Few ever knows that billions of dollars worth of life insurance policies is on single and available people with no spouse, no kids and even no parents to look after.

Who would get the death benefits?

The cockroach or hamster?

The main purpose of life insurance lies in averting a financial hardship should something unfortunate happens to you. If you are single and parents already in some lala land, may as well use the premiums for monthly car installments and enjoyed life to the max.

Do children really need life insurance cover?

For most people, their children aren’t some Harry Potter stars or earn 5 figure income in television commercials. Would it be better to insure income producing adults, i.e. parents, especially for low income families?

Close relatives of multi-millionaires who included inside the will to inherit part of their vast fortune usually got much more than what is covered by any major life insurance plans. As a result, it is unwise to spend money on premiums.

The longer a person lives, the more profit the insurance company gained. But the shorter a person lives, doesn’t really mean he profits.

Who need life insurance the most?

Obviously, the average Joe on the street with heavy family responsibilities and little wealth must have adequate life insurance cover. Bill Gates and Warren Buffet have multi-billions dollars assets for their descendents and life insurance cover doesn’t really make a difference to them.

However, purchasing the wrong type of life insurance is very detrimental to a person’s wealth, especially if it overprotects or got little real value to your overall financial plan.

Whatever type of life insurance, with whatever fanciful names, there are 5 basic figures you need to take note of and written down on a separate piece of table for comparison before reaching a good economic decisions on which specific policy to purchase.

Premium. Put it simply. It is the amount you pay to an insurance company for a given death benefit. The premiums can be paid in either in 1 lump sum or some periodic installments like monthly, quarterly or annually.

Even if you have a sum of money for 1 lump sum payment, it is advisable and wise to pay in monthly terms due to the time value of money.

Death Benefit. This is basically the amount paid to your chosen beneficiary should something unfortunate happens to you, i.e. death. It can be either in 1 lump sum or some periodic installments. Most but not all life insurance also covers the remaining mortgage of your primary residence in addition to a sum of money. This is commonly known as the face value of the policy.

Policy Term. This is a time period in which the insurance company will only pays you if you die within this time period. The term have a wide range from 1 year to a lifetime. If you die 1 day after the policy expires, too bad, you won’t get a cent. Your beneficiary won’t get a single cent.

Fees and commissions. This is like investing in individual stocks or unit trusts, the money to offset some administrative and selling expenses incurred by the company. It is usually a percentage of the premium value.

Surrender charge. Life is unpredictable. Sometimes, you need to change to another policy by another company and cancel the current plan by this company. Surrender charge is the amount of money retains by current company if the policy is canceled before reaching the policy term. Usually, only policies with investment plans got such charges.

After all, the prices of all goods and services we purchase, from food, energy, automobiles, clothing, and new apartments determine the profitability of businesses involved in procuring them. A sharp rise in oil barrel prices somehow translate into a few billions dollars more of profits for major oil companies like Exxon Mobil, chevron etc.

Basic concepts in Economic, scarcity, supply and demand, marginal utility are useful frames of reference in predicting market performances. It is no surprise that Creative Technology experiences operating losses for a few consecutive quarters, a person who buys an Ipod is highly unlikely to buy another Creative Zen. This is due to two fundamental concepts in Economics, first is scarcity Plato thinking, spending hundreds on another Mp3 player means less money for other stuffs. Secondly, happiness or utility in consuming a particular product decreases with each additional unit. In other words, owning an Ipod makes you happy but having 2 Ipods doesn’t mean the happiness is doubled. Given the preference for Ipod by consumers as a result of its branding or whatsoever, Creative does sells less of its Mp3 players.

As such, it is recommended for you to take an Introductory Economics course for one semester if you are still in college or buy this Economics Textbook by Ben S. Bernanke I find it give a very good illustrations of basic economics principles and will further inspire you in the subject.

By using classification, information and knowledge are more manageable. In Chemistry, specifically organic Chemistry, organic compounds are grouped based on their functional groups, and each functional group react in a specific way. Of course, there are a dozen ways to group organic compounds to other features. But as Chemistry is a disciple that deals with the study and prediction of reactions between matters, this method of classification is used.

Similarly, in the selection of stocks, companies are also categorized into different industries and sectors. The distinctive features which differentiate them, other than obvious differences in products and services sold, are that their earnings and profitability are affected in the same ways by certain economic factors.

Consequently, by knowing the business is under which industries and sectors, predictions of when to buy and when to sell are made more accurate. In addition, by considering their roles from macroeconomic point of view, you will have a better feel of whether they are in a sunrise industry, with potential for growth in the long run. Conversely, you better cashed out and exit if demand for their goods and services are heading downwards.

To be a wise and successfully investor, you need to look at the place we live in through an investment paradigm.

When a hard core engineer walks into a Starbucks café, different images and sets of questions run in his head from an investor.

Looking at the coffee maker, questions that ran through the engineer’ head are what are the raw materials that are used for its constructions? Metal and plastics, specifically what type of metals and plastics. Metals can comprised of steel, bronze, iron with different percentage and constituents of other components like carbon. Then Plastics got thermoplastics, thermosets etc. There are even further more categories from the two major types of plastics.

How are they being converted from metals and plastics to the finished products of the elegant coffee maker that you see in a typical Starbucks café?

Images and videos of metal and polymers melted before being molded into the complex shape of coffee makers. All the different components being assembled together in an economical way in a factory using machines are imagined in his head.

In contrast, what a master investor views is totally different from that of engineers, doctors, lawyers, toilet cleaners, machine operators etc.

Chances are they are more interested in the companies that provide the raw materials, metals and plastics, companies that manufacture coffee makers from metals and plastics. Businesses involved in the transportation of raw materials and finished products from factories to retail stores to customers.

Other than that, things like how pricing of a cup of mocha is determined? What’s the age group visiting the café often? How do these cafes, factories and retail stores survive and make profit?

If throughout the decades only some firms for each industry and sector survives and prosper, which ones are they and why?

You get it!

The investment perspective.

It is no wonder that being uncertain about what future will brings is a natural condition for humanity. In life, as in investing, accepting uncertainty and growing beyond it is something we all need to do. If it weren’t, no child would walk, no one would learn to drive, and there will be no businesses providing goods and services essential to our survival, needs and wants.

There are two techniques that successful investors employed successfully throughout the ages to deal with uncertainty. First is considering the worst case scenario. Second is the certainty in uncertainty.

No man is God, not even Warren Buffet and George Soros, they don’t have crystal balls as much as you and me. But they do know what is the worst case scenarios of each investment they under took. That is also the certainty in uncertainty of investment universe.

For instance, in purchasing of properties and necessary insurances to cover them, the worst thing that can happen is that their values will drop to a certain amount but never to zero, unlike stocks. In other words, you can actually safely predict to a high degree the maximum financial losses of each investment, not only in real estate but also in other cases.

Do reflect deeply on the fact that the worst case scenarios of most financial investments is actually a certain event, meaning to say that it is the worse thing that can happened.

The concept of certainty in uncertainty is well illustrated in many of our every day life which wise investors put to good use to achieve their financial goals. You do not have to look far to see how this idea translates into millions and billions of dollars profits consistently in various businesses and almost guaranteed returns in some investments.

First thing first, in the flipping of coins, whether the next flip is a head or tail is uncertain and no one can guess accurately every time but the fact that there will be no 100 consecutive heads or tails is a certain outcome. This is what I mean by the certainty in uncertainty.

In lottery, who will wins the top prize is what no one will be able to guess, but revenue from lottery ticket sales far exceeds that of prize money given out is a certain event for some lottery companies within some countries.

If you looked at the overall performance of the stock market, it is difficult to predict the prices of any individual stocks the next day but that overall the combined value of all the stocks increased substantially over the decades. The same occurs for properties.

Therefore, you should not avoid investing just because there is no guaranteed returns.

A lot of people have the assumption that just because they don’t have money or cannot comfortably afford all the expenses associated with private ownership of cars, then should not waste money, time and effort in learning driving.

But that is wrong, if you belong to the second case, then you even need to learn driving as early as possible.

Allow me to explain.

Case 1

You can well afford a car.

Be it owning a business that does millions of dollars in sales, earning a 5 figure income online or offline, as an employee or born with a sliver spoon etc.

99.99% of people in this category will definitely be seen driving their own cars.

As a result, you need a driving license.

Case 2

You can ill afford a car.

You have low educational qualifications and at the same time does not own a business that does millions of dollars in sales, earning a 5 figure income online or offline, as an employee or born with a sliver spoon. etc.

99.99% of people in this category most probably need to become a taxi driver after 50 years old (at least in Singapore).

Or that a driving license opens up more job opportunities in blue collar sector.

In this case, learning and getting driving license as early as possible is even more important due to rising costs of living (and of course fees taking driving lessons and tests).

As you can see, learning driving now means greater savings.

Some Basic Theory Tests Practice Questions - For People Living in Singapore only (Not sure if the questions is the same for other countries)

Generally known as highway code.

In my view, there are top 5 personal reason whys investing is important.

1. Only option to save your money

It is no mystery that money kept under a pillow or in a savings account is losing its value (or purchasing power) with each passing day.

2. Only option to save yourself

With achieving of financial freedom from sound investing and investments, you can save yourself from the drudge of work, of unreasonable or irritating boss.

3. Sleep and grow rich (or money work for you)

Don’t you feel like beating yourself up if your friend next to you buy a house for $500 000 today and sell it for $1 millions one year later?

4. Time to return flavor from money

You spend 80% of your life, time and efforts working for money. Why not have money return you some flavors and have it working for you.

5. Control your own destiny

Let’s face it. Without money, you can’t do anything and can’t go anywhere. You will be a slave to your job, your boss and basically no difference to a slave.

6. Work less and less but earn more and more

You don’t see Warren Buffet do double work when his net worth increased by a few billions. But you seemed need to put in extra effort for each pay raise from your boss.