While discussing the difference between saving and investing, it was suggested that “risk” influenced where the money was “stored”.  So, let’s explore what risk is.
Simply stated, when talking about investing, risk means that the asset could lose value … that it would not be sufficient to pay what it is needed for.  But, simple never really tells the whole story, does it?  For this reason, let’s take a little deeper look at the kinds of risk that an investor has to face.
•        Credit Risk – also known as default risk, this is the possibility that someone to whom money has been loaned will not be able to repay the debt as promised.  This risk is most common when someone has purchased bonds.  Example:  you have loaned money to a friend.  When the day on which the loan was to be repaid, your friend tells you that he/she does not have the money and cannot repay you as promised.
•        Interest Rate Risk – this is another risk faced by someone who has purchased a bond.  It is the risk that the lender has tied up his or her money in a loan paying a low interest rate and, when interest rates rise, the lender will not have that cash available to lend at the higher, more profitable, interest rate.  Example:  you have loaned money to someone at 5% interest.  This was all the money you had available to loan.  Now, someone else approaches you and states that, if you will loan them money, they will pay you 6% interest.  Since this would be a profitable business deal, you would like to make the loan.  However, you have not yet been repaid by the first borrower so you are unable to make the more profitable loan.
•        Market Risk – this risk can be faced by someone who has either invested in stocks or bonds.  It is the risk that you will not be able to sell something for at least as much as much as you bought it for; or, the item cannot be sold at a profit.  Example:  you bought an asset for $5,000 and, now, no one will pay you more than $4,000 for that same item.
•       Liquidity Risk – this risk can affect anyone who buys any asset; stocks, bonds, real estate, any asset.  This is the risk that your asset cannot be turned into cash when cash is needed.  Example:  ten years ago, you purchased trading cards that you hoped would go up in value.  Today, you find out that these cards are no longer considered valuable and no one will buy them from you.
•       Inflation Risk – this may be one of the most insidious risks people face because it means that money won’t buy as much in the future as it buys now.  Example:  imagine that you had a $100 bill ten years ago.  Because you knew that you would need it and could not afford to lose it, you had it sealed in a can and buried it in the back yard.  You clearly marked the point where it was buried and guarded it to ensure that no one dug it up and stole it from you.  To understand the impact of inflation risk, ask yourself how many bags of groceries you could have purchased with that $100 bill ten years ago; then, ask how many sacks you could fill with that same bill if you took it to the store today.
Clearly, there are different kinds of risk and there are steps that can be taken to protect yourself against those risks.  Managing risk is a topic that we will explore in another article.

Personality Types and Leadership – Part 3

At one time or another, most companies boast that, “Our most valuable asset is our people”.  While many may say it, one type of leadership personality LIVES it.  COREMAP® calls these special people Relater Personalities.
Relater Personalities as Leaders

When it comes to putting people first, few do it better than the Relater-Leader.  This individual demonstrates his/her commitment to doing what is best for “his/her people” in every word and action.  Consequently, he/she is genuinely loved by followers.  The traits that foster this love include:
• Develop Team Spirit and Loyalty – The Relater-Leader creates an environment in which every member of the team is valued; every idea and opinion deserves to be heard.  While the leader may have to make the final decision, it will only be made after hearing everyone’s input.  The Relater-Leader truly believes that his/her people are the very best at what they do; no one can do it better.  For this, the followers deliver a 110% effort because people want to live up to those expectations of greatness.
• Coach, Praise and Encourage – When the team is doing well, the Relater-Leader praises the team’s efforts and lauds their successes; encourages everyone to “keep up the good work”.  When things are not going well; or, when an individual’s performance needs correction, corrective actions are undertaken in a manner that makes the follower want to do better.
• Build Consensus – It is a rare project in which all participants are in 100% agreement.  Far more likely is a disparate range of opinions and beliefs that must be reconciled if the team is to make real progress and complete the task at hand in a timely manner.  This is where the Relater-Leader can truly excel because he/she is good at bringing these various factions together and having all parties feel that they had an opportunity to voice their beliefs, opinions, strategies; and, that the final decision was one that all could support.
While I have no idea if President Eisenhower was a Relater Personality, I can think of no finer example of Relater-like behavior than then General Eisenhower’s handling of the people involved with the D-Day invasion of Normandy.  As Supreme Allied Commander of the European Theater of Operations, “Ike” had to balance the egos of both Generals Patton and Montgomery; the belief of some in both the British and American bomber commands that bombing alone could win the war; the Soviet demands that the second front be opened immediately; and, a weather forecast that provided an extraordinarily narrow window of opportunity to launch the invasion with both acceptable weather and tides.  After hearing input from all parties, General Eisenhower made the fateful decision to launch the invasion on the morning of June 6, 1944.  All parties felt that they had been heard and executed the invasion as ordered.

Saving vs Investment

In all of the financial counseling sessions I’ve conducted; and, in all of the personal finances classes I’ve taught, the subject of saving inevitably comes up.  While discussing the importance of “saving for a rainy day”, one class participant asked me to explain the difference between saving and investing for the future.

Both involve deferred consumption … not spending money today so that it is available for use at some unspecified time in the future.  So, what does differentiate one from the other?  I believe that the distinction is found in two things … where the money is kept and the amount of time that is expected to elapse before the money will be used.


Let’s talk about time as it relates to where we keep our money.  Saving usually implies that the money will be needed in a relatively short period of time; for example, saving money for a new refrigerator or for a new set of tires for the car.  Both examples imply that the money will be needed relatively soon, possibly within the next year or so.  Since the money will be needed soon, it must be kept where it can be accessed quickly and easily; it must be a liquid asset.  Since it will be needed soon, the saver cannot take risks that might lead to less money being available than will be needed; the asset cannot be subject to possible depreciation.  For these reasons, some assets are far more suitable for savings than other assets.

Cash is certainly an asset that can be kept in a variety of locations.  It can be kept in grandma’s old sugar bowl or under the mattress.  Unfortunately, these carry the risk that the funds may be stolen since neither location is secure; and, sadly, there is no way these funds can grow since they earn no interest.

Suitable places to keep savings include savings accounts, money market funds, and certificates of deposit (CD’s) at their local bank or credit union.  All three are low risk; i.e., the value of the account cannot go down.  All three pay interest with CD’s paying a somewhat higher interest rate in return for the depositor’s promise to leave the money untouched for a specific period of time.  All three are designed for the short-term storage of money.  This is why they are good for saving.


Investing, by its nature, carries risk … the chance that the value of the asset might decrease … risk that there may not be enough money when it is needed.  There are many kinds of risk which will be discussed in another article.  For now, suffice it to say that the risk of loss makes many investments unsuitable for short-term financial needs.

Investments such as stocks, bonds, mutual funds, real estate, and real estate investment trusts (aka REIT’s) are much better suited to long-term financial goals.

Personality Types and Leadership – Part 2

If you are like most people, you’ve either met or heard of someone who just seems to attract others like a light bulb attracts moths at night.  He or she is seen as being warm, approachable, magnetic.  When there is work to be done, this person leads others into it with excitement and enthusiasm. COREMAP® calls these people Entertainers.

Entertainer Personalities as Leaders

Just as the Commander Personality brings specific skills to a leadership position, Entertainers bring skills that make people want to follow them; and makes the follower feel special for having chosen to follow this leader.  To separate themselves from the not-so-great, GREAT Entertainer-Leaders are:

  • Great Communicators – By their very nature, Entertainer Personalities have the ability to communicate their thoughts, their vision of the future, in clear and vivid terms.  For these leaders, words are not merely “words” … they are tools that bring their experiences and vision to life … when properly put together and sequenced, they change mere music into the soundtrack of a dream come to life.  For this person, the sky is not simply blue; it is a cerulean blue so bright that it hurts your eyes to look at it for any length of time.
  • Good Listeners – This seems highly improbable since Entertainer Personalities love to talk!  But, the fact is that great Entertainer-Leaders have learned that taking time to listen attracts followers; and, that having listened, they will be asked to provide feedback … they will be asked to talk and their audience will be eagerly awaiting their every word.
  • Interpersonal Skills – Entertainer Personalities love to be the center of attention.  Great Entertainer-Leaders take the time to interact with their followers and make themselves available … to have an “open-door” policy that is backed up with a welcoming, receptive attitude.  Great Entertainer-Leaders have learned that to have an audience that is fully engaged with them, they must give their audience their undivided attention.  When they are with you, they are with you; nothing and no one is permitted to interrupt or distract.
  • Optimistic – No one’s life is free from adversity.  The great Entertainer-Leader though has learned to find the silver lining in any cloud.
    There are no road blocks to progress.  Rather, these temporary obstacles are viewed as opportunities to be innovative; challenges that empower each of us to demonstrate how we can rise up to the challenge and create solutions.  Great Entertainer-Leaders use this optimism to inspire those around them to accomplish things that the followers have never thought possible.
  • Create a “Fun” Environment – For the Entertainer Personality, life is to be enjoyed and lived to the fullest.  The Entertainer-Leader knows that no one wants to slave away in a work environment that is dull, boring, and the days blur into a monotonous week in which nothing distinguishes one day from another.  Consequently, the Entertainer-Leader is going to create an environment in which not only are organizational objectives attained, the wants and needs of each individual are going to be fulfilled as well … an environment that is upbeat, positive, and contains occasional surprises that make each team member smile and eager to see what the coming day will bring.

In Part 1, I stated that Ray was a Commander-Leader.  He also had a lot of the Entertainer-Leader in him, too.  Whether it was a sales contest that made each salesperson want to make one more cold call; or, an end of the day “sale-a-bration” in which everyone returned to the office after their last evening appointment for pizza, he was always finding ways to make working feel like play.  He even found ways to make weekly sales meetings fun.

Anyone who has attended more than a couple of sales meetings knows that they usually follow a template that says, “I know you’ve sold something in the past but that is the past … go sell something today.”  Ray’s sales meetings were different.  He found ways to make them fun.  While I did not witness this one first hand, one of his greatest sales meetings was held right around Halloween.

He had a casket delivered to the office and set up in the meeting room.  Just before it was time for people to arrive for the weekly meeting, he laid down in that casket, folded his arms across his chest and closed his eyes.  When the sales people arrived, they were ushered into the meeting room by his secretary who simply told them to sit down and wait quietly for the service to begin.  They found Ray lying in the coffin and heard organ music playing softly.  When everyone was present, his secretary closed the door letting him know it was time to start the sales meeting.  While everyone sat there wondering what was going on, he suddenly sat up, climbed out of the casket, slapped his hands together and cried out, “Now that I have your attention … Now that you’ve thought about the permanence of death … NOW we’re going to talk about the miracle of life insurance!”  When the meeting ended, everyone of those sales people walked out with a smile on their face, eager to share the miracle of life insurance with a prospective client.  Obviously, Ray did not do this for every sales meeting; but, you can be assured that every member of his sales team looked forward to each meeting, wondering if today was going to be the day he grabbed their attention in a new and unusual way.

NEXT:  Organizer Personalities as Leaders