Key Ingredients to Securing Your Financial Freedom

Do you own a luxury home and/or a luxury car? Many people would take pride in owning such expensive properties and become asset rich. Your assets can be your house, car, cash on hand, bank deposits and investments. You could measure your assets by estimated market value. However, take a pause and take a good look at the other side of the equation. In the accounting sense, there is an opposing element called the "liabilities". How much liabilities do you have? Your liabilities are often debts, such as personal loan, credit card debt, housing loan, car loan, etc. Take stock of your total assets and liabilities and calculate the difference. You will have what we call the "Net Worth". If your total assets are greater than your total liabilities, you have a positive net worth. In simple terms, your money is working for you. On the reverse, if your total liabilities are greater than your total assets, you have a not so good situation called the negative net worth. In simple terms, your have too much debt and need some healthy cleansing!

Bear in mind your assets may not be worth much to you until or unless you achieve a positive net worth. It is also arguable whether a person's home should be classified a true asset. The reason is simple. Suppose you own a half a million dollar home, what are the chances you may settle for a cheaper home after selling your house? For most, it is difficult to go backwards! You probably want to get a decent new home reflecting the current standard of living and/or your "wish" list. Not forgetting, housing prices would probably have gone up over the years and although you may have settled a nice percentage of capital gain over your old home when you sell it, you might still have to settle for an even more expensive new home, plus renovation! Cost of renovation could also get out of control easily if you don't manage your budget tightly.

Besides net worth, another key ingredient is cash flow. I have explained before that cash flow is essentially a reflection of your total income over total expenses. The most important element here is having a positive cash flow, where your income exceeds total expenses. What you should do is to differentiate what gives a positive cash flow. For example, rental property is a good source of cash flow and could be a good source of generating positive cash flow. However, before concluding that it is a good piece of rental property to invest, make sure you take into account all the monthly expenses, including loan installment amount, upkeep expenses, maintenance fees, monthly utility bills, etc. Once you deduct the rental income against all the other related expenses, you will determine whether such piece of property gives you a positive or negative cash flow return. Therefore, don't just jump into any piece of investment before you have fully covered all the potential estimated expenses against your expected income!

So, have a true reflection of your financial position and gun for the positive net worth and positive cash flows, the key ingredients to securing your financial freedom.

Saudi Telekom Buying Strategic Stake in Malaysia's Maxis

Fresh from a recent concluded move by Malaysia's leading telecommunication company to be taken private by its owner, Ananda Krishnan, at a whopping USD1.16b (RM4billion), news just came out that Saudi Arabia's state-owned Saudi Telekom is buying a strategic stake in Maxis for USD3billion! This represents a 25% stake and is a significant boost for the future earnings of this leading telecommunication company that is now planning to expand their business aggressively in other parts of Asian region, particularly India and Indonesia. The strategic stake is believed would allow the Malaysian operator to negotiate more favourable terms with vendors and service providers and help create value for its parent company's shareholders.

5 Critical Success Factors to Wealth Creation

What would you do when your business is carrying a product? Obviously you need to market it. Targeted marketing campaign is essential in promoting your product to your targeted market and in producing awareness. A successful marketing campaign is only one aspect. You need to establish clearly the unique selling point and market it using these unique selling point. You need to understand what entices the target market to purchase your product and therefore target your market accordingly. You may also establish a sales force to help you or your organization to further sell your product. In doing so, you are expanding your reach to specific targeted companies or individuals who are interested in your product. In addition, this adds a personal touch to further differentiate your product from the competitors. In return for the converted sales, you compensate your sales team with an attractive incentive scheme or bonus. In short, one should be willing to give in order to reap the financial gains. This acts as a major catalysts for your sales team to convert prospects into sales. Besides marketing and selling, you need people to take care of back room administration, such as human resource, procurement, logistics, accounting, etc. Salary and staff benefits are of course important elements in motivating this group of people to perform their duties and fulfill your set goals and targets, but these are not the only ones. As a business owner, one needs to demonstrate great leadership in setting clear strategic vision and targets, and driving the business forward. Last but not least, a business owner needs to possess inspirational skills to be able to inspire your key company resources to attaining these goals and overcoming all complexities and obstacles.

In seeking successful business ventures, the above 5 critical success factors are the must haves. The same principles apply to those seeking to achieve financial freedom. In seeking more avenues for passive income generation, one needs to be able to apply these key principles towards wealth creation. Once the "systems" are in place, one can then expand their effort and energy in exploring other business opportunities with the ultimate objective of securing multiple source of income.

Rising Foreign Interest in Malaysia Real Estate

The latest property research released by Credit Suisse has indeed given a great dose of positive injection and reinforces my view that Malaysia property market is on the rise. According to Credit Suisse Research, Malaysia property will experience property asset inflation due to the wealth effect of the stock market, government pump-priming and foreigners snapping up high-end property as a result of perception that it is relatively undervalued compared with other major regional countries such as Hong Kong and Singapore, coupled with an undervalued currency. Credit Suisse also noted that the rise in the stock market would have generated tremendous wealth and should act as a stimulus for domestic consumption. Credit Suisse predicted that Kuala Lumpur could be the next property play after Hong Kong and Singapore. They also observed that visiting fund managers have been deviating from the normal routine of company visits to view property developments in Kuala Lumpur, Penang and Johor.

The rise in property interest is attributed to the Malaysian Government's recent relaxation of policies and plan to speed up public sector service delivery and reduce red tape. These new policies include:
- Foreigners are allowed to buy residential properties priced above RM250,000 (USD71,429) per unit without the approval from the Foreign Investment Committee, and no limits on the number of units;
- Foreigners are entitled up to 70% financing based on the property valuation (freehold property);
- waiver of Property Gains Tax

However, the research also pointed out that Malaysians have yet to become positive on the Malaysian property market. Not surprising, given the typical scepticisms of local community. The trend in Singapore is reminiscent of this as it also took a major move before the average Singaporeans became convinced.

On the other hand, there has been rising interest in properties in Pulau Langkawi (a popular resort island located at the north of Peninsular Malaysia). It was reported that purchasers from Hong Kong and Singapore made up the largest number of foreigners taking up residential properties here in Langkawi.

There is also strong interest in the commercial segment. According to Regroup Associates executive chairman, Christopher Boyd, the freeze on office buildings in Kuala Lumpur since the Asian financial crisis had led to pent-up demand in the downtown area and growth of more decentralised business precincts in the outer areas of the city as well as the suburbs where good accessibility and public transportation could be found. This is evident judging by the strong growth of office and retail market in the following Klang Valley areas such as Damansara Heights, Mutiara Damansara, Bandar Utama and Damansara Perdana.

How To Lead Your Life To Earn Multiple Source of Income

When it comes to earning a living, most people resort to trading time for money and work hard for money. They end up spending long hours in a day trading off their time to earn money. The truth is the moment they stop working, they stop earning. The common mode of trading time for money are employment and self-employed. When we were growing up, we were often told by our parents the importance of finding a good job after our study and work hard to earn a good living. Employment gives people a false sense of financial security. After all, predictability equates less risk and you can certainly count on it. However, most people do not realize that financial security and job security are two separately elements that are equally important. Having financial security does not mean one has job security. Conversely, without job security implies little financial security. A higher salaried position often comes with greater responsibility, work tension, and performance expectations. One may lose his job if he simply does not perform up to expectations. Let's not forget in today's competitive landscape, corporate profitability ranked above everything else, often at the expense of staff retention and employee satisfaction. An employee in the late 40s or close to retirement age will typically feel lesser of a job security as companies prefer fresher and younger talents (at a far lower pay!). With the spate of mergers and acquisitions these days, many employees end up being redundant, and there is nothing they could do about it. These are mere facts of life that we have to accept and get on with it.

It's not to say employment income is not good or cannot lead to greater wealth. It's a case of single source of income is simply not good enough by today's standard. The risk of losing this single source of income is highly possible given the reasons above. It is therefore imperative that one should look at securing multiple source of income. Multiple source of income is also an excellent platform to earning passive income, serving the ultimate goal of achieving financial freedom.

In creating multiple source of income, one should look at money making opportunities that can be self generated and dependent on a reliable SYSTEM. Besides reliability, the system must be automated as much as possible. It is also important that this system must be able to leverage on 3rd party or external resources in generating added capacities. However, initial effort and hard-work may need to be sacrificed in order to build a long-lasting income-generating machine, but the effort is truly well worth it.

Following are some common examples:

- Network Marketing
- Franchising
- Recurring income such as monthly or yearly renewable memberships, subscriptions, property rental income, dividends from stocks, Bond yield and other interest bearing instruments
- Patent or Product Royalty
- Collections from vending machines, etc.
- Internet business

Another important element when evaluating an income-generating opportunity is to understand the financial return, i.e., Rate of Return or Return on Investment (ROI). It's much better to focus your energy and effort into a high ROI opportunity. At the very least, the net ROI should at least double the inflation and the average time deposits in a bank. There again, one's ROI target should also be aligned to the set financial goals, so that collectively the multiple source of income is able to achieve the goals.

How To Achieve Financial Freedom

Many people have worked very hard throughout their lives yet they find themselves never able to achieve their goals of achieving financial freedom. Many people that I know even sacrifice their personal or family time in order to make up that extra bit of success or money, yet they are still not successful in meeting the goal. Why? The answer is perhaps they have worked too hard! What? Isn't that what our parents and teachers have always taught us from day one, that is, to work hard in order to earn a living and to get rich??!! This is where the problem lies...the keyword "work hard" and how our thinking is often being groomed as such.

First of all, let's properly define what "financial freedom" really means. Since there could be many definitions out there, i decide to take it from the worldwide commonly accepted media, the Wikipedia. Here is how Wikipedia defines it: "Financial Freedom describes a well-planned lifestyle where one no longer is required to work for income to cover their expenses". It adds on to say that being in a state of financial freedom does not mean that a person is necessary out of debt! What it means it that one does not have to work for money anymore simply because money is working for one and is consistently more than enough to cover expenses including debt. Ultimately, one can live the desired lifestyle without having to worry about money!

Some may say, " how to make money without working? It's not possible!" Indeed, it involves a major change of mindset. One needs to first start doing away with the bad word called "work" and replace it with "system". E.g., franchising, Network Marketing....these are all Systems. System is also often associated with Automation. The whole idea is to free yourself up doing the more value-added stuff rather than constantly requiring yourself to personally get involved in all major or minor matters.

With "Systems", you need to then understand the word "Leverage". A person by virtue of his or her own capacity is limited in resources, therefore it is important that one knows how to LEVERAGE! e.g., Network Marketing is one of the best form of leveraging due to the fact that you could effectively leverage all your down lines to support your business (and for himself of course) and make money for you too whenever they make money. Get the idea?

Once you have a SYSTEM in place, the next thing you notice is a consistent generation of cash flow. Although the amount of cash flow can often be small initially, the amount of cash flow increases over time due to compounding effect! Imagine you have 5 down lines in your network marketing organization and the same 5 person get another 5 person each under them the following month. This works out to be 25 persons in total! Get it? This systematically generated cash flow is called Passive Income (or Residual Income). Essentially, when one consistently earns more passive income than his or her expenses, he or she is on the right track to achieving financial freedom!

Investments such as stocks and properties are also a very good source of passive income. eg., dividends from stocks, rental income from property. I know some wealthy people out there are earning so much dividend income every year to the extend that they can effectively retire without having to worry about money.

Do I Need Options?

Do I need Options? That's the question, a personal question. No, I am not talking about whether we need options in our day-to-day decision making or in life! I am referring to the magical world of Options Trading.

Why I call it magical? Well, it's because it's one of the few investment tool (that I know of) that can actually make money whether the underlying asset prices go up, go down or even sideways! Sounds great isn't it? Looks simple but indeed the tricky part is one must be able to first make the right prediction on which direction to go for. If the prediction is right, one could gain handsome gain or even a windfall. Here's another interesting part...if the prediction is wrong, you could lose everything (your option investment value) or simply cut losses to avoid losing it all.

Options trading is essentially an investment tool that allows an investor the option to exercise his or her rights to buy or sell an underlying asset at a specific price on or before a specific date. Key to remember is it's an option, not an obligation. There are 2 types of option, being the Call and Put Option. In simple terms, Call option gives the right to buy whereas Put Option gives the right to sell. Option also comes with an expiry date. Upon expiry, the option is simply worthless!

Why use options? First of all, option is much less expensive compared to owning a share. The price is often a fraction of the underlying share price but the potential gain can be huge! Well, options can serve two purposes, i.e, hedging or speculation. Based on the above scenario, an investor speculates on the movement on an underlying stock. If his prediction is right, he exercises his option to make a profit. If his prediction is wrong, he simply do nothing (and ultimately loses the contract value) or cut losses by selling his option. By the way, it's possible that an investor can make 1000% of return in a matter of one day or days if he or she times it to perfection! However, bear in mind timing is more of an art then science!

On the other hand, an investor can use options to hedge against his direct investment in an underlying stock. The idea is to hedge against his stock exposure, i.e, he gets one right and the other one wrong, hence, he doesn't lose completely in the event the underlying stock price go the wrong way. In theory, a person just can't "lose"!

Well, sounds exciting! So, why won't everyone just go for this and makes lots of money? The truth is, this is a highly complex tool and very risky too. An option investor needs to closely monitor the market condition, possesses lots of technical know-how and keeps it tight to the discipline. Else, anyone's investment can just be wiped off overnight!

My conclusion is that options can be a powerful tool to creating riches but is not meant for everyone! A person needs to possess the right skills and experience, appetite, attitude and sound money management. It's certainly not as easy as what some of the experts have quoted!

As for me, I don't mind adding another valuable jigsaw into my investment life but is a huge deterrent to me at the moment due to fact that the timezone of the world's largest option trading market (the US!) is a real disadvantage to me. Why? It's simply because i value sleep more than making money at the expense of health! It's just my choice of life.

Roller Coaster Rides

Lately investors have witnessed a number of roller coaster rides in major markets such as Wall Street and China index. Last week Wall Street had a fair share of the roller coaster rides whereby it fell by close to 200 points last Thursday before rebounding the next day by almost the same quantum. Same old story... fear for inflation and therefore a possible interest rate hike. Higher interest rates could lead to negative impact on corporate profits, higher cost of doing business and worst case scenario, corporate defaults on debts. The fear was triggered by an alarming increase in bond yield, which could make stocks less attractive.

In my opinion, US Federal Reserve is unlikely to increase interest rates in the near future, given the following reasons:
- US economy is still weak albeit the indicators point to a slower growth rather than recession. Higher interest rates will lead to higher cost of doing business, which is something countries want to avoid in the midst of economic slowdown.
- an increase in interest rates will further dampen an already weakened property sector. It will likely cause more bank defaults and this is not what US Government wish to see.

I believe the above scenario should hold as long as there is no drastic changes in the leading indicators and underlying assumptions.

As for China, it's a case of Chinese Government vs local investors in curbing the stocks buying frenzies. The Chinese Government is experimenting with measures to curb the overheating stock market, and resulted in severe seesaw movement in the index caused by panicky investors. However, time and time again China's index recover in the shortest possible span of time. It clearly shows the buying frenzy and over optimisms ain't over yet. With the kind of economic boom China is experiencing, it is perhaps easy to see why over optimisms kick in. It will be interesting to see the Chinese Government's next action plan. Introducing capital gains tax may indeed be one possibility if the situation really gets out of control.

Truly Fascinated!

Yesterday a couple of my friends were sharing their blogs with me and something caught my attention. That thing is called the Google site translator, which effectively is a tool that allows us to translate our blog posts from the primary language (eg., English) into any of 8 other major languages in a matter of seconds!

This is truly amazing! I am truly fascinated with what technology can do for us these days! It's my wildest dream that I could actually write a post in another language!

I immediately try this out today and BANG, it truly works! However, i notice there were some glaring weakness in the translation as the outcome may not be 100% apple to apple translation but there again, i can't complain, can I? After all, I can now potentially have readers from a different part of the world of different languages potentially reading my blog!

By the way, the tool also allows us to give suggestion to a better translation. It does help if it's a another language that you could understand.

You can find the language translation tool immediately before the Blog Archive section (left column of the page).

Truly amazing and thanks Google!

Malaysia Property Making Waves

Most Malaysians would probably think that Malaysia Property are not good enough to compete globally. In most people's minds are issues such as poor quality, workmanship and even conceptual design are often not up to mark. This year's Fiabci Global Property Award has proven that this notion is invalid and in fact, Malaysia is a major force to be reckoned with as the country has emerged the biggest winner of all, winning 4 of the 6 awards!

The Prix d'Excellence is an international award accorded by Paris-headquartered Federation of International Real Estate (FIABCI). It is the most prestigious of global real estate accolades. So winning 4 of the 6 is no easy feat!

The Malaysia property winners are:
Master Plan Category: Setia Eco Park, Shah Alam
Office / Industrial Category: Cyberjaya
Hotel Category: Hilton Kuala Lumpur
Retail Category: 1 Utama Shopping Center (Expansion)

The other 2 winners are:
Residential category: Lysaker Brygge-Lysaker Quays, Norway
Public Sector category: University of Illinois, Chicago, US

The award was presented in Barcelona, Spain last Thursday.

Congratulations to all the four winners and making Malaysia proud!

A Quick Update on Malaysia Property

Following the strings of Malaysian Government effort announced earlier in the year in stimulating Malaysia property market, ever wonder how effective have these initiatives been? Let's take a look at a recent survey conducted by the Real Estate and Housing Developers' Association Malaysia (Rehda) and you could see that the outcome seems highly encouraging. The survey was conducted between April 21st and May 8th 2007.

According to the survey, enquiries from foreigners had increased by 10% while those from locals 35%. Sales of property to foreigners and locals increased by 8% and 32% respectively.

In another event, A South Korean company has bought an entire condominium block for RM64mil (USD19m)! The property is located at Bukit Jalil, Kuala Lumpur. The entire deal was sealed on May 8 2007. The condominium would be redesigned to suit the taste of the Koreans. It appears that they are on the lookout to purchase another block of condominium.

Economically, A Good Start For The Year (Updated)

Malaysia's GDP grew at an unexpected 5.3% in the first quarter of this year, compared to consensus estimate of 4.7%. Both construction and services sector were the major contributor, with 4% and 9.6% growth respectively. As expected, construction sector is aided by the rolling out of 9MP or (9th Malaysia Plan) while the services sector is boosted by growth in the Financial Services, Telecommunication and tourism sectors, in conjunction with the Visit Malaysia Year campaign.

Interesting to note that the Central Bank of Malaysia has adopted Year 2000 as the base year for GDP computation, instead of Year 1987. The move is widely seen as positive, due to an unexpectedly strong first quarter. This also shows that the economic slowdown in US is not entirely a doom and gloom for Malaysia's economy. It could also be an indication that Asia's economy is well supported by the economic boom in China and India, therefore leveraging the impact of US slowdown.

On the other hand, inflation for the first quarter averages 2.6%, which is at a manageable level.

Not forgetting, the local stock market has also done very well, outperforming many countries and becoming the 3rd best performer in the Asia region.

State of Beijing Property

Beijing’s property prices jumped 40% in 2001 when the city won the bid to hold the 29th Olympic Games. In the past 6 years, the compound growth rate has exceeded 50%! In 2006, Beijing’s property prices saw double-digit growth for seven months in a row, making it the hottest real estate market among all major Chinese cities.

This has naturally raised concerns about a potential real estate bubble, just like what has happened in US. Is the Olympics driving up the prices? Will the bubble burst after the Games? Should someone wait a little longer to buy a property? These are the questions Beijingers and investors are increasingly asking these days.

Some property investment experts opine that although the Olympics are fueling Beijing’s property market, it is not the primary factor. Some said the real driving force is the strong demand not only generated by Beijing residents themselves but also by others planning to settle down in the capital. Others think that only 10% of the property price rise can be attributed to the coming Olympics. Afterall, it’s only natural for real estate prices to rise if the economy grows. Recall that China's GDP has maintained a minimum 10% growth over the past four years, and Beijing's growth was 12% last year!

Certain experts think that the end of the Games won’t mean the end of this booming economy, so it’s unlikely that the property market will crash after the Games. "In fact, the boost that the city has received in terms of infrastructure, transportation and facilities will begin to show only after the Games", quoted Capitaland (China) Investment's General Manager Mao Daqing.

Nevertheless, in every optimist there is a pessimist. The pessimists believe that property price rise will slow down after the Games, some experts even forecast a drop afterward.
According to Beijing Statistics Bureau, investment in the city’s real estate sector totalled 171.9 billion yuan by the end of last year, up 12.8% year-on-year. But the growth rate dropped 28.3% compared with early 2006, and that of the residential sector fell from 86% early last year to 15.9% by the end of December. The average sales of property last year also dropped to a record eight-year low, a recent report from the economic research institute of National Development and Reform Commission showed. The report further states that they are expecting a sluggish property market after 2008 or 2009.

Whatever the opinion is, history tends to remind people that most things that go up too quickly will not be sustainable over time. Just remember the current US property market slump and the Hong Kong property market crash in the late 90s.