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Thursday, October 2, 2008

Different Categories of Investors

What kind of investor do you want to be?


This may be the question bothering everyone who has the goal of achieving financial independence. However, are you mentally prepared to become an investor? Have you done your analysis and research before you get in the market?


In fact, a true investor is prepared for whatever happens. A gambler tries to predict what and when things happen. If you are prepared, there is a deal of a lifetime being presented to you everyday of your life! The following explains the different categories of investors exist in the market. Let's review them one by one:


The Accredited Investor


The accredited investor is someone with high income or high net worth. A long-term investor who has chosen for security and comfort may very well qualify as an accredited investor. Many highly paid employees or self-employed persons fit in this category of investor.


Individuals with the following amount of money can be classified as accredited investors:

  • $200,000 or more annual income for an individual
  • $300,000 or more for a couple
  • $1 million net worth

The Qualified Investor


The qualified investor can be defined as the person who has money as well as some knowledge of investing. Qualified investors include most professional stock traders who are accredited investors and has invested in financial education. They have learned and understand the difference between fundamental and technical investing.


A fundamental investor searches for value and growth of a company by looking at the financial statement. The most important consideration for selecting good stock for investment is the future earnings potential of the company. Warren Buffet has been acknowledged as one of the best fundamental investors.


On the other hand, a well-trained technical investor invests on the emotions of the market and invests with insurance to hedge against catastrophic loss. The most important consideration for selecting a good stock is based on the supply and demand for the stock of a company. George Soros is often recognized as one of the best technical investor.


The Sophisticated Investor


The sophisticated investors know as much as the qualified investors but has also studied the advantages available through the legal system. They are familiar with the following specialties of law:

  • Tax law
  • Corporate law
  • Securities law

While not a lawyer, the sophisticated investor relies his or her investment strategy on the law as well as the financial products in determining the potential returns. They often gains higher returns with very low risk by using the different disciplines in law.


The Inside Investor


Although an important distinction of the inside investor is the aspect of control over management of a company, the most imperative point is that one does not need to have a lot of income or net worth to become an inside investor. An officer, director or owner of 10% or more shares of the company is an inside investor.


Actually someone with the financial education but not the financial resources can still become an inside investor. This is where many people enter the world of investing today. By building their own companies, inside investors are building assets that they can run, sell or take public.


The Ultimate Investor


The ultimate investor is a person like Bill Gates or Warren Buffett. These investors build giant companies that other investors want to invest in. The ultimate investor is a person who creates assets that become very valuable that it is worth literally billions of dollars to millions of people.


Both Gates and Buffett became rich not because of their high salaries but because they built great companies and took them public. While it is not likely that everyone of us will ever build a Microsoft or Berkshire Hathaway, we all have the possibility of building smaller businesses and becoming wealthy by selling it privately or publicly.


[Other financial posts...]

Monday, September 29, 2008

Oei Hong Leong


Singapore tycoon Mr. Oei Hong Leong bought one million American International Group (AIG) shares on Tuesday (16 Sep 2008) when the stock was in freefall and many investors were bailing out of the giant insurer.

Mr Oei bought in on the upswing and landed his average cost of purchasing at US$1.80. The stock price closed at US$3.75 at the end of the trading. He had looked hard at the unfolding AIG crisis and calculated that the firm was just too big and important to be allowed to fail.

He bought the shares when AIG shares price was dropping due to the rumor that AIG encountered short-term shortages of cash flows and grabbed one million shares of AIG.

Mr. Oei then sold the shares on Monday (22 Sep 2008) at US$5.00. The selling price rose more than double compared to the bidding price.

He donated the shares which have already shot up in value (about S$ 890 million) as promised to LKY School to mark Minister Mentor Lee Kuan Yew's 85th birthday, which fell on Tuesday. In other words, the school will receive about US$ 5 million from the shrewd investor.

Mr. Oei actually had donated S$ 1 million to LKY school 5 years ago felicitating Lee's 80th birthday.

Brief Biography

Mr. Oei Hong Leong estranged from his father, Eka Tjipta Widjaja who was one of the richest men in Indonesia. This Singapore citizen is now considered as a savvy investor with stakes in steel, coffee, real estate and health care industries. He committed to invest $10 million in waste-management firm Citiraya whose stock hasn't traded in over a year following a corporate scandal.

He was ranked number tenth in the Singapore's 40 Richest Men by Forbes Magazine. He is now 58 years old and has a net worth of about US$ 475 million.

Friday, September 26, 2008

Beautiful Morning

*Note: Click on the image above to view in full size.

Wednesday, September 24, 2008

Carl Icahn


Carl Celian Icahn (born February 16, 1936) is an American billionaire financier, corporate raider, and private equity investor. His net worth is US$14 billion as of 2008, making him the 46th richest man in the world.

He grew up in NYC's Queens and studied philosophy at Princeton. Then went to Wall Street with $4,000 in poker winnings.

He gained reputation for buying into troubled companies, forcing management to improve, restructure, and buy back stock. Once considered the world's most dangerous shareholder activist, he is now having trouble effecting vast management changes.

Icahn made an attempted run as a major shareholder of Time Warner owning about 3.3% of the company valued at billions of dollars. He has been actively attempting to influence the direction of Time Warner, often in conflict with its former Chief Executive, Richard Parsons. Although Time Warner recently sold 5% of its AOL division, Icahn has been pressing for additional action to increase shareholder value.

On February 7, 2006, a group led by Icahn and Lazard Frères CEO Bruce Wasserstein unveiled a 343-page proposal calling for the breakup of Time Warner into four companies and stock buybacks totaling approximately $20 billion.

On February 17, 2006, the Icahn-led group agreed with Time Warner to not contest the re-election of TW's slate of board members at the 2006 shareholders meeting. In exchange for the Icahn group's cooperation, Time Warner will buy back up $20 billion of stock, nominate more independent members to the board of directors, cut $1 billion of costs by 2007, and continue discussions with the Icahn group over their proposal, particularly on the future of Time Warner Cable.

Recently, Icahn was shown to be interested in the takeover of Yahoo! and the ousting of Jerry Yang from his current position as CEO to allow Microsoft to purchase the web company.

Tuesday, September 23, 2008

A Lesson to Ferrari Driver