3. Greed versus Need

In any plan for investing, you should always set clear goals and guide your decisions on what you need rather than what you want.

What are your investment goals? A house, a car, college tuition, retirement? Your goals and how long or short term they are will also help you determine what your investment strategies should be.

How much risk can you afford? The greater risks must be balanced by a realistic expectation of greater gains, but you have to ask yourself if you can genuinely afford the great losses that might result.

You might be able to when you are in your 30s, but when you are 64, you will not be able to.

One crucial aspect in any investment decision is an accurate risk assessment using the best information you can get.

But research as you will, there will always be information that you can’t get, or circumstances you can’t predict.

So your acessments will always be inaccurate, perhaps disastrously so. Therefore, invest cautiously, and keep your eye on the prize. Work with your team to maintain growth and minimize risk and loss, in order to watch your portfolio grow.

2. Diversify your portfolio

This is the golden rule that asset managers go by. Diversification means that you need to put investments in more than one product and not in one investment product. The yield can be good but it isn’t worth it to risk your entire savings in one go.

If your asset manager has not done this, think twice before continuing with their services. The adage “Do not put all your eggs in one basket” holds true for this field.

Investments can be lucrative, but they can also be very risky. Even those that are considered a surefire success can suddenly fold, leaving you with big losses. The greater the risk, the higher the reward.

That is why you need to make sure that you have something to fall back on if one investment falls through. If you diversify your investments with proper asset management, you can still count on your other investments to give you a secure foundation until things start to cycle upwards again.

One drawback to certain types of diversification is that some markets are interlocked. For instance, the stock market and bond markets will generally go in opposite directions. So investing in both will pretty much guarantee that if you are gaining in one, you will be losing in the other and achieving zero growth at best.

However, keep in mind that stocks are generally more volatile than bonds. If stocks drop they will generally lose value much more rapidly than any gains in the bond market.

1. There are a lot of scams and con artists in the world

Greed can make people do things that they will not normally do.

This is a sad fact of life that you need to know before you start hiring somebody to handle your assets and properties. Keeping this in mind before hire any one means you will be more careful when looking for an asset manager.

When hiring somebody, make sure that you have done a thorough background check on the person first. As far as possible, hire only those that you know personally.

If you don’t know anyone who can handle your finances, ask the people that you know and trust to make recommendations. Start with your family and friends, as they will be careful to give you their honest answer.

But before you hire the person, make sure you talk to them on the phone, and in person. Even if he or she is recommended by your most trusted friend, you cannot be too sure. Go with your gut feeling about them.

After you have hired him or her, still take an active part with the investing of your money. Make sure that you are informed about every investment made.

Do not give full power to the asset manager to decide on investing issues. Your approval must always be asked before making an investment.

Asset management seems like a fancy term for people who are not much into investing and into business but the truth is, it is something that all people need in order to survive the rising costs of living and inflation rates.

The concept is actually similar in a way to putting the money that you earn in a bank in order to earn interest on that money and make it grow.

The difference is, asset management makes use of stocks, mutual funds, properties and bonds to further increase your wealth and assets.

Putting your money in the bank is not enough when you are going to get only 2% to 3% interest, as compared with 10% inflation on food prices in the early part of 2008.

By all means have some cash put by in an easily accessible interest-bearing account in case of emergencies, but don’t put all your eggs in one paltry basket.

For the extra money that you can afford to invest, consider instead m funds, bonds and stocks, which yield higher rewards than the tiny interest that banks’ provide. In just a few years, you can earn 50% of what you invested, something that you can never do with the bank.

But before you get into asset management and hire yourself a professional, read through the suggestions which follow below to help orient yourself in the field of investing.

The economics of asset management

So now let’s look at the economics of asset management:

These vessels earn about $2,000 per hour when they are operational. Time literally was money in this case. (That would be at least $20k an hour at present day prices).

The failure of an exhaust valve would mean stopping the engine and changing it out, which would take about one hour, a loss of $2000.

For every hour the ship is out of commission that was $2000 lost. A day out of commission, about $48k lost.

In one true disaster on another ship, the engineers had bypassed the air/oil interlock that prevented the engine from starting when it had no oil pressure. The interlock had failed and there was no replacement immediately available. They shut down for a failed exhaust valve, and when they restarted, no one turned the lube oil pump back on. The engine was destroyed, and replacement cost $1 million.

In addition, about 1/4 of the revenue of the vessel for a whole year was lost while waiting for a replacement engine to be built and delivered, adding about $2.2 million in losses.

The failure of an intake valve was another potential disaster that could destroy the engine, and thus the assets of the company.

In general, the valve head would drop into the cylinder, where it would get mashed into pieces about the size of a marble. In the process, it would destroy the other intake valve, the head, the piston and liner. This would generally cause an emergency port call and take a full day or two to repair, which at $48k a day lost, was again a costly mistake.

In about 14 years of operation this ship never experienced a head failure due to the computer program which charted all the repairs appropriately.

So preventive maintenance was essential, but before the advent of computers, there was no good way to keep track of it.

When the company which owned the vessel discovered this program existed, they went into high gear and replaced every part of the ship that was overdue.

However, this story does not have a happy ending. After they finished with the ill-fated other ship, the engines were started one morning and the lube oil pump failed to provide full pressure to the port engine.

It was severely damaged but not destroyed as had been the starboard one in the previous incident.

But the money was not there to repair it, and the company finally went bankrupt as a result and had to sell their remaining functional ships for a fraction of what they were worth.

All of this is a real world example of how critical asset management can be to the lifeblood of a company, and how even one hour of ‘downtime’ with computers or other essential pieces of equipment can be make or break for a company.

Finally, this is also a real world example of how important it is to keep track of all your assets, and plot out where you’ve been, where you are, and where you plan to go. Your path to profitability will be as smooth or as rough as you want it to be depending on the preparation and planning you make beforehand.