INQUIRER.net
Q: What's the best way to save these days? I am expecting a big amount of money to come from the sale of a lot we've had in the family for a long time. With the global economic crisis affecting our economy, I want to play it safe yet grow my money. – Edwin
A: It's good that you are thinking of protecting your money (your capital) by investing the proceeds from the sale of your lot. Investing your money may make it grow over time.
Understand, though, that with investing comes risks and rewards. If you want your investment to grow and yield higher possible returns on your investment, be prepared to meet setbacks and losses if they happen. Investments that yield higher returns come with higher risks such as heavy losses, as what stock market investors have realized last year at the height of the global financial crisis. Investments that have low risks may more or less safeguard your capital but give you low rewards as well (low interest income or minimal capital gains).
Bank deposits and government securities may offer you relatively safe investment options.
Bank deposits take the form of savings accounts, interest-bearing checking accounts, and time deposits. You deposit your cash in the bank and you get interest back after a month or so. While this may seem to be safe and will preserve your investment, this may not actually be the case as inflation may eat into your investment.
The current rate for savings accounts, for instance, is about 0.75 percent per annum. The inflation rate is way higher than that, which means that the growth to be yielded by your investment in a savings account will be overtaken by the rise in prices of commodities.
Time deposits may give better rates, but still may not be enough to match the cost of inflation. You may need to keep your money on deposit for a longer term to achieve a higher rate of return.
As “The Citibank Guide to Building Personal Wealth” (a book published by Citibank) says, “Inflation is a major risk if you hold large sums of cash permanently, because it reduces the buying power of cash.” Put simply, inflation may erode the value of your investments over time.
We mentioned government securities above. These come in the form of treasury bills, treasury notes, and treasury bonds. Bills have the shorter term (less than a year), and bonds have the longest term. Government securities are generally low risk since the government guarantees to meet its obligations and pay the published interest rate.
But since you mentioned that you want to grow your money, it may be wise to look into other forms of investment as well to achieve your goals:
1. Stocks or equities may give you high possible returns over the long term, but these come with high risk, which you don't seem to want to assume at this time.
2. Bonds may also give you good rates of return, but these also come with some form of risk, although lower than that of stocks.
3. Pooled funds come in the form of mutual funds or unit investment trust funds (UITFs) and depending on their nature may be invested in stocks alone, bonds alone, money market funds (government securities and commercial papers), or a combination of these.
To keep your money safe and make it grow at the same time, we advise that you do what wise investors have been doing all along: Diversify! Keep some funds in bank deposits, some in government securities, and some in pooled funds. Since you may have other financial goals and may have a timetable in needing your funds later on (example, for retirement), we advise that you consult a financial professional who will assess your risk profile and suggest the best possible allocation of your investments.
You may also invest your money in tangible assets such as real estate property. However, market values fluctuate over time, so be prepared for any eventuality. Investing in a business also comes with a high risk as not all businesses realize income. Jewelry and art are also forms of investment, but bear in mind that it may take a while for their value to increase. Converting them to cash may also take a longer time should you find the need to do so.
Whatever investments you go into, study all aspects thoroughly. Look into the pros and cons before deciding. We wish you the best.
*Disclaimer: Readers are solely responsible for their own investment decisions and should thus conduct their own research and due diligence and obtain professional advice. INQUIRER.net will not be liable for
any loss or damage caused by a reader's reliance on information obtained from our web site. INQUIRER.net
Showing posts with label stock option. Show all posts
Showing posts with label stock option. Show all posts
Monday, September 7, 2009
Friday, September 4, 2009
Miami banker gives $60 million of his own to employees
By Martha Brannigan
After selling a majority stake in Miami-based City National Bancshares last November, all he did was take $60 million of the proceeds _ $60 million out of his own pocket _ and hand it to his tellers, bookkeepers, clerks, everyone on the payroll. All 399 workers on the staff received bonuses, and he even tracked down 72 former employees so they could share in the windfall.
For longtime employees, the bonus _ based on years of service _ amounted to tens of thousands of dollars, and in some cases, more than $100,000.
At a time when financial titans are being paraded before Congress to explain how they blew billions on executives' bonuses even as they received a taxpayer bailout, the big-hearted banker's selfless deed stands out.
"I retired seven years ago, and all of a sudden I get this wonderful letter and phone call," said Evelyn J. Budde, who spent 43 years at City National Bank of Florida, rising to vice president.
"I was shocked," said William Perry. In 43½ years at City National, he climbed from janitor to vice president. Like many longtime City National employees, he forged an unbreakable bond with the bank that continued into retirement. Perry returns regularly for the annual employees' dinner.
Abess didn't publicize what he had done. He didn't even show up at the bank to bask in his employees' gratitude on the day the bonus envelopes were distributed. He was inundated with letters soon afterward.
Asked later what motivated him, Abess said he had long dreamed of a way to reward employees. He had been thinking of creating an employee stock option plan before he decided to sell the bank.
"Those people who joined me and stayed with me at the bank with no promise of equity _ I always thought someday I'm going to surprise them," he said. "I sure as heck don't need (the money)."
In exchange for an 83 percent stake in the business, the Spanish bank Caja Madrid paid $927 million in November. Abess retained a minority share and is still the board chairman and chief executive officer at City National.
Even before the sale, Abess wasn't hurting for money. He bought his 11.8-acre, $23 million estate in Miami's Cliff Hammocks neighborhood from actor Sylvester Stallone in 1999.
Abess' father, Leonard L. Abess, founded City National in 1946 with Baron de Hirsch Meyer as one of the first postwar commercial banks in the region. Abess Jr. started his career in the bank's print shop, which made forms and documents. Working his way up the ladder gave him an appreciation for the role that employees play in the success of an enterprise.
"I saw that if the president doesn't come to work, it's not a big deal," he said. "But if the tellers don't show up, it's a serious problem."
Many people presume that Abess inherited the bank from his father, but he didn't.
In fact, in true Miami fashion, the bank has a colorful history. City National was sold in the early 1980s to an investment group that, in turn, resold it to Colombian coffee magnate Alberto Duque.
The dapper and charming Duque was the toast of Miami _ until he was convicted of bilking two dozen Miami banks out of about $108 million in connection with his coffee business.
Duque went to federal prison _ he eventually fled the country from a halfway house _ and City National went on the block in bankruptcy court.
In 1985, the younger Abess bought majority control in the bankruptcy proceedings for $21 million _ all of it borrowed, he says _ and he later acquired the rest from about 200 investors for about $6 million. Under his hand, the bank grew from $400 million in assets and seven offices to $2.75 billion in assets and 18 offices.
Sharing the wealth with staffers came naturally. Abess and his wife, Jayne, have long been big contributors to local organizations, such as the Greater Miami Jewish Federation and Mount Sinai Medical Center. In 2006, the Abesses gave $5 million to the University of Miami to promote environmental studies.
But he also wanted to reach out to his staff. "I wonder if I did enough," he recently mused.
"I knew some of these people since I was 7 years old. I didn't feel right getting the money myself," said Abess, who was concerned that their 401(k) plans had taken a beating in the downdraft on Wall Street last year.
To prepare employees, Abess made an online video just before the merger was completed and explained in it that a windfall was coming soon. He also wanted to make sure that people realized it was a one-time bonus _ and certainly not severance pay or a nudge for them to move on.
Three days later, about 2 p.m. Nov. 7, a Friday, a handful of senior employees fanned out throughout the bank's offices to dole out vouchers that detailed the sums deposited in their payroll accounts. A handful of senior executives got separate payouts.
"We expected a bonus, but the type we received _ our mouths are still open," said Carleatha E. Barbary, a 39-year veteran.
Geneva Lawson, a 72-year-old safety-deposit clerk who has spent 51 years with City National, including a stint as Abess' boss in the print shop, plans to buy a new car _ and to save a bit.
Workers were provided with financial counseling and special high-rate certificates of deposit at City National.
"It was like a lottery, only better," Virginia C. Dunn, managing senior vice president, said of the gift. "Because it came from someone's heart."
After selling a majority stake in Miami-based City National Bancshares last November, all he did was take $60 million of the proceeds _ $60 million out of his own pocket _ and hand it to his tellers, bookkeepers, clerks, everyone on the payroll. All 399 workers on the staff received bonuses, and he even tracked down 72 former employees so they could share in the windfall.
For longtime employees, the bonus _ based on years of service _ amounted to tens of thousands of dollars, and in some cases, more than $100,000.
At a time when financial titans are being paraded before Congress to explain how they blew billions on executives' bonuses even as they received a taxpayer bailout, the big-hearted banker's selfless deed stands out.
"I retired seven years ago, and all of a sudden I get this wonderful letter and phone call," said Evelyn J. Budde, who spent 43 years at City National Bank of Florida, rising to vice president.
"I was shocked," said William Perry. In 43½ years at City National, he climbed from janitor to vice president. Like many longtime City National employees, he forged an unbreakable bond with the bank that continued into retirement. Perry returns regularly for the annual employees' dinner.
Abess didn't publicize what he had done. He didn't even show up at the bank to bask in his employees' gratitude on the day the bonus envelopes were distributed. He was inundated with letters soon afterward.
Asked later what motivated him, Abess said he had long dreamed of a way to reward employees. He had been thinking of creating an employee stock option plan before he decided to sell the bank.
"Those people who joined me and stayed with me at the bank with no promise of equity _ I always thought someday I'm going to surprise them," he said. "I sure as heck don't need (the money)."
In exchange for an 83 percent stake in the business, the Spanish bank Caja Madrid paid $927 million in November. Abess retained a minority share and is still the board chairman and chief executive officer at City National.
Even before the sale, Abess wasn't hurting for money. He bought his 11.8-acre, $23 million estate in Miami's Cliff Hammocks neighborhood from actor Sylvester Stallone in 1999.
Abess' father, Leonard L. Abess, founded City National in 1946 with Baron de Hirsch Meyer as one of the first postwar commercial banks in the region. Abess Jr. started his career in the bank's print shop, which made forms and documents. Working his way up the ladder gave him an appreciation for the role that employees play in the success of an enterprise.
"I saw that if the president doesn't come to work, it's not a big deal," he said. "But if the tellers don't show up, it's a serious problem."
Many people presume that Abess inherited the bank from his father, but he didn't.
In fact, in true Miami fashion, the bank has a colorful history. City National was sold in the early 1980s to an investment group that, in turn, resold it to Colombian coffee magnate Alberto Duque.
The dapper and charming Duque was the toast of Miami _ until he was convicted of bilking two dozen Miami banks out of about $108 million in connection with his coffee business.
Duque went to federal prison _ he eventually fled the country from a halfway house _ and City National went on the block in bankruptcy court.
In 1985, the younger Abess bought majority control in the bankruptcy proceedings for $21 million _ all of it borrowed, he says _ and he later acquired the rest from about 200 investors for about $6 million. Under his hand, the bank grew from $400 million in assets and seven offices to $2.75 billion in assets and 18 offices.
Sharing the wealth with staffers came naturally. Abess and his wife, Jayne, have long been big contributors to local organizations, such as the Greater Miami Jewish Federation and Mount Sinai Medical Center. In 2006, the Abesses gave $5 million to the University of Miami to promote environmental studies.
But he also wanted to reach out to his staff. "I wonder if I did enough," he recently mused.
"I knew some of these people since I was 7 years old. I didn't feel right getting the money myself," said Abess, who was concerned that their 401(k) plans had taken a beating in the downdraft on Wall Street last year.
To prepare employees, Abess made an online video just before the merger was completed and explained in it that a windfall was coming soon. He also wanted to make sure that people realized it was a one-time bonus _ and certainly not severance pay or a nudge for them to move on.
Three days later, about 2 p.m. Nov. 7, a Friday, a handful of senior employees fanned out throughout the bank's offices to dole out vouchers that detailed the sums deposited in their payroll accounts. A handful of senior executives got separate payouts.
"We expected a bonus, but the type we received _ our mouths are still open," said Carleatha E. Barbary, a 39-year veteran.
Geneva Lawson, a 72-year-old safety-deposit clerk who has spent 51 years with City National, including a stint as Abess' boss in the print shop, plans to buy a new car _ and to save a bit.
Workers were provided with financial counseling and special high-rate certificates of deposit at City National.
"It was like a lottery, only better," Virginia C. Dunn, managing senior vice president, said of the gift. "Because it came from someone's heart."
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