesses in your business

The actions a business may have taken to get through the slowdown can have negative consequences that may need to be addressed amid the recovery. Activities that may need to be undertaken to address the consequences of actions taken during tough times include:

· Increase stock
· Pay down high-priced external debt
· Broaden the focus of sales
· Revisit staffing arrangements
· Beware of a false recovery.

Entrepreneurship secret recipe

If only entrepreneurship were like a secret sauce, people would copy the recipe and reapply it each time they need a dose of it in their newly minted business plans. Unfortunately for most would-be entrepreneurs, this is not the case.

Two speakers with links to the Massachusetts Institute of Technology (MIT) came close when they shared insights and highlights of the so-called 'MIT approach' at a recent forum co-hosted by SMU's Institute of Innovation and Entrepreneurship.

Mr Kivel is currently CEO of TheraGenetics, a London-based company working on commercialisation of diagnostic tests to improve the treatment of disorders such as schizophrenia, depression and Alzheimer's. A serial life science commercialisation veteran, Mr Kivel oversaw the successful acquisition of MolecularWare, an MIT spin-off which he led as CEO from 2001 to 2004.

Mr Califano, on the other hand, manages the operation of the SMART (Singapore-MIT Alliance for Research & Technology) Innovation Centre in Singapore. He founded and held senior positions in many companies in the United States and Asia, including a stint as consulting director of Bio*One Capital Pte Ltd, the biomedical investment arm of Singapore's Economic Development Board. He was also the CEO of Johns Hopkins Singapore and The Johns Hopkins-NUH International Medical Centre.

For both men, a key issue in any informed debate over entrepreneurship is whether it is replicable. In other words, given the same mix of factors, will there be an equal response in terms of number of commercial successes? And if not, is the whole project of trying to teach entrepreneurship simply an exercise in despair?

Risk without failure?

Access to early funding and advice is critical for new entrepreneurs. Finding and tapping into the VC (venture capital) and angel investor communities is absolutely critical.

VCs who have invested their money and are keen to see it multiply will see that they continue to engage with the start-up and help see it succeed. To guard their own interests, the typical venture capitalist will not allow you to fall into a living death situation since that would threaten their own investment.

We're capturing people from each department who would never have thought of starting their own business, noting that these now include life sciences, engineering, computing and even social sciences grads apart from the usual finance and business admin people.

Entrepreneurship involves people with integrity, leadership, a bias to action and ability to attract talent. The theme, 'it takes a village', is echoed at MIT where entrepreneurship is widely practised among the community of interested parties that reinforces the culture and drives further risk taking from the shared experience.

Stocks are at 10-month lows with recent Europe debt and N-S Korea saga....

Asian stocks are at 10-month lows amid fears that tensions will keep escalating on the Korean peninsula and possibly of bringing the stocks sliding to 2008 crisis?

A Korean war is not the only downside risk to markets and before that, fears were festering that Europe's debt crisis could spread, and that China's real estate bubble could pop horribly and cause problems around the globe. Another scare came when the Dow Jones Industrial Average plunged almost 1,000 points in less than 30 minutes earlier this month, for reasons yet to be fully explained although it was quickly to blame on computer glitch or human error in keying the trade figure with additional zero 000s’.

The ups, as well as the downs, are also getting sharper - with the Dow often rising or falling 200 points or more in a single day.

For long-term investors, it should not be reacting to the short-term volatility and be derailed from their long-term plans. In times like these - while there can be an appropriate shift of risky assets to less risky assets - totally exiting from risky assets may not be the most advisable strategy.

If one is uncomfortable putting in a lump sum of money, regular investing is a disciplined approach and more palatable if you are uncertain about the market.

Question is whether this level of volatility is keeping you up at night if your main concern is limiting your losses and saving what cash you have, then you may want to put a lower percentage of your money into stocks and stock funds.

You can put all your money in bank deposits just because they are very secure, but that is not wise as your purchasing power will be reduced by inflation - which exceeds bank deposit rates by a fair margin ! !

Some says that a sensible combination of products with varying risk levels can provide good returns.

Bonds

Assume you buy a bond that has a face value of $10,000, a coupon - the annual interest payment - of 6 per cent, and a maturity term of five years.

You would earn a total of $600 (6 per cent of $10,000) in interest a year for the next five years. When the bond reaches maturity after five years, you would get your $10,000 back.

Consider buying Asian bonds. Asian bonds are a very attractive asset class to invest in.It is worth mentioning that while bonds are generally safe bets, they are not risk-free either.

The bond issuer could default on its debt payments.

Investing directly in bonds does not come cheap. The average bond is usually sold in blocks of $50,000 to $1 million at a time and if chosen properly can be cost efficient.

Money market funds

Money market funds invest in high-quality short-term instruments and debt securities. The latter are loans sold by firms and governments to borrow money.

These funds are a good alternative for investors who are looking for a stable, low-risk instrument with potentially higher returns - ranging between 1 per cent and 2 per cent - than banks' savings deposits.

Not all money market funds are the same. Do your homework and read the fund's prospectus and annual reports. Check to see what kinds of debt instruments the fund invests in.

Multi-asset funds

The rationale for investing in such funds is straightforward.No single asset class can be guaranteed to top the performance charts each year, so it makes sense to have exposure to a broad mix of investments, such as stocks, bonds and property. Multi-asset funds are riskier than fixed deposits, but they are usually less risky than a stock-only portfolio.

It has the ability and flexibility to invest in not just traditional asset classes like equities, bonds and cash, but also alternative asset classes like commodities and property. The fund also tactically moves into asset classes that are most appropriate for the prevailing market cycle.

Gold

Many people invest in gold as a hedge against stock market declines, burgeoning national debt, currency failure, war and social unrest. In fact, there are a number of studies which show that gold prices generally move in the opposite direction from stock prices: Gold soars when stocks tank.

Gold protects wealth as a safe haven in troubled and uncertain times. This appeal remains compelling for modern investors. United Overseas Bank sells physical gold that can be bought from, and sold back to, the bank at its daily buy-sell market rate.

Gold savings accounts

UOB and Citibank customers can open a gold saving account, allowing them to invest directly in the metal without actually owning the physical item.UOB customers can buy and sell gold at prevailing market rates. The minimum transaction and maintenance requirement for its gold savings account is 5g of 999.9 fine gold.
Based on indicative pricing rates on its website, this would cost $278.55. Transactions are done in units of 1g, at a minimum of 5g per transaction. Holdings in the account are not subject to GST and can be exchanged for cash.
An administrative fee is charged: either 0.12g of gold per month or 0.25 per cent of the highest balance per month, whichever is higher. Fees are subject to GST, which will also be deducted from a user's account in grams of gold.
At Citibank, users have to set up an account with a minimum requirement of 30 ounces of gold bought at market rates.Taking the example of a US$1,258 an ounce price, this would amount to US$37,740.
Trades are done in blocks of 30 ounces. No administration fees are charged.

Gold certificates
Gold certificates, offered only by UOB, are more popular among buyers and allow for ownership of physical gold without any physical movement of the metal. This means it is free of GST.
Issued in multiples of 1 kilobar, or kilocert, one certificate can account for at most 30 kilobars of 999.9 fine gold. An annual administrative charge of $30 per kilobar and a certificate fee of $5 per certificate are levied.
Certificates can be traded at UOB according to daily prices.

Last Friday, 18June'10, a single unit gold certificate sold at $55,843. The bank would buy it back at $55,743 - a 0.17 per cent difference. Customers can also exchange their certificates for gold kilobars with two days' notice. The bars would be subject to GST.

Fixed deposits

If the top priority is to have cash at hand, then fixed deposits are the usual place to park your money.They let you save a fixed amount of money for a fixed period at a fixed interest rate.DBS is offering 0.7 per cent a year for a 24-month term deposit.

Investing tip 1

It is better to remain focused and stay invested during volatile times.During volatile times, it is important to remember to stay focused and stick to your long-term investment strategy. An investor who panics and sells his investments when markets are down is likely to incur losses. In addition, he may also miss out on potential gains when markets recover. Historically, markets have rebounded and eventually returned to or even surpassed previous levels. By investing over the long term, you can ride out the volatility.

Investing tip 2

The three Rs: Revisit goals, review portfolio and rebalance your investments.Over time, our financial goals and needs may change. For example, you may want to set aside funds to cater to growing expenses when new members are added to the family. Your financial objectives will have to be reviewed to meet this need.

The components in your investment portfolio may also need to be readjusted to generate higher potential returns. You may do this by taking on more risks.Even if your financial objectives or risk profile remain the same, market movements may tilt the weightage of each investment in the portfolio, exposing the overall portfolio to more risks than intended.

A rebalancing of the portfolio is required to bring it back to its original risk-return parameters. Generally, you should review and rebalance your investment portfolio every eight to 12 months.

Investing tip 3

Spread out your risks, diversify.Diversification is important as most investors are not able to predict the performance or returns of one particular asset class. Equities, bonds, different geographic regions, sectors or even various investment styles react differently to market events and cycles. Hence, investing in multiple asset classes and types will help to buffer the impact of any non-performing investment in a portfolio. Diversifying your portfolio can also help you weather the ups and downs of the market cycle.

Investing tip 4

Invest in a balanced portfolio to better manage risks and returns. A balanced portfolio is designed to achieve higher returns than debt securities or cash, but at a lower risk than a pure equities portfolio.

A fund offering a balanced approach should include both equity and fixed-income components, which can help to provide cushioning when either one of the asset classes is down. Equities and bonds usually show low correlation to each other and behave in an opposite manner under the same market conditions. Hence, when equity prices are down, bond prices usually rise, and vice versa.

Investing tip 5

Market corrections can mean opportunities; use dollar cost averaging to smoothen price swings.

Market swings and volatility are part of stock market movements. They present opportunities for investors to buy on dips or enter into dollar-cost averaging (DCA).

With DCA, a set amount of money is invested at regular intervals over a long period of time. It can lower an investor's cost of investment and reduce the risk of investing at a peak.

For example, when prices are high, the set amount can buy fewer investment units or shares. Likewise, when prices are low, more units or shares can be bought with the same amount. It helps to smoothen the ups and downs in market volatility.

Most importantly, bear in mind one golden rule: The chain is as strong as its weakest link. Regardless of the size of your investments, be vigilant and disciplined when it comes to preserving, investing and growing your wealth.

The worst of the financial crisis may be over, but the global economy is not totally out of the woods yet. Lingering problems still exist, especially in the developed countries. However, opportunities exist even in the worst of times.

Governments outside the euro zone are also at risk of drawing flawed conclusions, especially on exchange rates and fiscal policy. China seems to think that the euro’s decline makes it less urgent to allow the yuan to appreciate. The opposite is true. With its biggest export market in a funk, China needs to accelerate the rebalancing of its economy towards domestic consumption, with the help of a stronger currency.

For much of the rich world, however, the most important consequences of Europe’s mess will be fiscal. Governments must steer between imposing premature austerity (in a bid to avoid becoming Greece) and allowing their public finances to deteriorate for too long. In some countries with big deficits, the fear of a bond-market rout is forcing rapid action. Britain’s new government spelled out useful initial spending cuts this week. But the emergency budget promised for June 22nd will be trickier: it needs to show resolve on the deficit without sending the country back into recession.

In America, paradoxically, the Greek crisis has, if anything, removed the pressure for deficit reduction, by reducing bond yields. America’s structural budget deficit will soon be bigger than that of any other OECD member, and the country badly needs a plan to deal with it. But for now, lower bond yields and a stronger dollar are the route through which American spending will rise to counter European austerity. Thanks to its population growth and the dollar’s role as a global currency, America has more fiscal room than any other big-deficit country. It has been right to use it.

The world is nervous for good reason. Although the fundamentals are reasonably good, the judgment of politicians is often unreasonably bad. Right now that is what poses the biggest risk to the world economy.

Top Competitiveness Nation - Singapore

SINGAPORE ahead of Hong Kong and the United States to snatch the top spot in global ranking of economic competitiveness. The Republic edged ahead of its rivals to assume pole position for the first time in what the compiler of the annual rankings, Swiss business school IMD, is calling a photo finish.

The gap between the three in this latest assessment of the world's economies - which places Hong Kong second and the US third - is less than 1 per cent. This is nothing surprising that Singapore has come to grab this title and if you look at the political stability aspect and what is currently happening around the neighbouring regions like Thailand, political instability affects the nation's business and foreign investors will move away from countries eventually if the MNCs are not in the comfort zone. It will affect the MNCs bottom line and it is not in their business plan to take on such risk to invest in places that leave uncertainty in their day to day operations. 

This year's rankings are an upset to what has become the traditional pecking order and mark the first time since 1994 that the US has failed to trounce the competition. For most of the 1990s and early 2000s Singapore has ranked second, but in recent years it has alternated with Hong Kong for second and third place.

IMD said Singapore and Hong Kong 'displayed great resilience through the crisis... and are now taking full advantage of strong expansion in the surrounding Asian region'. It was particularly impressed with Singapore's 13 per cent growth in the first quarter of this year.

While 'it's a tango between Hong Kong and Singapore at the top' of the rankings, Singapore's ability to utilise its competitive advantages and improve on its weaknesses was what gave it the edge over Hong Kong this year, according to Ms Suzanne Rosselet-McCauley, deputy director of the IMD World Competitiveness Centre.

Business chambers and associations believe Singapore's clinching of the elusive top spot could be partly down to the Government's swift and business-friendly response to the downturn last year.

British Chamber of Commerce president Steve Puckett said: 'The handling of the financial crisis here was exemplary and a model example of what planning, good sense and cooperation can achieve.'

Singapore International Chamber of Commerce agreed: 'During the downturn, the Government stepped in with very effective programmes that enabled companies here to retain their skilled people and send them on to learn new things during the slow time of the recession.'

Another key factor contributing to Singapore's triumph is thought to be the loss of competitiveness in the US relative to other countries.

The study suggests that developed economies are all suffering from a 'debt curse' of soaring budget deficits, which, in the worst case of Japan, will take up to 2084 to pay off.

For most of the 20 criteria used to draw up the rankings, Singapore appeared in the top 10. But it was placed 22nd in terms of economic indicators - which include the economy's percentage share of global gross domestic product (GDP) - and fared poorly in prices, coming 47th out of the 58 economies ranked.

The cost of living and doing business here remains a cause for concern for business chambers.

Citigroup economist said recent policy moves that effectively raise labour costs may weigh on Singapore's cost competitiveness in the short term, until the drive for higher productivity catches up.

Coming Out Tops

Finance for kids and adults ??

Prof Emeritus Lewis Mandell is in Singapore until next week. He teaches Economics for Managers in the UB (University at Buffalo) Executive MBA programme, which is offered in partnership with the Singapore Institute of Management.

Professor Mandell, who has researched financial literacy issues in the last 15 years, says teaching financial literacy to kids doesn't work. Financial literacy is defined as the ability to make important financial decisions for one's own benefit.

'I'm very pessimistic. I have been doing research continuously, tracking levels of financial literacy which have not gotten any better, and also attempting to measure the impact of educational programmes. The research gives no reason for optimism. It basically shows that students in high school who have had a course in financial education are no more financially literate than those who never had such a course. That's an indication that we have not figured out how to teach financial literacy.'

Since the financial crisis, regulators have been grappling with how the sale of investment products should be tightened particularly when investors are relatively financially unsophisticated. In Singapore, the Monetary Authority of Singapore has proposed a test to ascertain investors' knowledge before they can invest.

Prof Mandell says financial illiteracy takes a heavy toll on individuals and society. '(Mistakes) aggregate. They were not the sole factor in the meltdown but they were an important factor. If everyone makes a bad decision it can have a bad effect on the whole society. Is it possible to educate people to the extent that they will not make such mistakes? It does not appear to be possible.'

There are, however, ways to raise the chances that children will absorb sound personal finance principles. One way is to allow them real experience with money - with adult guidance.

Prof Mandell himself was allowed by his parents to invest his college education savings. 'When I was 13, my parents said - you have some money and you have an interest in the market. They called my broker, who was a cousin and told him to let me trade my own account. That was before there was online trading. So I'd call him and he'd invest. That helped me develop a great interest in finance.'

His daughter, he recounts, came home one day when she was 12, and said she wanted to invest in Pepsi instead of Southwest Airlines which was then a fast growing stock. 'She said - 'I think (Southwest) is boring. My friends and I all like the commercials for Pepsi. I want to invest all my money in Pepsi'.'

Prof Mandell told her to call the broker and to go ahead with whatever was jointly decided. 'The broker said - rather than invest all your money in Pepsi, let's invest half in Pepsi and half in Southwest.

'Pepsi fell. She lost some money but she learnt something extremely valuable. To this day she's very good at personal finance. She has a very good understanding that no matter how much you like a stock, it doesn't mean it will go up.

'I believe that it is useful to get children involved in their own finances to give them a degree of control with adult supervision. If they realise they are spending and investing their own money, they'll be much more serious about it than if it was a game.'

Children, he adds, should also be able to open their own savings accounts and have control over their spending. In Singapore, child accounts are typically jointly opened with a parent. Banks such as OCBC, however, do allow accounts solely in the child's name, from as young as five years old. Yet another avenue is to allow a child to have a supplementary credit card with limits on spending. This, he says, will teach the child to spend responsibly within a budget. Supplementary cards, however, can only be issued to a child of at least 18.

'I believe strongly in child accounts. I believe that a child should at a very early age have an account in his or her name, and that the parent should encourage the child to get into a behaviour of saving . . . If a parent can take money out of the account it doesn't give the child identification with those assets.'

Research on the effect of allowances on children yield startling results. There are generally three types of allowances, he says. One is a regular allowance. A second form is an allowance as a form of reward, for doing chores, for instance. A third is not to give a regular allowance, but to give money when the child asks for it.

'It turns out that children who get a regular allowance have the lowest financial literacy. Columnists are well meaning and often argue that an allowance teaches responsibility but it's the opposite. The ones who do best are those who get an allowance for doing chores or meeting expectations. They're followed closely by those who don't get a regular allowance but who ask for money.

'My reasoning is that children who get a regular allowance - it's like being on welfare. You're not reinforcing good habits. You're saying that regardless of how good or bad you are, I'm giving you this amount, and it doesn't tend to teach responsibility.'

Prof Mandell has been working on a proposal as part of the Obama administration's efforts to address the need for an 'automatic' retirement savings option that is safe and simple. His proposal, dubbed RS + (Real Savings +) is a portfolio that aims to provide capital and inflation protection with some upside from equities.

The default option in most US retirement plans is a target date fund where the asset allocation shifts to a more conservative profile as a worker nears retirement. But such funds came under fierce criticism in the crisis as their fairly heavy equity weightings caused severe losses.

Prof Mandell's portfolio would invest a portion in Treasury Inflated Protected Securities, at an allocation that would deliver the principal on an inflation adjusted basis at retirement. The balance is to be invested in equities through low cost index funds. 'My idea is to use financial engineering to develop products that are not going to make rich people richer, but to make ordinary people safer. They may use derivatives but to benefit the ordinary person rather than the financial institution.'

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We all need to invest early and start the day you start your first job ! !

We all dream of having a golden retirement - to indulge in new hobbies, travel and spend time with family. Whether you want to retire comfortably or lead just a simple lifestyle, you should take retirement planning early and seriously. You have to manage the transition from an employment income to an alternative stream of income - from savings or investments - to support your retirement period.

The time spent in retirement will rise with increasing life expectancy, so planning will also include managing longevity and inflation risks.

Start early :

There are times when retirement is forced upon individuals. By planning ahead, you ensure you are ready when it happens. Ideally, the best time to start planning is the moment you start work. When you have time to build your nest egg, you do not have to play catch-up. You do not have to take a higher investment risk to meet your retirement goal.

Points to remember :

Getting started early (regardless of the amount) is a means of forcing you to be disciplined. If you are 40, you are 264 pay cheques away from retirement, assuming you work till 62. If you put aside $1,000 per pay cheque, you will have a nest egg of $264,000. If you were to invest it at 4 per cent per annum, this amount will grow to $423,620.

Key factors that you should keep in mind include aiming to pay off your loans, such as mortgages, before you stop work. Also, educate yourself and be familiar with the financial world to help you get started. Ensure also that you have sufficient protection plans as medical costs are likely to increase as you age. Do not over commit on loans or spend on wants ( needs is important, not wants ), eg. car, club membership,etc which you do not really got to have them in life.......

Buy health protection plans, such as hospitalisation and surgical plans, critical illness and long-term care, when you are young and healthy to keep costs low.

Government schemes :

First, you can start with your Central Provident Fund (CPF) savings to build your retirement portfolio.  CPF members aged 55 from year 2013 (with at least $40,000 savings in their retirement account with the CPF Board) will automatically be enrolled in the national annuity scheme, CPF Life.  They can look forward to a stream of annuity income from age 65 for life.

Most are familiar with CPF savings but overlook another critical source of funds - the Supplementary Retirement Scheme (SRS).  For those who pay income taxes, SRS can be an excellent tax-deferral scheme. Each dollar of contribution to the scheme will reduce your taxable income by the same amount.

Individuals can leverage on this scheme to build a stream of retirement income. You can plan it such that your SRS drawdown starts at age 62 before your CPF Life Plan payment begins. You must complete your withdrawals in 10 years.

Alternative income streams :

Using cash savings and investments to build your retirement nest egg is another way.

A well-diversified retirement portfolio, consisting of investments in equities, bonds and commodities as well as fixed deposit savings, will provide staggered income streams. The proportion you place in each asset class will depend on the investment risk you are willing to take.

Having an annuity in your retirement portfolio is prudent because it would pay you an income as long as you live. You may want to supplement CPF Life payouts with annuity products to hedge against inflation.

With this, you do not have to worry about how long you live. The annuity products can be structured in your portfolio to cover your basic lifestyle expenses from age 65.

Guard your nest egg :

Don't be complacent about monitoring your retirement plan. Ensure that you monitor it - once a year, at least - as your investment risk appetite may fall or change over time.

What it means to be Rich ??

What does it mean to be rich? Are rich and famous completely different from you and me? Recently one market research did a survey and found some answers we could learn from those being interviewed. Whether the survey is anything conclusive or not but the general findings below are likely to be "commonsense" if you were getting those feedback and probably you will also buy into the ideas coming out from the rich.  Try only if you have spare cash to flout or flounder, otherwise you end up in misery and alone if you end up bankrupt.

While almost everyone the interview had carried out said luck and timing played a role in their success, this had some similarities in the responses. Most of the truly rich, perhaps surprisingly, are not that different from you and me. They have the fears about their health and their children's future and the same basic desires as you and me have.

However, some differences.
The first secret of the truly rich is that they are never afraid to fail. Most said that at one point they had had a choice to either stick to an easy, secure route or take a calculated risk. To reach the truly heights of wealth, some extreme risk is needed. If you look for security in a job or are scared to try something different, you won't get far in the pursuit of super wealth.
Even when they had failed--and every single one of them had at least once--the truly rich said they had used those experiences to learn from their mistakes and get back in some time later. They had avoided letting failure destroy their optimism and their passion.

An Internet executive said his net worth had surpassed $1 billion during the dot-com bubble. He had partied with famous rock singer and jetted around the world on in his own jet plane. His net worth collapsed when the bubble burst. Instead of letting failure and financial difficulty stop him, he went out and tried again. He learned from his mistakes and created another tech company that actually had a business model and didn't rely merely on eyeball hits and being cool. The result? He just sold his last company for several hundred million dollars. He has that jet back, but he isn't resting on his laurels at the beach. Instead, he has started yet another company.

The second secret of the truly rich is that they look creatively at problems to find new income sources. Often they looked at problems from different angles and liked to go against the grain. They recognized that everyone else believing or doing something didn't make it right. But being a contrarian for the sake of being contrary was no solution either. They knew they always had to think critically when analyzing any problems

An oil executive said decades ago he had wanted to make better use of gas stations. They were profitable, but he felt they wasted space. People would drive up, fill up and then drive off again from the expensive real estate. His solution? Put in convenience stores, so people could buy gas and snacks at the same time. At first, he got a lot of ridicule for the idea. Who would buy petroleum and coffee together?
Well, today you'd be hard pressed to find a gas station without a convenience store. That executive is among the truly rich because he looked creatively at a problem and didn't let a little criticism discourage him.
The third secret of the truly rich is that they marry well. Not that they find a rich heir or heiress to wed, though that might not hurt. Rather, most of the truly rich, especially the self-made ones, said that having a good spouse had been critical to their success. Starting a company or running a conglomerate takes a lot of sacrifices. The stress can be a killer. Having a good spouse to support you and, most important, believe in you as you struggle to the top is critical.  [ Obviously the Woods having a good wife did not follow this advice and gone astray and now trying hard to find back his club not just his broken tooth ?? ]

The Hopeful Tiger Year 2010 ?

The 2010 Tiger seems to bring possible opportunities in the property market - albeit risky ones - if historical record hold true. Tiger Years are typically good years to invest but this year could hold full of hope and anticipation as the market recovers from one of Singapore's steepest recessions.

Some agree the Singapore economy expected to expand between 3-5 per cent by year end and may present opportunities for investors to buy in anticipation of a price recovery. But the element of risk remains. Like the tiger, the market is likely to remain active for the first half, but the second half of 2010 remains unpredictable. Although property prices have already reached a high level in the past 12 months, the prospect of further increases would be tempting to some investors. However, further price growth would also bring higher risks of a correction.

The last Tiger Year came around in 1998, smack in the middle of the Asian financial crisis. Then, the property price index for private homes shrank 34 per cent over 12 months. There was a very pessimistic mood at the start of 1998 in the property market.

But by the Chinese New Year of 1999, people were optimistic again. The market rebounded from Q1 1999 and, over the next two years, prices rose more than 40 per cent on the back of strong pent-up demand, increased investor confidence and a global IT boom.

Twelve years before that, in 1986, Singapore was in the midst of another crisis.

That Year of the Tiger (1986) came after the 1984-85 economic recession, which was exacerbated by the collapse of Pan-Electric. The property market dived to the lowest point in Q2 1986. But it then made a remarkable, long recovery over the next 10 years until May 1996 (when anti-speculation measures were introduced by the government), with prices rising more than five times. [ Maybe, I should take a side-step look at the car COE prices, which probably behave the same phenomena effect of rise and fall ? ]]

Similar history applies to 1974. The global oil crisis hit Singapore that year - the first major economic crisis the island had to weather post-independence. But property prices then went on to rise steadily from 1974. Over the next seven years until 1981, prices of residential properties rose more than four times.

IT seems that the Year of the Tiger has historically been linked to tumult and upheaval.

Relooking back the last century showed that almost every year of the ferocious Cat has been accompanied by either market downturn, wars, or crises of other forms. In many cases, the markets walked into crises in a Tiger year, while on some occasions, they climbed out of turmoil.

As the world now stands on the brink of yet another Tiger year, the top questions on every market player's mind are: Is there an Asian property bubble in the making and is the equity rally over.

On property, the consensus is that although markets have rebounded, they still fall short of the dizzying heights seen during the 2006-2007 years.

On equity, markets posted spectacular gains in 2009, but the increases only offset some of the outsized losses that were registered during the preceding year. Likewise, China is not experiencing a property bubble as compare to what you can see with much higher prices in Australia and or Hong Kong and lately the Chinese government stepped in to cool down the market.

Indeed, analysts felt that most Asian stock indexes remain well below peaks that were reached in 2007 and although forward-looking price-earnings ratios in Asia may have gone up a lot, they are not at levels yet that most would associate with asset bubbles.

Plus, the governments will be looking at signs of asset inflation in property sectors, in particular. Any selldown should give yield-buying opportunities as markets would eventually get used to the idea that governments are not going to over-tighten. Market watchers believe that the 10-month rally which started last year has already ended and stocks are now seemed to be in a correction phase rightly or not.

This came as risk appetite for Asian equities has sunk due to credit tightening in China, while equities have priced in the V-shaped recovery. At current environment, an overweight position could see the Singapore market and a year-end Straits Times Index target of 3,200.

Be aware of valuations, avoid well-known themes and search for value laggards. OCBC Investment Research believes that 'smart money will take note of the more reasonable valuations now and will be ready to re-enter the market'. Some estimates are that Singapore's economy shrank 2.1 per cent last year, while growth of between 3 and 5 per cent is expected for 2010, and private sector economists are even more bullish.

But leading indicators from a recent BT-UniSIM study showed that the present recovery may look more like 1986's gradual recovery, even though it lasted about as long as the crisis of 1998.

This Tiger year brings political uncertainties too. Economists say oil price spikes, a top risk in 2010 according to the World Economic Forum's recent report, could be triggered by a conflict in the Middle East.
And for the global economy, looming concerns over the withdrawal of stimulus plans and sovereign debt persist.

Shield your savings from a double-dip recession....

Question: You are in your 60s, soon to retire or getting the golden handshake from your boss and have some amount of money in your retirement accounts. You may want to liquidate most of your holdings and put the proceeds in money market funds or maybe an annuity, as you fears the political situation will lead to another recession.


Answer: If you're asking whether if it is right about your concerns that the political situation will lead to another recession, then the answer is, Who knows?

Considering the beating it's taken, the economy seems to be bouncing back pretty well so far. The recovery at this stage looks as strong as the recoveries after severe recessions in the early 70s and early 80s. That said, the news as the economy climbs out of a recession, particularly a severe one, is usually mixed reaction with both positive and negative developments. So it's hard to say at this point whether the recovery could stall or even reverse, whether due to the global political situation, deteriorating fundamentals or both.

Whether it is right to liquidate your mutual fund portfolio and essentially hunker down in cash and an annuity because of fears, the more direct answer: No, that doesn't sound like a very good idea.

One reason is that, as a rule, investors should not make drastic moves with their investments. Radical shifts are usually triggered by the gut, not the head, and acting on emotional impulse is a notoriously bad way to handle your money.

Besides, even if your actions are based on rationale rather than emotion, there are doubts about such planned move. Getting it right when predicting trends in the economy is difficult even for economists. So for any investment strategy in such a heavy-handed manner to make a bet on one particular economic scenario playing out is seen as not very prudent.

It's a mistake to let emotions dictate your investment strategy, you should take them into account when investing money. You can't live your life feeling you're teetering on the precipice of financial disaster. So if it is really some concern about the damage your retirement portfolio might sustain if the market heads south, we ought to address those concerns, but in a more thoughtful, methodical way.

Invest for the long-term

Say you are in your late 60s then you're looking to your investments to support you throughout retirement, which, given your age could easily be another 20 or more years.

That means that, unless you've got a ton of money socked away, putting virtually all of it in cash (the annuity excepted) would probably make it difficult for you to get sufficient income that will both last the rest of your lives and stand up to inflation over the long run.

In short, it's very likely that you should be investing at least some of your stash in a diversified portfolio of stocks and bonds that can generate some long-term growth. The trick is to get some growth, but not so much that your stomach flutters every time the Dow takes a hundred-point dive.

Achieving this balance of growth and safety will depend, among other things, on how much income you need from your investments, your tolerance for watching your portfolio's value fluctuate and how much room you have for paring living expenses should investment values take a hit.

Now, about that annuity. Making an immediate annuity part of your retirement portfolio could make sense in your situation for two reasons. First, the steady income, which you get regardless of what the market is doing, may allay some of your anxiety about the economy and the markets. That, in turn, may make you less apt to batten down the hatches in cash and more inclined to devote at least a portion of the portfolio to investments that can generate growth.

Second, combining an immediate annuity with traditional assets like stock and bond funds can actually help your retirement savings last longer, which is a definite plus for retirees.

The bottom line is that whatever you end up doing, you should do it based not on some vague notion of what the political situation may do to the economy. Rather, you should make a plan after considering several alternatives and seeing what effect those different choices might have on your ability to live off your investments the rest of your life.