The Hindu Business Line : Three types of investors

Donald J. Trump of `The Apprentice' fame, and Robert Kiyosaki, who had written `Rich Dad Poor Dad', join hands to give `one message' in `Why we want You to be Rich' (www.landmarkonthenet.com).

"The one problem money cannot solve is poverty," declares Sharon Lechter in the intro to the book. "The one true solution to worldwide poverty is financial education, not money... As your financial education increases, you will start to recognise financial opportunities everywhere."

Rich or poor, we all have financial problems, says Kiyosaki.

However, "Most rich people don't want others to know how they got rich, much less tell people about their failures." If you want to become rich, you must solve problems, he insists. "Identifying a problem creates the opportunity for creating a solution."

Think of problems as challenges, advises Trump. "Taking a positive spin on problems will inevitably give you more energy... What is essential can sometimes be invisible to the eye. That's where discernment comes in."

There are three types of investors, says the book. One, those who do not invest at all, because they expect their family, the company they work for or their Government to take care of them once their working days are over.

Two, people who invest not to lose; here lies the majority, choosing `safe investments' and thus adopting `the saver's mentality when it comes to investing'. And the third type is of those who invest to win; they are `willing to study more, want more control, and invest for higher returns'.

The 90/10 rule applies to money, writes Kiyosaki. "In the game of money, 10 per cent of the players win 90 per cent of the money." So in real estate, too, "with the greatest amount going to the top 1 per cent of that 10 per cent."

Be young at heart and be stubborn, counsels Trump. Aim high and have the enthusiasm and the plans to achieve what you are aiming for. "Positive thinking works. It has a lot of power. Winning requires that kind of power, whether you're a quiet person or a gregarious one." Ignorance can be more expensive than education, he cautions. "Learn about money and make it work for you."

Though we are all born with a special genius, some don't get to find it. Why so? Because they do not find the environment for the genius to blossom, explains the book.

So, what should you do if you want your wealth to grow? "Go to a place where people are getting rich (like a real estate office or stockbroker's office), join an investment club, or start a study group and meet new friends who also want to grow richer." Sometimes, the fastest way to change and improve yourself is this: Simply change your environment.

Messages worth paying heed to.

CIC kicks off

There used to be a time when banks had only a handful of borrowers, and the managers knew all about the borrowers. "Bang came nationalisation in 1969, and the era of `class banking' descended to `mass banking'," chronicles K. Mohan Chandran in `Credit Information Companies' from Snow white (www.swpindia.com).

Between 1972 and 1995, advances increased nearly 40 times. Credit of all scheduled commercial banks rose from about Rs 5,000 crore in 1972 to more than Rs 11 lakh crore in 2005, `representing a growth of whopping 20,316 per cent'!

A major problem that came in the wake of fast credit growth was that of huge non-performing loans engendered by `adverse selection of borrowers'. Credit desk officers had to precariously balance between pressure to sanction, and following the norms. Credit information about borrowers and guarantors was absent or scant.

The officers had to depend on `best guesstimate' as a substitute for real credit information. "I have seen several credit desk officers and even general managers of credit portfolio praying to god before sanctioning a loan," reminisces the author, as one such ex-officer.

The cruel world of finance is perhaps no respecter of fond wishes, so the fallout of many pious lending decisions showed as big red blotches in the financial results of many banks.

A turning point came in 1999 with the publication of the Siddiqui Committee Report on credit information bureaus. Another key milestone was the ushering in of the Credit Information Companies (Regulation) Act passed in June 2005; rules were notified in December 2006. Chandran is of the view that the Act has broken the shackles of archaic laws of bank secrecy, which had all along prohibited banks from sharing borrower information even among themselves.

To cope with the new law, and to benefit from it, banks have to `disassemble their credit departments and re-engineer their entire credit operations from corporate office to village branch'.

In this, the author sees immense opportunities for the IT sector, in the form of `database management services, database and network security.

Essential reference.

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