11From Zurich to disaster
Whatever you want
Anisa Chabbra picked up her book. ‘It says here that everyone
needs a nancial expert to help them invest.’
‘No. Investment is much simpler than that. There are basically only
two types of investor. Once you understand what they want, then
you understand money. Throw away that silly book, and I’ll tell you
what I’ve learned about money in my many years of investment.’
‘What are the two types?’ Anisa had obviously decided that
Conrad was a harmless old windbag. And she was probably
desperate to have a distraction for the long journey.
‘I’m the rst type, my dear. I’m older and I try as hard as I can to
preserve my capital. I’ll do anything to avoid risk. I need my invest-
ments to give me a regular income because I’m retired and I don’t
have a job. My investments need to give dividends or interest.’
‘What’s a dividend?’
Three facts about compound interest . . .
Start as early as you can. This is a long-term strategy, not a get-
rich-quick scheme.
Be prepared to move your money to find the best interest rates.
Small differences in costs and fees can have a huge impact in the
long term. You have been warned.
And an opinion and a myth about compound interest:
Don’t become a miser. Fun today is also a good way to live your
life.
Loads of websites claim Albert Einstein called compound interest
the greatest mathematical discovery of all time. He didn’t, but
why let the truth get in the way of a good story?
fast facts
One-way ticket12
‘A dividend is a payment made by a company to shareholders out
of its prot for the year.’
‘OK,’ she said.
‘What would you rather have – a company that paid you a big
dividend every year or a company that paid you nothing?’
Anisa rushed her answer. ‘A company that paid me something
every year.’
‘No. You have to consider the question a little more carefully,
young lady. What would happen if the company paid all of its
prots out every year?’
Conrad’s condescending tone was already irritating me. I
wondered what effect it was having on poor Anisa Chabbra. I
decided to be the gallant knight and chip in. ‘It can’t re-invest
the prots and so it won’t be able to grow.’ Anisa smiled at me, a
great big red-lipstick grin that said we were on the same side now.
Conrad continued, a little irritated at me interrupting his ow. ‘It
can’t buy a new factory or take over a competitor or research new
products. Or employ more staff.’
‘Or launch a high-quality – and very expensive – training
programme to get the best possible value out of its new recruits.’
I smiled, but Conrad carried on as if I’d said nothing. ‘If the
company pays out loads of dividends, it might be great because
you’ve got all the money in your hands. But the problem is that
the company has no money left to plough back into growth. Ask
yourself again: what would you prefer?’
‘OK, this time I’ll choose a company that keeps all of its money.’
I took up the theme. I was aware that I was sounding a little bit
like a teacher, but that’s an occupational hazard. ‘Shares make
more sense for someone your age, Anisa. You buy a share, and
the idea is over the next twenty years the company reinvests the
money and grows. If all goes well, the share price goes up and
you can sell it. Then you’ll be able to live off your capital gains.’
..................Content has been hidden....................
You can't read the all page of ebook, please click here login for view all page.