Because of my business, I come across many successful businessmen. They are brilliant people who made their fortune though excellent judgement and hard work. However, when come to investing, many have taken, in my view, excessive risks which are not suitable to them.
While the opportunistic character may help them achieve their financial success, the trait always turns their investments into disaster. The common mistakes are
- Doing risky investments when running risky business, no proper asset allocation
- Heavily leveraged with NO personal emergency fund
- Trade stocks or Forex day in and out while having a full time day job themselves.
Instead of arguing which are the right investment styles, why not take a look at how Obama, the leader of the largest economy in the world, run his personal finance.
According to just-released The President & Vice President’s 2010 Financial Disclosure Forms, US President Obama and First Lady Michelle Obama are rolling in Treasury bills and notes. The First Couple also relying almost entirely on the Vanguard Index 500 mutual fund for stock investments. I couldn’t agree more with his choices.
I’ve summarized the following points from Yahoo Finance, which are relevant to Singapore investors.
Go for Short Term Duration Debt when interest rates are rising.
The report shows Obama having between $1.1 million-$5.25 million invested in Treasury bills (a maximum maturity of one year) and another $1 million to $5 million in Treasury notes (maturities between 2 and 10 years).
Even Presidents need a Personal Emergency Fund, why don’t you?
The Obamas reported having between $250,001-$500,000 sitting in a checking account at JP Morgan Chase Private Client Asset Management account.
He is the leader of the free world, but when it comes to stocks, He invests passively.
The Obamas report having between $200,000-$450,000 invested in the Vanguard 500 Index Fund. In Berkshire Hathaway 2011 Annual General Meeting, Warren Buffett advised that if you have a day job and aren’t going to be actively engaged in investing, then “consistently set aside money in index funds” is the best long-term strategy. Obviously Obama has taken his advice.
Obamas use “target funds” for their children’s education planning.
The Obamas were reported to have between $100,000-$250,000 invested for each daughter. According to the Obamas’ financial disclosure, both accounts are invested in the age-based portfolio for 9-12 year olds.
Obamas are personally debt free.
The Bidens reported six different liabilities, with the largest debt a home equity line of credit for $100,000-$250,000 that they took out in 2005. The Obamas, by comparison, had nothing to list under the Liabilities section of the disclosure form.
I still vividly remember that one Singapore family have “accumulated” $35 million housing loan for three properties and eventually went bankrupt when the property market turned south. Never be too confident about your ability to pay for the debts.
If you are the President of United States, would you have invested the same way?