Third Party Ink

The time was midnight and the task was installing my third party ink (TPI) from Ink Station. This was no ordinary TPI, it came in a bottle and all I had to do was to draw out the ink with a syringe(provided by Ink Station) and refill my ink cartridge. Piece of cheesecake, or so I thought.

Some information for the lesser informed: such bottles cost $10 each and they give you up to 10 refills which makes it a dollar per refill!!!! Compare that to $20 per cartridge of authentic ink which translates to over 95% savings per cartridge and you'll be in tears of joy.

I carefully drew out a syringe of that yummy yellow ink and thought (in a sing-song tone): cheap cheap cheap cheap cheap. Now came the insertion, which I did expertly though somewhat excruciatingly. Now for the pump so I pressed the syringe. Emptiness flooded the cartridge. I pressed again, this time harder. Emptiness remained. My fingers are so weak, I thought and I pressed again. My world turned yellow.

The ink squirted over my face, walls, floor and ink cartridge (but not a drop went in the ink cartridge). Horrified and yellow-faced, I let out the a death-defying silent shriek (for fear of waking my sleeping folks) and half limped, Mas Selamat style, to grab a mop (for fear of staining the floor with my yellow feet).

Now you say, what on earth has this got to do with finances other than a wasted $10? Well it is hell more than that. It is Risk.
I took a Risk by buying TPI hoping to capture the savings of 95% and ended up incurring a dead weight loss of 50% ($10 is half of $20). This is not unlike how people risk buying stocks instead of going for the good old boringly stale mutual funds. Mutual funds, like original ink, come with a price. The price you pay to the fund managers for managing the portfolio. Stocks or shares seem so much more exciting and mutual funds are for wussies.

People always complain about the 'hidden costs' that come along with mutual funds but you seldom hear about people complaining about the 'hidden risks' in stocks! In my opinion, its a pretty simple situation. You park your money in mutual funds (preferably index funds which follow the movement of indices) and that's pretty much the end of your homework, no more scanning of financial news, research of company accounts, waiting for insider information etc.

The most important 'hidden cost' of any mutual fund or unit trust is whether it is a front-end load or a back-end load fund. Front-end loading simply means a sales charge incurred at the point of purchase of the fund. Back-end loading correspondingly means an 'exit' fee when you sell the fund. Not exactly rocket science.

There are so many reasons why I find mutual funds seductive and in time to come, I will cover them all. Meanwhile it is recommended by most financial experts not to have more than 30% of your portfolio in stocks.

It is also recommended by most printing experts not to buy TPI because it will spoil your printer-head and spray your walls yellow.

Not convinced by me? Well go ahead and buy all the stocks you want.

Just be careful not to end up yellow-faced.