15 January 2013

Simply Making Money Plan: Here got Silver 300 taels

"Here no silver three hundred taels" in Chinese is "此地无银三百两". It comes from a story about a person who wrote a sign board of "Here no silver 300 taels" to indicate that his backyard does not have the aforementioned silver after he has buried those silver in that area. Its meaning can be "Never try to prove what nobody doubts"  or "A guilty person gives himself away by consciously protesting his innocence". This can be either a funny story or a philosophy that we should concern about. If "no silver" is used to mask the silver so that nobody knows it, then "got silver" may be used to unmask "the silver" so that everybody knows it. In this post, I would like to share some idea about "Here got silver 300 taels".

Now, let's say you are in a shopping mall, XXX salesman approaches and tells you that he is a honest man who would like to introduce a good financial plan for you. Based on the knowledge (that is "Here no silver three hundred taels"), no honest and bad financial plan equal to got honest and good financial plan, respectively. In contract to "Here got silver 300 taels", got honest and got good financial plan should be no honest and no good financial plan. Thus, we should not believe him.

However, due to our perception to his attire, smile, and friendly (or sexy) voices, we probably believe him as what he said. Besides, the use of neural language programming (NLP) will further weaken our defensive mode and manipulate our thought, indirectly.

Is the XXX salesman a honest man? Is the financial plan good? or is it simply another "Here got silver three hundred taels" trick?

Frankly speaking, we do not know whether a person is honest or not in such short period of time. Because "Honest" does not be written on the face of a honest man. However, we can assess his proposed financial plan to determine his characteristic.

Personally, I have studied lots of financial plan, investment plan, etc. None of them attract my eye balls. This is because many hidden costs mashed in the plan. Moreover, after using IRR to assess its internal rate of return or effective return rate, I will have sufficient evidence to reject such financial plan. Normally, the IRR of each plan is almost the same: For safe one, it will almost same as the rate of fixed deposit; for the risky one, it will from 6 to 12%, excluding those hidden costs. If the plan is too good to be true, I afraid either the credibility of the person is very low or he is simply a victim.

I hereby provide two questions for you to consider:
(1) How long should we need to determine the characteristic of a person?
(2) Is the financial plan so good, why they still want to introduce it to public or strangers?

If there is a plan of guarantee 10% annual return, then you can go to the bank to loan 100 billion for such plan. For loan interest rate of 6~8%, your net profit margin will be guaranteed around 2~4%, without doing anything else. With 2% return, your annual return will be 2 billion. Is it too good to be true. I strongly think so, don't you?

Lastly, I always do not believe the so-called Simply-Make-Money plan (such as Guaranteed returns plan and  pay 6 years and cover 20 years plan ) can provide attractive return. Since there is no free lunch in this world, the story of "Here No Silver Three hundred taels" reminds us the lesson. So, personally, I will always get rid of them (unless I want to kill time with them). That's all for today. More fascinating articles and sharing will be updated from time to time in Xaivier Blog. So, you are welcome to subscribe our feed, look at our sitemap or simply visit our Homepage for latest sharing.

Written by: Xaivier Chia

(P/S: The above sharing is solely based on personal insight. Please do not take it seriously. However, your valuable feedback are very welcome.)


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