How To Invest in Individual Stocks Using EPF Money

Phillip Capital Management (PCM) is one such company licensed by Securities Commission and an approved Fund Manager for EPF. In order to invest your EPF money with Phillip Capital to buy individual stocks, you will need to first of all satisfy the criteria set by EPF as summarised in my previous article "Can You Invest In Individual Stocks Using EPF Money?"

Calculation example:

Procedure:

1. Fill up the application Form KWSP 9F (AHL) which you can download from EPF website or visit your nearest EPF office.
2. Download or obtain a copy of the latest EPF statement
3. In the Form, indicate the amount you are entitled to withdraw and submit it to PCM, together with a copy of your MyKad, and that's about all!
4. PCM will then submit the relevant documents to EPF for processing, which is expected to complete within 2 to 4 weeks.
   
5. Once completed, the funds will be transferred into your PCM trust account.
   
6. You may start to purchase any of your desirable stocks using PCM's online trading platform.

Upon disposing the stocks, the funds will be returned to the PCM trust account. Upon termination of account, the funds will be reverted back to your EPF Account 1.

Other noteworthy Terms & Conditions:
- upfront fee of 3% chargeable by PCM. Withdrawal from EPF is free of charge;
- annual management fee of 1.5% is chargeable by PCM;
- normal on-line trading brokerage & admin charges at about 0.55% of transaction amount is payable;
- minimum holding period is 1 year. Termination only upon one month's written notification thereafter;
- minimum investment is RM30k but can be broken down into trunks starting with RM10k, as long as the minimum amount is satisfied within one year;
- Stocks are only applicable for equity stocks, excluding warrants or any other preferential stocks

Do manage your risks before investing! Best to adopt defensive strategy as EPF money is not meant for excessive speculation!

Can You Invest In individual Stocks Using EPF Money?

Many people are probably aware that they can withdraw money from their EPF (Employees Provident Fund) savings to invest in ministry approved Unit Trust funds. However, many are probably not aware that there is also a way to invest the EPF money on individual Bursa Malaysia stocks!

Some people prefer the idea of leaving the tough decisions on choosing the right investments with Unit Trust Fund Managers but in doing so, they effectively relinquish control over how the money will be invested. Ironically, the objective of Fund Managers are often to safeguard their jobs, instead of looking after investors' best interest, i.e., make money and return on investments!

On average, EPF's average annual rate of dividend is between 5% to 6%. The rate of return is no doubt better than Fixed Desposits (FD) return but for the savvy or wise investors, this sort of return is barely sufficient to counter inflation! (By the way, forget about the so-called officially reported inflation rate of 2% to 3% because the reality is much higher than that!)

So instead of keeping all your money in EPF or leave the money with someone else, why not consider moving some money from EPF to investing in individual stocks of your choice? Without doubt, there are risks with this approach because one can potentially lose this hard earned money if the wrong choice of stocks is chosen! With the stock market being so volatile, you may think that this is extremely risky!

To mitigate the risk, one of the key success factor is through first of all doing a little bit of homework up-front and selecting stocks or companies that possess good quality and fundamentals, plus supported with decent dividend yield. To be comparable with the annual rate of dividend from EPF, one should look for dividend yield that can at least match EPF's if not better. A scan across some of the quality Bursa stocks will reveal that a number of companies under REITs and consumer businesses generally do fit such criteria!

So how do you qualify to withdraw funds from EPF for the above investment? Let's list down some of the salient points:

1. savings of at least RM5,000 more than the Basic Savings amount required in Account 1, and must be equal or below 55 years old. The basic savings is the minimum amount you must have in Account 1 before you can apply under this scheme. The table below shows the different minimum savings required for people of different ages:
   
   
   2) 20% from your savings in excess of your Basic Savings amount in your Account 1, that means the minimum amount for investment withdrawal is RM1,000.00, given the condition set in point (1).
   
   3) Formula of eligibility = (Account 1 – Basic Savings) x 20%.
   4) Investment can be made at the intervals of 3 months from the date of the last transfer, subject to the availability of the required balance in Account I.
   5) Investment must be through appointed external Fund Manager by the Ministry of Finance. Click here for the complete list.
   
   I hope this gives you an idea of an alternative form of investing, for your hard-earned savings that you can't simply screw up, i.e., EPF. In my next post, I shall touch on precisely how you can invest in individual Bursa stocks using your EPF funds and the inherent costs that you should be aware of.
   
   Here's the link to EPF should you require further clarification.

The Inevitable...Postage Rate Hike

After much speculation, I just got the confirmed news that POS Malaysia will increase the tariff or postage rate effective from 1st July 2010! Frankly, I foresee the rate hike is a matter of time, given that the last hike was way back in 1992!

As per the information that I have gathered so far, the postage increase will affect domestic postage stamps for standard mail below 50gram, non-standard mail below 100 gram, periodicals, and PosDokumen.

Here's the quantum of increase....
- For standard mail weighing up to 20 gram - RM0.60 to 0.70 (from the present RM0.30 to RM0.40).
- For others in general, the quantum of increase is 75%.

The higher postal tariffs effectively paves way for POS Malaysia to raise employees’ salaries (which is currently reported to be below the average government servant’s salary) by 30%.

In addition, the higher earnings will also pave the way for the company to undertake it's aggressive transformation plan such as potential mergers & acquisitions, revamping operational efficiency and cost reduction exercise.

No wonder it's share price has also shot up the past few days...let's take a look. "Someone" obviously knew this is coming for sure!

Is US stock market on verge of another big rally?

Some experts say investors are starting to believe that the U.S. stock market is on the verge of another big rally.

The fact is, Dow Jones Industrial Index have just posted new high above 10,800 compared to previous high posted in January 2010.

US's National Association of Realtors reported a drop in homes sales last month that wasn't as steep as forecast.

However, the report on housing was typical of recent economic numbers that have been somewhat better than expected but still point to a weak economy.

For now, it appears the sales numbers aren't disrupting hopes that the economy can recover even if there is only a slow stabilizing in the housing market.

A month ago, investors shrugged off an 11.2% drop in sales of new homes.

The market's continuing advance has been welcome but analysts are divided over whether stocks have run too far or if they have more to gain because of improvements in the economy. The story on investors is that they are afraid of missing out on further gains, after seeing the Dow making new highs.

On the other hand, investors seem optimistic about the health of corporate earnings for the January to March quarter.

Also, unlike the developed nations, Asia (excluding Japan) is still growing and certainly is the place to be at least for the next couple of decades. So despite America's and Europe's problems, it's a mere fact that there are certainly plenty of light at the end of tunnel elsewhere! It's a certainty that American companies will follow suit where the money is.

However, the issue on sovereign debts of Dubai and Greece has still not gone away, despite plenty or reassurances from various party.

As always, there are two sides of the coin to look at. One can be optimist or pessimist. May be one more for being neutral? Whatever it is, I always believe in following the trend, and that's where the smart money is. Current trend obviously still point to the north (up trend), supported by relatively strong volumes, amidst intermittent signals of danger looms!

Why do I say so? Well, simply the hot money (or better termed as liquidity) is still there, no matter what people say. The smart money has come to the realization that money has to be invested and parked somewhere (to counter inflationary stress), no matter fundamentally it's right or wrong!

However, the musical chair will stop one day of course....So until then, let the party moves on.

The Year of the Tiger, A Year Of Volatility?

The tiger is characterized by being energetic, optimistic, impulsive and restless. 2010 is the year of tiger in the Chinese lunar calendar (4708). People born in this year are believed to be adventurous, sensitive, emotional, risk-taking, smart, and straightforward by nature.

Chinese New Years falls on 14th February 2010. Celebrations start on the eve of the new moon and end 15 days later with the full moon lantern festival.

According to many Feng Shui master, 2010 Year of the Metal Tiger will be a Bad Year! Inside the Tiger, there is Wood, Fire and Earth elements. Here lies the "problem", ie., having no water element is the problem!

So, if the Feng Shui views were to be believed, then expect high volatility in the global stock markets for the year of 2010! Already we have seen glimpses of trouble started off by Dubai, followed by the PIIGS (Portugal, Italy, Ireland, Greece and Spain). With further tightening of lending by Chinese Government to curb speculative activities, and the imminent raise of interest rates by the U.S. in the near future, risk aversion will likely return to haunt the markets as USD-carry trades being unwinded.

Things can only return to the better unless the fundamental aspects of the real economy such as consumption, exports and employment return to normal.

Last but not least, I would like to wish all Chinese a Happy and Prosperous Chinese New Year!

New Roads to Travel,
New Skies to Conquer,,
New Dreams To Live,
New Hopes to Cherish,
It's the Beginning of Yet Another Year,
May it Be a Fulfilling Experience For You!
A Year of Excellent Health, Wealth, Happiness and Wisdom!
Happy 4708!

A Case of Reality Check

2009 was a stellar year for global stocks recovery. As I had written before, it was more hope than factual when global funds decided to take on an optimistic route. 2010 is expected to be a lot tougher, in the sense that what was expected last year must bear fruit this year, in order to sustain the bullish views across global economy and investments.

Last year (until the beginning of this year) we saw massive inflows of funds into emerging markets particularly like China, frenzily mopping up undervalued equity stocks and real estate properties. Property prices in Shanghai, for example, has even surpassed the previous highs made before the 2007 financial crisis! Things were beginning to look more bubblish and speculative than solid fundamental!

Problems began to emerge towards the end of 2009, in places like Dubai where they were not able to service their massive debts, to the point they need to be rescued by Abu Dhabi's sovereign funds.

Next in line comes some of the European countries commonly known as the PIIGS (being Portugal, Italy, Ireland, Greece and Spain) who appear increasingly unable to service their respective sovereign debts.

The key question in everyone's mind is that will this snowball into a global issue? Thus turning it into a double dip recession, as what some economists have predicted?

Worries about Europe caused the Euro to hit an eight-month low against the US dollar.

The perception of US Dollar may even turn to become a safe haven! Some analysts are also predicting a bullish rally on US Dollar this year against world major currencies!

Merry Christmas & Happy New Year

I would like to take this opportunity to wish all my friends a MERRY CHRISTMAS and Happy New Year! May the good times and treasures of the present become the golden memories of tomorrow. Wish you lots of love, joy and happiness.

Happy investing and many good returns ahead in 2010!

China Stocks To Rally In 2010?

Source of Article: Bloomberg

Chinese shares may rise as much as 35% next year as the yuan strengthens and earnings growth accelerates, according to Greenwoods Asset Management, manager of this year’s best-performing Chinese long-short equity fund.

According to Greenwood's Hong Kong office head Joseph Zeng, the gains by A shares denominated in yuan in Shanghai and Shenzhen will probably exceed a forecast increase of as much as 30% for mainland companies’ H shares traded in Hong Kong. Zeng's prediction is that China shares will extend gains as they have yet to enter a speculative “bubble”, and now trade at about 24 times estimated earnings, below the 10-year average of 35 times. In addition, China will probably yield to pressure from trading partners by allowing the yuan to appreciate by between 4% and 6% by end-2010, easing imbalances that worsened the global economic crisis.

The Shanghai Composite Index has jumped more than 8-% this year, as the government implemented a four trillion yuan stimulus package and allowed banks to lend beyond targets to support an expansionary monetary policy.

However, the US$1.3 trillion credit boom and a revival in the property market have triggered warnings about possible asset bubbles by officials and investors. Zeng on the other hand believes that overall property market isn’t in bubble territory yet either, because the “big gains” in prices were mainly confined to major cities.

According to Zeng, Greenwoods’ US$174 million Golden China Fund has 30% of its portfolio in A shares. The fund favours companies whose A shares are trading at lower valuations than their H shares. It also likes companies with “compelling valuations” in industries that are under-represented in Hong Kong, including Hundsun Electronics Co, which develops software for financial companies.

The Golden China Fund, which invests in A shares, H shares and American depositary receipts of Chinese companies, rose 137% year to date as of Oct 31, the best return among Chinese long-short equity funds, according to data from Bloomberg and the company. It also has the highest total return over one year, three years and five years among 37 peers tracked by Bloomberg.

The Worst Is Over? Listen To What the Two Richest Men Have To Say

Capitalism is still alive and well, say the world's two richest men, despite lingering shocks from the longest, deepest recession since the Great Depression.

During a live interview in an auditorium filled with nearly 1,000 people at a CNBC-sponsored event at Columbia University in New York, Warren Buffett, the CEO of Berkshire Hathaway, and Microsoft founder Bill Gates fielded questions from Columbia Business School students on the recession and investing.

Most notably, Warren Buffett said that the financial crisis is behind us, and the bottom has come in stocks, therefore do not pass on something that's attractive today!

Both Buffett and Gates also agreed that although mistakes were made, the fundamentals of the American system and a marketplace-driven system where American invest in education and innovation, coupled with a great long term infrastructure, will continue and augurs well for the future of U.S."

To watch the video of Warren and Gates interview, click this link.

For the full article, visit Yahoo News

For Buffett's latest view on investment, click this link.

Is Gold Truly A Safe Haven?

Following my post on "How To Invest In Gold?", I received a number of queries on whether investing in gold is truly safe as projected by many investors or analysts.

For the matter, i can assure you that all investments come with risks, with gold being no exception.

With gold prices reaching record highs and recently exceeding USD1,000 per ounce, there were many bullish calls for gold to scale even higher!

Before you decide to jump into the gold rush, i recommend you to first read this new book written by Doug Eberhardt. The title of the book is "Buy Gold Safely". The book reveals the importance of gold, how you can keep your gold investment secured, the underlying secrets of gold investing that the experts do not want you to know, common pitfalls to avoid while investing in gold and much more!

Click Here!

Although some of the information contained in this book are slightly outdated, it certainly pays to understand how gold mechanism works and why it is absolutely critical in preserving our wealth and maintaining a balanced investment portfolio!

On the other hand, do not make the mistake of simply assuming investing in gold at any time is good! Remember the big correction in gold prices in 2008 from the peak of 1000 to the low of 712? Understanding the state of affairs and a sense of timing are still essential!

Click Here!

How To Invest In Gold?

Arguably, gold is the only investment asset class in the world that is widely perceived to be the safe investment haven. Many investors will therefore choose to invest in this precious metal as part of their wealth preservation and creation strategy.

During last two years, when all the asset classes have failed to perform, gold is the only investment asset that has remained outperformed. As such, Gold is also widely believed to be the best hedge against the U.S. dollar and inflation. When U.S. Dollar falls, demand for gold is set to increase as investors sought to preserve their wealth. In addition, gold has a very low correlation with other asset classes like equity and debt thereby it's a very good asset to diversify for the overall portfolio.

The most direct way of investing in gold is to purchase the physical gold bullion directly from financial institutions or dealer. You can then choose to safe keep the gold yourself or the safer alternative is to keep them in a secured vault owned by third party such as banks.

Instead of holding physical gold bullion, there are a number of other forms of investment in gold without the need to hold physical stock. In Malaysia, both Maybank and Public Bank offer the convenience of gold investment account with a passbook, whereby every trade is done through the account without the involvement of physical stock. Transactions are highly liquid as the buying and selling are based on the bank's prevailing quoted buying and selling prices.

Other means of gold investment (without physical delivery) include Gold Exchange Traded Funds (ETFs), unit trusts (mutual funds) and also the choice of investing directly in gold mining companies.

Gold ETFs are open-ended mutual funds that are passively managed and they mirror the return of spot price of gold. Gold ETFs are listed and traded on stock exchanges just like stocks. As such, the cost of trading Gold ETFs is lower compared to mutual fund type of investment. Gold ETFs provide returns, which before expenses, closely correspond to the returns provided by physical gold. Each unit is approximately equal to the price of 1 gram.

Some of the most popular regional gold ETFs and mutual funds include:
- DWS Invest Gold and Precious metals Equities (listed in Singapore)
- United Gold & General Fund (listed in Singapore)
- DWS Noor Precious Metals Securities A USD (listed in Singapore)
- SPDR Gold Trust ETF (listed in U.S., Hong Kong, Singapore and Japan)

Here you are some of the gold investment vehicles available for your consideration, should you decide to get hold of one of the world's most highly sought after precious metal!

Exchange Traded Fund vs Mutual Fund (Unit Trust)

During an uptrend market like the current, you may consider to invest in an index linked security (alternatively also known as tracker fund) instead of trying to pick the right stock. An index linked security essentially links its performance according to the broad market index performance, such as Dow Jones Industrial Index or Malaysia's FBMKLCI. Locally in Malaysia, there are many index-linked unit trust funds available in the market. However, before you consider parting your money in an index-linked Fund, understand your cost of investment and consider the alternative such as ETFs (Exchange Traded Funds).



ETFs are baskets of securities that trade like stocks on an exchange and are designed to track the performance of an index. Examples are FBM KLCI ETF Fund and MyETF Dow Jones Islamic Market Malaysia Titans 25, the first Syariah compliant ETF in Asia.

Investors who want to buy an index linked unit trust fund may be better off buying the ETF which does exactly the same. The obvious benefit is that the cost of ETF is cheaper. This is because there are no management and upfront fees, unlike unit trusts.

 The upfront fees for unit trust in Malaysia on average is about 3% to 5% but could be as high as 7%!

Besides, a unit trust fund may charge up to 1.5% a year on management fee, which is much higher than the 0.5% charged by the FBM KLCI ETF.

Buying ETF is exactly the same as buying a stock, with the same lot size of 100 units. Unlike unit trust, buying and selling ETF is easy and traded real-time. Dividend is also distributed by ETFs generally on a half yearly basis.

So next time when you were to be approached by unit trust salesperson, find out about the cost of investment first. Don't let the hidden charges affect your fund performance.

The Age of Buy and Hold Is Over?

Based on various feedback, this is a mixed view. Some say the age of "buy and hold" stocks and/or equity related investments is simply over, simply due to the fact that economy and business are cyclical in nature. For instance, many stocks (even the bluest of blue chips) effectively wiped out the entire gains made during the last 10 years in just one year of global economic crisis last year!

On the other hand, others say that adopting the "buy and hold" strategy is the best strategy to investing as it is not possible to time the market in terms of peaks and troughs.

Personally for me, the "buy and hold" strategy will not work at turbulent times like this as every single company 's market share will be severely affected by sentiment. Instead of "buy and hold", the likely apprroach during such time in fact is "dump first, think later"! The objective of course, is capital preservation.

However, the strategy of "buy and hold" may make sense during market bull rally. For instance, US market went through a 5 year up trend from 1995 to 1999, followed by from Year 2003 to 2007. Notice that market went through a 3 year correction from year 2000 to year 2002. Assuming the stock price performance is correlated to the index, it would be wise to take some profit during initial market downtrend instead of waiting out for the unknown.

Year 2007 to date performance is a classic example where things really turn nasty! For those who hold on to their investments, chances are the entire gain built up over the last 10 years or so may be wiped off completely! Is it worth while to continue with the gung ho approach then?

So the question is how do you tell the market is undergoing bullish trend or bearish trend then?

Answer lies with Technical Analysis. As technical chartists often say, the charts do not lie! Mind you, technical charts are no crystal ball! They serve the purpose of serving a strategic or tactical guide, based on market "psychology" which will be reflected in the chart. As one say, the Trend is your Friend! Do not fight against the trend when it comes to trading or Investing! Tonnes of hard earned gains accumulated over the years could well be wiped off in an instant!

At the end of day, trade or invest with the trend rather than fighting it. One may not be able to time the market perfectly but at the minimum invest with proper risk management in place is the key to long term success.

Similarly, one needs to know when to cash out when the trend changes. No point be the hero. After all, IT'S YOUR MONEY!

How To Invest At A Point of Maximum Pessimism

Want to know how to invest at the point of maximum pessimism (given current stock market's doldrums)? Below is an experts' view on investing techniques at current market pessimism and where Malaysia stands from both economic and technical perspective.

The live interview was conducted by TheStar newspaper on 20th February 2009. This video may be a tad back-dated but the interviewees certainly gave a full-hearted and frank opinion on current business and market conditions, and sharing good ideas on investing for better future returns.

Here's the video. Enjoy.

Beware Of The High Yield Trap

Many analysts and advisers have been recommending high dividend yield stocks as one of the most effective and defensive instrument against the current beaten down and volatile markets. The principal to follow here is that as long as you are buying or holding on to stocks that continues to distribute decent percentage of dividend on an annual basis, you are assured of receiving at least a decent amount of dividend income, as a cushion against the possible slide in share prices.

The dividend yield is calculated as the amount of dividend per share against the share price. The projected yield is therefore taking into account the future projected earnings and the average dividend distribution ratio. Instances where companies are committed to a certain percentage of their net earnings as dividend distribution augurs well for such defensive strategy.

However, beware of the earning trap, before you jump out of the bandwagon and start collecting high yield stocks!

Technically, as every country is experiencing recession or severe economic slowdown, so will the corporate earnings! This is inevitable as business and consumer confidence will surely take a hit, whether one likes it or not. In some cases, business could be driven down by slower and lesser demand, thus driving them out of business. In most cases, people could well be taking a more cautious or "wait-and-see" approach, thus limit spending. Bnnks on the other hand, are more likely to take a cautious approach to lending, although liquidity may still be abundant. This literally reduces credit availability in the market and ultimately increases cost of borrowing. All-in-all, business and consumer spending sentiment will be affected.

As the above takes place over a period of time, it remains to be seen the degree of severity of the business downturn. As you can see now, more of more companies are reporting lower than expected corporate earnings recently.

As such, one has to review carefully the forecasted earnings of companies before taking the defensive high yielding approach. When the chips are down, do not be surprised that companies may actually declare lower dividends or even cancel them altogether in order to preserve cash (for rainy days)!

Look out for companies that are least affected by the economic slowdown and consistently payout dividends through rain or shine. Companies in the utility sector (such as power generator) may be one of them.

What Does De-leveraging Mean To You?

In 2007, we had the the buzzword carry-trade, followed by sub-prime. Both have had devastating effects on global financial markets! The latest financial buzzword is "de-leveraging". In simple terms, it means that banks, consumers, companies, and the government need to reduce their debt.

From the early 1920s through 1985, the average level of debt-to-GDP in the U.S. was 155%. The highest peak in history (until the recent debt boom) was in the early 1930s, when debt-to-GDP soared to 260% of GDP. In the 1930s, the ratio then cratered to 130%, and it remained close to that level for another half a century.

In 1985, U.S. started to borrow, and last year, when U.S. finished borrowing, the country had borrowed 350% of GDP! To get back to that 155%, U.S. need to get rid of more than $25 trillion of debt!

For a start, U.S. banks have written off $650 billion of debt so far!

Global stock and asset prices in general have been the victim of the global de-leveraging exercise, pushing prices of equities and commodities to unrealistically low levels. This de-leveraging is being driven by the unwinding of over-leveraged positions, and compounded by fund redemptions and frozen credit markets.

The bottom of the markets will happen when this whole de-leveraging exercise ends - which for now is still uncertain. It is important to take note that Lehman Brothers reportedly has between US$40 billion to US$70 billion of assets belonging to hedge funds that are frozen in its UK arm - and negotiations are still ongoing with the administrator to release them.

When the time comes, prepare for another round of "de-leveraging" exercise!

How To Invest Like A Shark

For possibly few lucky ones, it might have been a fruitful journey and were early to read the danger signs but for most, it's more likely to be a rocky road with encounters of many land mines! Given the current financial turmoil the world is facing, perhaps it's time to review your own investment or trading strategy.

I recently come across a fine investment book "Invest Like A Shark" written by James Deporre. Deporre was a featured writer for Jim Cramer's TheStreet.com and RealMoney.com since 2001.
In it he makes the case that you can not only beat the markets consistently, but also make money, or at the very least protect your money, even when the market is tanking.

But DePorre says the way to do it is NOT to do what the mutual funds do or what experts tell you to do - sit around waiting for a fundamentally sound stock to go up. Instead, use your advantage as a small investor to get into a stock already on the way up and hop out before it falls-getting in and out like a shark.

DePorre opines that the vast majority of investors have been brainwashed by traditional Wall Street into thinking that it is just plain foolish to approach the market in any manner other than the way a mutual fund or pension plan might. It has worked for them since the inception of the stock market so it should work for you equally well. The truth is that in most cases traditional investment advice doesn't even work that well for the big funds. The vast majority of funds never consistently beat the major indices, but the belief is still widely held that it is best approach for everyone. Unfortunately, the Whales of Wall Street really have no choice but to invest like whales. They are limited stylistically due to their size and the way that Wall Street works. The problem is that they keep trying to justify what they do by telling the rest of us that it is the best and most profitable style of investing. Maybe it is for them but not for the average individual.

DePorre also believes that investing the way many mutual fund investors did certainly is not the best way for the small investor who is investing his own funds.

The best approach according to DePorre for the average investor, who is managing his own money, is to invest like a shark. That means moving quickly, aggressively and running for safety at the first sign of trouble. It means looking at the market in a very different way than the big institutions and traditional brokers, and it means being in control and not being pushed around by powerful forces that the small investor has no control over anyway. Most individual investors have no clue and never will understand how lucrative and safe it is to be a quick, aggressive fast moving shark in an environment that is dominated by huge slow moving whales.
It is worthy to note that DePorre is not particularly interested in a stock's fundamentals or even what a company does; he just looks for the trend. While he does offers some thoughts on averaging in or doing limited stock sells along the way to take profits, this is not a book offering specific techniques. It's goal is to help you develop a mindset, to start thinking about how the market provides plenty of opportunities for big gains, and how the market often clearly signals when it's time to exit.

DePorre's technique is obviously not for everyone, but for those who are open to new ideas and do not have a good "system" yet to follow, this might be worthy to pick up.

You can get more details about his book on http://www.investlikeashark.com

Should You Gear Up or Pay Up?

One common question i always received, is "Shall I gear up on my loan or pay up the loan as fast as possible"? The answer depends. Confused? Well, there is really no real right or wrong answer here.... The answer lies with the risk tolerance of an individual and to a certain extent, age too.

First of all, let's break this down into different categories...For those who are in the 20s and 30s, it probably makes sense to take on a greater risk by gearing up, that is, leverage through loans with longer tenure, with the assumption that you have a regular income and/or reasonable amount of savings, investments or businesses that are able to generate some consistent decent returns. These group of people generally can afford to take on more risks and in the worst case scenario, they have something to fall back on.

On the other hand, people who are more than 40s and approaching retirement age may consider taking on lesser risk. Bear in mind that the maximum lending age is generally up to 65 years old. Basically one should make sure that one is able to continue servicing the loan post retirement. Another reason why i like properties such as high-rise apartments or commercial properties that are able to generate positive cash flows. In essence, the monthly rental is more than able to pay off the loan installments so you don't need to worry about it too much!

Overall, you should review your own financial goals, resources (such as savings, investments and other diversifications) and risk appetite in order to come to any conclusion. eg., if you settle your loan first, you may lose out on other investment opportunities that may potentially give you much higher returns than your loan rates. On the other hand, if investment is not your cup of tea or if you have limited knowledge, then early settlement may be the better choice since it is a sure gain. Also bear in mind that all investments come with risk, so you need to be able to bear the risk if your investment decisions turn sour!

Other things to consider include the economy and the likely interest rate direction. Currently i would consider a good time to borrow since the banks are offering very attractive rates to the extent of BLR (Bank Lending Rates) minus 2, which works out to be around 4.75% (assuming BLR = 6.75%). However, in lieu of the current high inflation, banks may raise interest rates going forward. So, you could risk paying more interests in the future! However, i believe the rise should be negligible since the current inflation is cost driven rather than demand.

Another important element is from a tax perspective, it may not be advisable to settle early since there are certain tax benefits that come with investment property such as tax deductibility on loan interests against rental income. Effectively you will be paying less tax on your rental income. If you have two loans for your home and investment respectively, settle the home loan first.

Last but not least, if you have credit card debts (balance transfer and installment plan not included), you may consider refinancing your current property so that you could use the excess funds to pay off the outstanding credit card debts! Like I always said, never ever borrow money through credit card!

Do share with me your thoughts.

JG8D69D

Happy With A Savvy Investment Return!

This year has been a very challenging year in terms of the global investment climate...it has been series of negative events followed by another, don 't you agree? Same old concerns keep popping up, from sub-prime to credit crunch, escalating crude oil prices, inflation, etc! So the key question is how fast and how far the bugs are going to spread? God knows, really!

Some experts say 2009 will be the end of the boom cycle. To me, it appears more like 2008! Light at the end of tunnel? Well, may be traces of light at best but still dim, i should say!

Malaysia of course is no exception, although the country has not been hit so badly by credit crunch. However, the current political uncertainties have indeed thrown a large spanner, where speculations constantly alive that the leading opposition party may overturn the Government within the next few months! It does not help the fact that no opposition party has ever led the country to become the Governor. So i could understand the jitters everywhere, especially from abroad!

Like I always emphasize, it's good to diversify one's investment portfolio, instead of putting all in one basket! For the Warren Buffet fans, of course you would say otherwise?

Real estate property is definitely one of the most defensive and stable asset class of investment. Arguably the best hedge against inflation, and generally stands good against time. Of course there are some exceptions, particularly for places where huge price increase occurs and bubble formed. In the not so distant past, we have witnessed that happened for Hong Kong, followed by recently US residential market and Vietnam! Well, the good thing was at least they had a good run once upon a time!

Recently i manage to dispose off one of my real estate property for a decent 45% gain (gross) within 4 years! Not bad indeed! Not to mention the positive cash flows that I had been earning from rental income for the past 4 years too! My gross rental yield averaged 11% to 13% per annum! I have decided to cash out due to receiving an excellent offer at a time when the economic climate is going through rocky roads. I believe i could certainly keep the spare cash for the next better opportunity out there, especially during times of crisis!

Bullish Outlook for US?

In the current doom and gloom over the global financial markets and US stock indices, who would bet there is a bullish outlook for US stocks?

The following post is a direct extract from an article posted by iCapital that i think serves an interesting global view for further market digestion.

As opposed to the doomsday scenario, iCapital thinks the US economy is not falling off the cliff.
We all know that the US housing industry is in dire straits. And based on what is being reported, it would seem that there is no end in sight yet.

On the other hand, when the US housing industry was expanding robustly, there were few who worried there would be a nasty end until the end actually occurred.

Whatever the asset class may be, the behaviour of investors is the same; they are often one-track.

This means that when there is an expansion or contraction, they expect that trend to persist until the trend eventually changes. The same applies to the current housing contraction.

For now, most see the current contraction and the accompanying woes as having no end. Such thinking, of course, does not make sense. Why?

One, the contractions in both sales and starts have been very prolonged.

Two, the contractions in both starts and sales have been steep.

Three, interest rates have dropped, even at the longer end.

Four, as opposed to the doomsday scenario, i Capital thinks that the US economy is not falling off the cliff.

As house prices get lower, the houses become more affordable, which means that eventually housing sales would pick up again. Finally, the population of the US is growing relatively fast.

The chart shows the US population, in total and percentage change, from 1950 to 2007.

During this period, the US population doubled or increased by almost 150 million. In that same period, Japan’s population increased 53% or 44 million.

From 1990 to 2007, the US had an increase of 52 million people or a jump of almost 21%.

In this 18-year period, Japan’s population increased only 4.16 million or 3.4%. Japan’s population peaked in 2004 and is now declining.

From 2004 to 2007, the US added 8 million people.

i Capital strongly believes that the population growth is an important factor.

Besides helping one to understand that the US economy in the coming years will not be like the Japanese economy, post-1990, the sustained and rapid population growth of the US means that the current drop in demand for housing is only temporary.

When the recovery comes, there will be quite a fair bit of pent-up demand to fulfil.

If the current housing contraction ends in 2008, the contraction would have lasted three years and, in that time, there would be eight million to nine million more people in the US.

Taking all the above factors into consideration, one should not be like the lemmings and expect the housing woes and contraction to go on forever.

While it is easy to be caught up with the pessimism, it is time to look beyond the housing valley.

The implication of this for the US economy is simple.

Over the next 12 months or so, instead of being a negative drag on the US economy, i Capital opines that the US housing industry would become a positive contributor to US gross domestic product growth.

Since the subprime problem broke out in August 2007, i Capital has remained steadfastly optimistic over the New York Stock Exchange (NYSE).

If there were one single factor that can prevent a rally or bull market from breaking out on the NYSE, it would not be a prolonged, weak US economy.

As advised previously, the factor would be an overheating US economy and an inflation rate that is too high to bear.

Many economists, investors, strategists, etc have been very pessimistic over the US economy. i Capital does not share this doomsday view.


In fact, i Capital is concerned that all the recent prognosis, worries and fears have resulted in the US politicians, policymakers and central bankers taking too many stimulus actions at the same time and that the end result would be a too-strong US economy.

Such an outcome, which has a reasonable chance of unfolding, would be a major dampener on the NYSE.

Assuming that this overheating, inflationary scenario does not materialise, i Capital’s bullish outlook for the NYSE remains unchanged.

iCapital is a close-end fund listed in Malaysia's KL Stock Exchange. iCapital is owned by Capital Dynamics, the first independent investment adviser in Malaysia. It has been described as "one of the country's most iconoclastic and critical research outfits".