Once upon a time, in a faraway land. Where the mountains were tall, and the babies were small. Where the rivers were wide, and the children played and screamed with delight.
There lived a King. The King lived in his Kingdom, like all Kings do. It was a vast kingdom, stretching from coast to mountain, from north to south.
The Kings’s subjects were the most hardworking people in the land. They grew crops and kept farm animals; some of them hunt while others fish. There were craftsmen within their midst who designed and built tools and machines ahead of their time. The artistes painted beautiful pictures and create sculptures that will live on for generations after.
The King loved his subjects dearly and ruled in their best interest. He was a benevolent King. His people led happy fulfilling lives.
[Free Ebook] How should you invest your first $20,000?
We asked 14 Singapore finance bloggers to share what they would do if they could go back in time and invest their first $20,000. They can no longer rewind time, but you can learn from their experience and hopefully start with a better footing.
An Investing Kingdom
There is something interesting about the people in this Kingdom though. They invest. All of them.
Legend has it that many many years ago a man arrived on a ship one day. He bought with him spices from the Far East. The people in the Kingdom were fascinated with his travels and asked him many questions about the world beyond. After unloading his heavily laden ship and just before casting off again, he shared with the people a book entitled Investing for Dummies.
The wise men in the Kingdom poured over the book and began sharing its lessons with everyone in the land. The idea of making money work hard for you, of owning a stake in well-run companies making a good profit year after year resonated with the people. They too wanted to start investing.
Some time later, a stock exchange opened in one of their neighbouring Kingdoms. It was an arduous journey though mountains and forests but the very first people who made the trip returned with shares in some of the best companies far and wide.
It was an exhilarating time. As more and more people wanted to start investing, horsemen started making the trip to buy shares on their behalf. There were some hits and some misses, some made a fortune while others lost theirs in the stock market. All in all, investing has become a fascinating endeavour for all the people in the land.
The Ambitious Young Man
The King met with his High Council regularly. At these sessions, his wisest and most trusted advisors would share their thoughts on how to better the lives of people in the Kingdom.
It was at one such meeting that a young man spoke up. He had returned to serve his ministry after receiving an education from the most pretigious university in a faraway land. He said.
‘Your Highness, the people in our land are all investors, but they are not investing correctly. They have no idea how risky it is to invest in individual stocks. Many of them want to diversify into different sectors and other Kingdoms but are either unable or could not afford to. The poor people are unable to afford the best companies where even one share is so expensive’.
The elderly advisors nodded their heads in agreement. The ambitious young man continued.
‘Retail investors can never ever hope to do better than the professionals. They are out in their fields or hunting in the forest all day. They have never studied finance. They cannot visit the companies they want to invest in. They cannot hope to have the same level of understanding of the markets and receive information at the same speed a dedicated money manager can have.
My suggestion is to start a fund. Put someone who is good at investing in charge. Give the investors a chance to work together with someone who can do wonders with their money. The people in the land will be able to receive better returns from their investments.
I am up to the task if you so desire, Your Highness.’
The King had some misgivings. His role as the Head of State is to ensure that there is prosperity, peace and progress in the land. The Kingdom’s one and only bank operates conservatively to ensure that all deposits are safe, and it is never his desire to take on more risk for the people by managing their money.
Nevertheless, he understood how important it is to help his people do well. Reluctantly, he agreed and the young man was appointed the first Fund Manager in the Kingdom.
He took to his task immediately. He set up an office in High Street, right in the heart of the Kingdom and only a stone’s throw from the King’s palace. He gathered the best investing minds in the land, people who have studied and traveled far and wide to help him run the outfit.
He set up funds that invest in individual sectors, funds that invest in different instruments, funds that invest in different countries and regions. For an upfront fee and a percentage of the asset under management, clients can have the best minds in the land helping them invest in stuff they can only dream of. A whole new world of possibilities beckon.
To spread the word, he went to the Kingdom’s press and took out full page advertisements in the papers. He printed glossy brochures and organised roadshows at the marketplace. He roped in the town folks to share about the funds and promised them a cut of every dollar they could get a new client to invest.
The Assets Under Management (AUM) grew. Many of the town folks are doing so well that they have stopped their craft or trade and turned into full time sales staff for the funds.
The Distribution Channels
Not to be contented, they thought of ways to attract even more clients and more funds. They approached the Kingdom Bank and cut it a very good deal to help promote their products.
Every bank customer who has excess funds lying in their accounts will be approached to invest these monies into a fund. The thought of money losing its value little by little every day proved too much to bear for ordinary folks and they readily agreed to plough them into the funds.
The fund manager then approached the one and only insurance company in the kingdom to distribute their funds. Typically when someone seeks out insurance coverage, he or she has concerns about the future and what it will hold. What better time to market the vision of a better future through investment products? Endowment funds and investment linked plans were born this way.
In no time, Kingdom Bank and Kingdom Insurance become very efficient distributors of the funds. Despite the fact that investment activity is not a mainstay of banking nor insurance, their bottomline has benefited greatly from encouraging people to invest.
Kingdom Bank, Kingdom Insurance and Kingdom Fund Manager has grown so interdependent that it was only a matter of time before they started lobbying the King to allow them to take up stakes in each other.
Richer than the King
The young man and his associates grew wealthy beyond words. Some say he is even richer than the King, and almost indefinitely more powerful.