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!

Power Towards High Income Nation....How la?

Our beloved Prime Minister of Malaysia had finally delivered his much anticipated 2010 budget. It was claimed to be a peoples' budget, with the stated aim of elevating the people of this country to high income status....

Sure, a number of positive incentives were tabled, such as:
- reduction of personal income tax from 27% to 26% effective 2010;
- an increase of RM1,000 for personal tax rebate
- an additional RM1,000 for personal tax relief on pension fund and life insurance
- people who are self-employed are given the option to contribute to the pension fund savings at any amount monthly starting 2010, with the Government contributing further 5% to the amount of contribution;

However, the positives are mitigated by the following negatives:
- introduction of RM50 service tax on each principal credit card holder and RM25 for each supplementary credit card holder
- reintroduction of real property gains tax (RPGT) for real estate disposal, starting from 2010, with a minimum of 5% tax regardless of the duration of holding period (Again, a common Government flip-flop policy sickness has reemerged!)
- realigning the fuel subsidy scheme to make sure that it benefits the lower income group....Whatever that means!

Is there really much to shout about? Hang on a second....how are these supposed to elevate the people to become high-income nation? To make things worse, the Government has also slashed next year's targeted GDP growth to around 3%! On the other hand, Malaysia is barely a decade away from its Vision 2020 target and there's certainly little sign that the developed status objective can be achieved by then! As per my understanding, the nation will need to grow something like 7-8% per annum on average for the next decade in order to achieve that and that's a very tall order indeed!

I am sorry, I just don't see how the "high income" word can be associated in this context! It certainly won't work unless there is a radical change in the governing approach and mindset, and with principal focus on meritocracy, liberalization and enhancing competitiveness as the priority.

What's your thought on the recent national budget for 2010? I look forward to your sharing.

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!

Capital Gain vs Cash Flow

When it comes to making a decision on investing, would you choose one based on the criteria of capital gain or cash flow? It's a tough one, isn't it? Frankly, the answer varies from person to person. However, i would say that for most ordinary people, they would prefer capital gain.

Let's quote an example, suppose you purchase an asset for x amount of dollar and sold it for a nice 40% gain in 3 years, versus you purchase an asset for the same amount that gives you say 8% annual return in the form of dividend or rental for instance, and the asset only appreciates less than 5% a year. For most people, they would probably go for the first example, where higher capital gain is made. After all, it sounds more convincing and exciting when you tell your friends or business partners that you have pocketed handsomely in this deal!

Question is, what do you do with the money gained thereafter? Most commonly, there is always a lurking temptation to spend on luxury items when you have spare cash in hand, be it a luxury holiday, fancy car, watches, etc. After all, why wouldn't you want to pamper yourself a "little" for closing a wonderful deal! Nothing wrong with pampering yourself sometimes (good way to recharge the batteries!), but it's the quantum of spending unecessarily that you would want to take caution of. Bear in mind, spending unnecessarily means you are giving away an opportunity to make money work for you in the future!

On the other hand, can you find another opportunity that can give you similarly good financial returns after this? Chances are you may not. So you will end up with plenty of cash on hand and as time passes, the temptation to spend grows!

For me personally, although short term capital gain sounds sweet and exciting, there is no guarantee that a particular investment will yield the expected capital gain. Therefore the risk increases. On the other hand, human nature to spend unnecessarily is also a lurking danger. On the contrary, an investment that can generate a regular streams of income (cash flow) is perceived to be lower risk and helps to sustain your own personal financial position in the longer term. To take one step further, go for investments which generate positive cash flows.

Positive cash flow simply refers to the excess regular income generated by an asset after deducting all the relevant expenses in deriving the particular income. A good example is property rental income where the tenant will pay the property owner rental every month as long as the property remains tenanted.

A good point of comparison is between landed property and rental yield property such as high rise residential apartment. Landed property has bigger potential for capital gain (but not guaranteed) but poor rental yield. That means extra burden having to regularly service the commitment from your own pocket and opportunity cost! On the contrary, good high rise apartment may not generate as high capital gain but gives much better return when it comes to rental yield. In this case, the tenant will finance your property but the property is still owned by you!

A long lasting positive cash flow will help a person or a business to survive and sustain longer, without the need to continuously spend more money and therefore sacrificing other opportunities. As you build more businesses or acquire assets that generate positive cash flows over time, you will find that you have truly gained the ultimate goal of financial freedom!

Nevertheless, that doesn't mean you should ignore capital gain all together! Why not the best of both worlds? According to Robert Kiyosaki, the key to financial intelligence is how to use both cash flow and capital gains to grow wealthy. So many people are not successful, because they’re generally focusing on only one of the two.

Read This Only If You Are Serious In Changing Your Financial Life Forever!

I wasn't convinced but I am now! Before I attended this program, i was just as sceptical as you do...reading the same headline. I thought i knew everything there is to be financially successful but I soon realize that what i lack is a solid financial blueprint of wealthy and successful people. Mind you, a solid financial blueprint, is not just all about money but also about having the right positive and balanced state of mind!

Have you ever wondered why some people seem to get rich easily, while others are destined for a life of financial struggle?

Over the years since we were a child, our minds have been conditioned to think a certain way about money and success. If you have not realized it, this is one of the most important factor affecting our finances today!

You need to unwind these conditioning, and learn how to identify and change your personal money and success blueprint, FOREVER!

Introducing Millionaire Mind Intensive, a program that has touched and helped more than half a million people worldwide and is now coming to Asia!

If you are serious in changing your financial life forever, this is certainly an event not to be missed! Besides, it does not cost you an arm and a leg to attend this program as they are giving a very special promotion price that will simply blow your mind off! (Trust me, it will!)

Click this link now to find out more. To register, all you need to do is go to the bottom of the page, pick the appropriate date and venue, and then fill in the information as required.

This is certainly a weekend worth sacrificing for.....To me, it's one of the best I have ever attended and it has certainly changed my financial life for the better, FOREVER! I sincerely hope you are the next to benefit too.

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P.S.: This is a definite sell-out program. You need to register fast before the seats are gone! FYI, the special promotion price is only valid until 30th April 2009. So Act now!

P.P.S: Be honest with yourself! This program is not suitable for people who continue to live their lives in self-denial! One way is to look at your own results!

Should You Invest In Foreign Currency Account?

What is a Foreign Currency Account? Foreign currency account is essentially an account maintained in a financial institution in another currency other than the local currency. As most banks in Malaysia are offering this facility, you can easily open up one account, with normally the condition that you have an existing deposit account with the bank.

There are several purposes why one would require a Foreign Currency account, namely:

1. An account to hedge against foreign currency transactions whether in the form of business or personal use;
2. Higher yielding interest rates (e.g., Australian and New Zealand Dollar) compared to local interest rates;
3. Children education funding;
4. Individuals with sources of income from overseas;
5. Investment return
   

One should bear in mind the most important factor to consider is the direction of the foreign currency versus local currency, no matter what the purpose are. In other words, one should invest into foreign currency account only if there is a perception or expectation that the foreign currency will appreciate against local currency. Otherwise, the benefits of having a foreign currency account may well have been offset by a depreciating foreign currency even though one may gain from the supposedly higher yielding interest rates for instance.

In general, many have this perception that local currency will tend to depreciate over time but certainly this could be a false perception at times. Economic fundamentals and market sentiment definitely have a large role to play in the direction of currency strength. For instance, the value of Australian Dollar had in fact depreciated by more than 20% against Ringgit Malaysia early part of this year!

Therefore, it's important to study these factors before plunging into any foreign currency or open a foreign currency account.

There are generally two types of account, being call deposit and term deposit account. Call deposit is equivalent to a savings account and in most currency offered, there will be nominal interest rates computed daily credited month-end. Currently, US Dollar does not offer any interests. Term Deposit on the other hand is a fixed term deposit account whereby higher interest rates are given upon maturity.The term can range from 1 week to 12 months.

Locally in Malaysia, there is generally no fees charged for opening a foreign currency account. However, the catch is this.....the bank would have earned from you already the moment you open one due to the exchange rate spread between buy and sell rates. As such, don't be overly excited when the bank officer tells you that they do not charge any fees!

Shall I Accept A Lower Loan Installment?

In view of the current low interest rates environment due to global economic crisis, costs of borrowings have become cheaper and if we were to base on the original loan facility agreement with the bank, the repayment period for the affected loans will be shortened, assuming the same amount of installment were to be paid each month. In some countries, banks are required to voluntarily reduce the monthly installment amount of loans so that the repayment period will not be shortened. In some cases, banks even allow troubled borrowers to stop payment for a specific period of time, or willingly negotiate with the borrower to restructure the terms of loan. The objective of this is simple, that is, reduce the burden on consumers and/or businesses in a challenging time like this.

Some people have sought my opinion whether to accept the reduction in installment amount. My answer to that is why not, even if one has no financial difficulties! After all, one could save a fair amount of commitment each month and assuming one has multiple loans (like myself), the amount of savings each month can be quite sizeable.

There are many advantages reduced commitment can bring to the equation. Among them include:
- excess funds for spending on goods and services. Flow of funds and spending are essential for the growth of economy. An environment without consumer and business spending will just make the already stale situation worse off!

- pay off debts which carry a higher interest rates than one's mortgage loan. Credit card debt is an obvious example. This could lead to significant savings in cost of debt.

- best of all, use the savings from the excess funds to invest wisely. Given that many investment grade assets have been bashed down badly during the past one to two years, great bargains are abundant! For instance, stockmarket is expected to give the best return once the global economy recovers. So for those who have not acquired the knowledge of investing, now is the best time to educate yourself, before it's too late!

Also, keeping extra cash in your pocket at the time of crisis is definitely a wise thing to do. After all, we will not know what may happen next. For instance, job retrenchment, business failure, etc, may just pop up down the road, especially if the economy gets worsen.

One word of caution though, do not expect every bank will voluntarily reduce the installment for you. I know for some banks, you will actually have to write in to request for the reduction. So do not just assume this will be done automatically. Go ASK YOUR BANK now!

Warren Buffett's Words of Wisdom for 2009

Here's a special message from the one of the wealthiest man on earth and is worth your time reading and taking notes....It's simple yet powerful and meaningful.

"We begin this New Year with dampened enthusiasm and dented optimism. Our happiness is diluted and our peace is threatened by the financial illness that has infected our families, organisations and nations. Everyone is desperate to find a remedy that will cure their financial illness and help them recover their financial health.

They expect the financial experts to provide them with remedies, forgetting the fact that it is these experts who created this financial mess.

Every new year, I adopt a couple of old maxims as my beacons to guide my future. This self-prescribed therapy has ensured that with each passing year, I grow wiser and not older. This year, I invite you to tap into the financial wisdom of our elders along with me, and become financially wiser.

Spending: If you buy things you don't need, you'll soon sell things you need.

Savings: Don't save what is left after spending; spend what is left after saving.

Hard work: All hard work brings profit; but mere talk leads only to poverty.

Laziness: A sleeping lobster is carried away by the water current.

Earnings: Never depend on a single source of income.

Borrowings: The borrower becomes the lender's slave.

Accounting: It's no use carrying an umbrella, if your shoes are leaking.

Auditing: Beware of little expenses; a small leak can sink a large ship.

Risk-taking: Never test the depth of the river with both feet.

Investment: Don't put all your eggs in one basket.

I'm certain that those who have already been practicing these principles remain financially healthy.

I'm equally confident that those who resolve to start practicing these principles will quickly regain their financial health.

Let us become wiser and lead a happy, healthy, prosperous and peaceful life."

- Warren Buffet

Interest Rate Cut: How Does It Impact You?

The Central Bank of Malaysia cut its interest rates by 75 basis point from 3.25% to 2.5%. The latest move is higher than the consensus expectation of 50 basis point. The higher than expected rate cut probably reflects a faster than expected deterioration in the country's economy.

In the same token, the Central Bank has also reduced the Statutory Reserve Requirement (SRR) of banks by 150 basis points, from 3.5% to 2%. This potentially neutralizes the expected margin squeeze on banks (due to lower rates) by reducing banks' cost of funds, expanding liquidity in the banking sector and thus increases the capability of banks to restructure loan defaults and helps reduce risk of non-performing loans.

With the latest low interest rates, it's a blessing to loan borrowers but a bane to depositors. For loan borrowers, it is a good time to refinance their existing loans. A low interest rate environment will most likely bring some relief to the property market too.

On the other hand, the lower interest rate should benefit bond yield.

With the slowing economy (and possibility of recession) and volatile investment climate, it is indeed imposing greater challenges to sustaining real wealth creation in the foreseeable future.

Is It Much Easier To Make Your Second Million Than First?

According to surveys in the US, most millionaires are not made by winning the lottery, a brilliant business idea or through inheritance. Most do it the steady way via disciplied savings and investing. But how hard is it to achieve a million this way?

Let's say you start with nothing in the bank and put away $1,000 a month. With income increases and bonuses, let's assume you add to the savings at the rate of 5% a year. After one year, you would be putting away an average of $1,050 a month. With an average return of 8% per annum, you would hit the $1 million within 22 years!

But then, here's the bad news. In 22 years, your million would be worth only about $340,000, assuming annual inflation rate of 5%.

The good news is, given that the assumptions are right, your second million will be much easier to achieve. It the rate of savings remains, the second million would be made in another seven years. The third million, you would make in another four years. Even if you stop contributing after you reach the first million, the second million would be made in nine years, less than half the time it took to accumulate the first million.

If you put away $1,000 a month without increasing your savings, you would go from zero to $1million in 26 years and $2million in 35 years.

In a nutshell, most of the effort is spent in accumulating that first million. Once you get to that level, the magic of compounding and the opportunities that will open up to you, will help you get that second and third million.

They say the rich gets richer, and that is really true.

It's Time To Think About The Future

A piece of advice for investors who have little time to monitor market's daily movement, don't know much about technical analysis, but appreciate long term value and can look beyond the present crisis....

Buy low, sell high...Sure, it sounded simple but in reality, no one can truly predict when is the low or lowest! So, instead of trying to time the market at perfection and fear for losing the plot, let's look at an alternative approach where you can better manage risks and emotions.

For many, it is often hard to think about the world in the next five years from now. It is even harder to think about things that have yet to happen. Still, decisions with your investments should depend on future potential instead of what is happening now and in the past.

A long-term perspective means looking at the potential for your asset in the next five-years. If so, then don’t panic if you have not exited the market earlier and your portfolio is down.

Time to do some reshuffling (asset reallocation) and do not hesitate to chop down the dead woods. If you have wrongly invested in certain assets, cut the losses and shift the funds to the ones with the highest potential for recovery and value growth over the next five years.

Bear in mind, markets react in anticipation of the actual event. As such, you just can't wait to enter the market only until the economy has recovered. On average, markets will react six months in advance of actual. Therefore, it is a calculated risk. For example, if you believe that the global economy will turn better in the second half of 2009, 1st quarter of 2008 may well be the major turning point.

Dollar-cost Averaging is one technique where you can look at to consistently accumulate promising assets going forward. Set aside a certain percentage of your income and keep to the discipline by investing the money on a regular basis (common is monthly). However, make sure the money you set aside are not meant for emergency purposes and is relatively free from emotion, in case you have to bear some short term losses in the event the asset value goes lower.

Remember this, abundance of wealth can be best created during crisis! Now is not the time to feel sorry but to look ahead for opportunities!

Start Buying Now, Seriously?

This is a recent interesting article that i would like to share with my readers. The author claims that it is now the right timing to re-enter equity markets.

Warren Buffett proclaimed that it is now time to buy American stocks, and he certainly led by example. Bear in mind given that Warren is the top 2 richest man on earth, his words are definitely not to be taken lightly.

However, there are also many doomsayers who claim that the worst is yet to come. At the same time, many so-called investment gurus were criticising Warren. They said he was irrelevant to the new economy in 1999, when he refused to buy technology shares. They say he didn’t understand the situation when he said that financial derivatives were “financial weapons of mass destruction” back in 2002. And now they say that he is simply trying to talk up his own investments, when he said recently to “Buy America”. These things they say of the world’s most successful investor. Nobody remembers these “they”, but Warren Buffet continues to make loads of money from his investments.

The reasons in favour of things will get worse include:
1) This time is different, because this is an unprecedented global economic slowdown!
For this reason, the author argued that of course it's always different. After all, if it wasn’t different, no one would panic, and no one would sell their shares, and stock markets wouldn’t fall. However, he also argued that human race has always been able to find solutions to these problems and emerge stronger. This is one of the reasons world stock markets grow over the long term!

Point taken!

2) There's no clear sign that the recovery is in sight!
For this reason, the author argued that if we had clear signs, the stock markets would have gone up a lot, and you would have missed the opportunity to make profits. Stock markets always anticipate economic recoveries. By the time the analysts are able to report clear signs, we would be more than halfway to the top. The author also claim that some of the "clear signs" could well be the fiscal and monetary policy actions undertaken recently by various governments of different countries.

Valid point again!

3) The recession will last for another 3 quarters!
For this reason, the author argues that assuming this is true, three quarters means the last quarter of 08 and the first two quarters of 09. Let’s budget another quarter and say it goes on till the end of 3Q 09. Stock markets always recover before the economy does. So if stock investors all thought that the global economy would recover by end of 3Q 09, we ain't that far away....

Lastly, the author points to the "I wish I had bought" syndrome. Many investors surely have experienced this before and regretted not buying when the market was heavily trashed! The author's reasons for optimism include Malaysia's current low market Price Earnings (PE) valuation, supported with growing population and successful regionalization of many local businesses, which means many businesses are less dependent on one country's economy alone.

Nevertheless, the author further advised that make sure one invests with money one can set aside for at least three years, so that one will not be caught short having to sell at the wrong time, as market needs time to realise its potential!

Here you are. Do you agree now is the time to re-enter equity investment?

The above article was written by Moh Hon Meng, the co-founder and executive director of iFAST Corporation.

For the full article, click here.

Five Personality Tips To Better Your Investment

First Tip: Save Money
Many people come to me and tell me that they have no money to invest. So i ask, " Do you spend money on buying unnecessary items each month?" Most responded by saying they do. Here lies the problem. People mindset are naturally tuned to spend but not to save!

Keep a diary of what you plan to spend versus the actual spending for each month. Make sure you spend within budget and only on necessities. If need be, you may also budget not more than 5% to 10% of your income on entertainment or something to pamper yourself each month. What's left over should be kept as savings. At the minimum, the savings should be at least 10% of your income.

Do not think the amount of savings is too small to begin with. Let's just say $200 a month. This will accumulate to $2,400 a year! Multiply that with compound interest year on year and you will get the picture...

2nd Tip: Invest Only Money You Can Afford To Lose
Try not to invest money that are to be used for emergency purposes or other purposes such as your children tertiary education fund! Reason is because this kind of funds tend to attract plenty of emotions during investing, i.e., one simply can't afford to lose it! Remember, one of the most fundamental rule of thumb in investing is that one must be able to control his or her own emotions. Emotions tend to lead to poor decision making and panic state!

That does not mean you absolutely can't invest your emergency funds. First and foremost, you should classify the risk profiling associated with the type of funds you have, prior to investing. You may place funds that have the lowest risk profile into cash instrument such as Fixed Deposit or capital guaranteed mutual fund or unit trust. Choosing the latter has the advantage in the sense that you have a chance to see the money grow but at the same time capital is guaranteed. However, bear in mind you should expect a lower rate of return for such capital guaranteed instrument.

3rd Tip: Invest Comfortably
One should adopt a systematic approach to investing, particularly for investments such as equity, derivative or currency. The key is model after what other successful traders have done, emulate their trading style and follow a systematic approach. Eliminate as much as possible the element of GREED, FEAR AND EMOTIONS from your investments so that investing is enjoyable and least stressful.

Where applicable, try adapting a particular trading style to suit your own needs and practice. However, bear in mind you should never deviate too far away from the successful trading principles and make sure the adaptations must make sense and workable.

4th Tip: Invest In What You Know Best and Stick To It!
In a nutshell, don't be a Jack of all trade and master of none! Given there are so many investment instruments out there, choose only the ones you know best and focus in perfecting your investment technique.

Trust me, it's easy to always think that the grass on the other side is always greener but the reality is that it's seldom true! When something work against you, don't just give up and jump onto another bandwagon! After all, there are so many instruments out there where you can invest, be it equity, derivative, bond, currency trading, various types of commodities, wine, etc.

Always find out the reasons for failure and learn from it. Don't simply give up!

5th Tip: Stay Current
Stay current and be up-to-date with latest happening, trends, economy and industry development. Knowing the latest trends will help you to unearth the next potential boom or burst! You can achieve this by reading the latest books or publications, attend workshops or seminars, or even through sharing with friends and peers.

It's Time To Be Greedy When Others Are Fearful?

The Master of value investing has to be no other than Warren Buffett himself. A couple of days ago, he made a personal call to suggest that now is the time to invest in the banished equity market. For the faithful fans of Warren Buffett, his statement carries a lot of weight and influence. Below is an extract of Warren's statement.

The financial world is a mess, both in the United States and abroad. Its problems, moreover, have been leaking into the general economy, and the leaks are now turning into a gusher. In the near term, unemployment will rise, business activity will falter and headlines will continue to be scary.

So ... I’ve been buying American stocks. This is my personal account I’m talking about, in which I previously owned nothing but United States government bonds. (This description leaves aside my Berkshire Hathaway holdings, which are all committed to philanthropy.) If prices keep looking attractive, my non-Berkshire net worth will soon be 100 percent in United States equities.

Why?

A simple rule dictates my buying: Be fearful when others are greedy, and be greedy when others are fearful. And most certainly, fear is now widespread, gripping even seasoned investors. To be sure, investors are right to be wary of highly leveraged entities or businesses in weak competitive positions. But fears regarding the long-term prosperity of the nation’s many sound companies make no sense. These businesses will indeed suffer earnings hiccups, as they always have. But most major companies will be setting new profit records 5, 10 and 20 years from now.

Let me be clear on one point: I can’t predict the short-term movements of the stock market. I haven’t the faintest idea as to whether stocks will be higher or lower a month — or a year — from now. What is likely, however, is that the market will move higher, perhaps substantially so, well before either sentiment or the economy turns up. So if you wait for the robins, spring will be over.

A little history here: During the Depression, the Dow hit its low, 41, on July 8, 1932. Economic conditions, though, kept deteriorating until Franklin D. Roosevelt took office in March 1933. By that time, the market had already advanced 30 percent. Or think back to the early days of World War II, when things were going badly for the United States in Europe and the Pacific. The market hit bottom in April 1942, well before Allied fortunes turned. Again, in the early 1980s, the time to buy stocks was when inflation raged and the economy was in the tank. In short, bad news is an investor’s best friend. It lets you buy a slice of America’s future at a marked-down price.

Over the long term, the stock market news will be good. In the 20th century, the United States endured two world wars and other traumatic and expensive military conflicts; the Depression; a dozen or so recessions and financial panics; oil shocks; a flu epidemic; and the resignation of a disgraced president. Yet the Dow rose from 66 to 11,497.

You might think it would have been impossible for an investor to lose money during a century marked by such an extraordinary gain. But some investors did. The hapless ones bought stocks only when they felt comfort in doing so and then proceeded to sell when the headlines made them queasy.

Today people who hold cash equivalents feel comfortable. They shouldn’t. They have opted for a terrible long-term asset, one that pays virtually nothing and is certain to depreciate in value. Indeed, the policies that government will follow in its efforts to alleviate the current crisis will probably prove inflationary and therefore accelerate declines in the real value of cash accounts. |

Equities will almost certainly outperform cash over the next decade, probably by a substantial degree. Those investors who cling now to cash are betting they can efficiently time their move away from it later. In waiting for the comfort of good news, they are ignoring Wayne Gretzky’s advice: “I skate to where the puck is going to be, not to where it has been.”

I don’t like to opine on the stock market, and again I emphasize that I have no idea what the market will do in the short term. Nevertheless, I’ll follow the lead of a restaurant that opened in an empty bank building and then advertised: “Put your mouth where your money was.” Today my money and my mouth both say equities."

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In the past, there were at least 2 similar calls made by Warren. Following his first call in year 1974, the Dow Jones Industrial Average and the S&P 500 soared by 86% and 70%, respectively, over the next two years. His second call came in 1979 and two year after that, the S&P achieved an annualized return of 17.3%, nearly twice the average 9.6% return for bonds.

Is It Important To Time The Market?

For a long term type of investor such as Warren Buffett, timing the market does not appear to hold much degree of significance. After all, this type of investor believes that an undervalued company (coupled with solid fundamentals, management, etc) will find its feet ultimately and investors will "recognize" its value one day. This group of investors are generally seen as the minority group, as most of the others generally prefer to go for short-term or medium-term type of investment. For this majority, they will most likely argue that timing the market is of utmost significance. After all, catching a falling knife is likely to hurt one, badly!

So, who is right, who is wrong?

Most long term investors will argue that volatility in equity prices is an inherent part of investing. It takes courage, discipline and foresight to remain invested in the market, especially when the urge to avoid financial pain is strong. Investors may be prone to sell in a volatile market because they think they can wait until the market settles lower and go back in when the market starts to recover. This strategy seems to make common sense". However, the problem with this strategy is that they may miss their chances of missing the major market movements that signal the start of a longer recovery. Many of these major upside moves can happen quickly, often in just a few days.

Interestingly, a study conducted by a local asset management group on Malaysia's equity market (KLCI) has the following analysis.

• Missing five of the best trading days results in negative returns of 17.39%.
• Missing the 10 best trading days and the loss almost triples to 49.13%.
• Missing the 30 best trading days and the loss soars to 83.07%. This represents just 30 days out of approximately 3,807 trading days in total, or merely 0.79% of the total trading days
• An investor who remained invested throughout the last 15 years enjoyed returns of 82.25 per cent.

Nevertheless, how about if we assume an investor manages to avoid the worst trading days? The results of the study reveals the following:

• Remaining invested through- out the last 15 years gives returns of 82.25 %.
• Avoiding just the five worst trading days results in positive returns of 260.15%.
• Avoid the 10 worst trading days and the gain jumps to 413.62%.
• Avoid the 50 worst trading days and the returns are a phenomenal 3,266.59 %.

The results are far better than than the first scenario. However, the most fundamental question is whether the investor is able to have the foresight and timing to perfection to avoid those worst trading days? Quite likely, the answer is No, likewise no one is able to aim buying at the cheapest price!

Does this mean that investors should never attempt to time the market at all and buy at whatever time, even if the market is expected to sink further?

Certainly not.

In my view, first and foremost, we need to understand that timing the market does not equate to trying to mark an entry at the best possible pricing. It just means a way to minimize one's risk or what we call risk management. The best way of gauging the timing of the entry is by using tools such as technical analysis, i.e., enter the market only when there is an appropriate buying signal. Sceptics will argue that technical analysis is no crystal ball. It may be true somewhat but the key here is risk management. By using technical analysis, one can reduce the risk of getting it wrong. Why invest when the market has shown little sign of recovery or a sustainable recovery? Catching a falling knife can hurt the most! The current global crisis is the best case of example. Cheap stock prices and undervalued companies are aplenty, but when sentiment is against you, no fundamental holds as fear factor will over power any positive mindset!

In addition, it may also take years before the market recovers. For instance, the Dot Com burst in Year 2001 took around 2 to 3 years for full market recovery.

While it may appear sensible for investors with plenty of cash to just ignore the timing, buy and then put aside without ever looking at if for several years, many investors are simply not in the same league financially. The fact is many investors also do not possess the right emotional state to handle large amount of paper losses.

As such, the "safest" route for many, is still timing.

"Its not about being right or wrong, rather, its about how much money you make when you're right and how much you don't lose when you're wrong" - Quote by George Soros

However, for those who are not active investors, perhaps leaving it to the professionals may be the better option. However, be prepared to see your investment values erode as market will most likely not recover so soon.

For more details on the study, please click this link.

Switching to Cash May Feel Safe, but Risks Remain

Amidst the current global market weakness and the downward spiral performance of most asset classes, many people have advocated keeping cash as the best form of capital preservation. Recently I came across an interesting article that discusses the wisdom of liquidating one's investments and keeping cash. This article was written by Ron Lieber from The New York Times.

"It’s a question we’ve all asked in our darker moments of late: Why not just put all of our investments in cash, 100 percent, just for a little while, until things calm down?

Some people already seem to be acting on that instinct. In the first six days of October (through Monday), investors pulled $19 billion out of mutual funds that invest in United States stocks, matching the outflows for the entire month of September, according to TrimTabs Investment Research.

“What clients are looking for is safety,” said John Bunch, president of retail distribution at TD Ameritrade. “They are seeking solutions that are backed by the federal government. Specifically, F.D.I.C-insured money funds and certificates of deposit. All of it is under the umbrella of, ‘Am I safe and insured?’ ”

By fleeing for the comfort of safe and insured, however, investors with a time horizon beyond a few years may be doing real damage to their long-term finances. If you’re tempted to make a big move to cash right now, you’re doing something called market timing. It’s an implied statement that you’ve figured out the right moment to get out of stocks — and will also know the right time to get back in.

So let’s dispense with the first part straightaway. The right time to move out of stocks was a year or so ago, before various stock indexes the world over fell by one-third or more.

If you missed that opportunity, you’re hardly alone.

But if you sell now, you’ll be locking in your losses. And once you’re in cash, there isn’t much upside. In fact, with interest rates low, you’re likely to lose money in cash, because inflation will probably eat up the after-tax returns you earn from a savings or money-market account.

A guarantee of a small loss may sound good right now. But if you’re not bailing out of stocks once and for all, how will you know when it’s time to get back in? The fact is, any peace of mind you gain by being on the sidelines now will turn into a migraine once you see how much you can harm your portfolio over time by missing just a bit of any rebound.

H. Nejat Seyhun, a professor of finance at the Ross School of Business at the University of Michigan, put together a study in 2005 for Towneley Capital Management, where he tested the long-term damage that investors could do to their portfolios if they missed out on the small percentage of days when the stock market experienced big gains.

From 1963 to 2004, the index of American stocks he tested gained 10.84 percent annually in a geometric average, which avoided overstating the true performance. For people who missed the 90 biggest-gaining days in that period, however, the annual return fell to just 3.2 percent. Less than 1 percent of the trading days accounted for 96 percent of the market gains.

This fall, Javier Estrada, a professor of finance at IESE Business School in Barcelona, published a similar study in The Journal of Investing that looked at equity markets in 15 nations, including the United States. A portfolio belonging to an investor who missed the 10 best days over several decades across all of those markets would end up, on average, with about half the balance of someone who sat tight throughout.

So moving to cash right now is just fine as long as you know precisely when to get back into stocks (even though you didn’t know when to get out of them).

At some point, stocks will indeed fall enough that investors will remove the money from their mattresses and put it to work, causing prices to rise significantly. But, as Bonnie A. Hughes, a certified financial planner with the Enrichment Group in Miami, put it to me, there won’t be an e-mail message or news release that goes out when this is about to happen. It will be evident only afterward, on the few days when the market surges.

And it gets worse for those who think they won’t have any trouble investing in stocks again later. Medium- or long-term investors who are considering a big move into cash right now are probably making an emotional decision, at least in part. For those who follow through, the same instincts will probably hurt when trying to figure out when to reinvest in stocks.

“The emotional forces that drove them out of the market aren’t likely to let them back in ‘until things are better,’ ” Dan Danford of the Family Investment Center in St. Joseph, Mo., said in an e-mail message. “And for most people, things won’t feel better again until the market has already moved back up.” In fact, he added, plenty of people may not allow themselves to get back in until the market has already risen significantly. "

Do you agree with the views posted on this article?

For the full article, please read on this link.

Currency Depreciation: A Fine Line Between Poorer and Richer

From 1997 (the year of Asian financial crisis) to 2005, my country's currency (Ringgit) had depreciated by around 50% against the US Dollar! That effectively more or less dented my pocket's purchasing power by half, and that's a very huge quantum! Not only imported goods were more expensive, it also increased the cost of travel and doing business overseas!

In 2005, the Government finally decided to do the "right" thing by floating Ringgit against a basket of global currencies, thereby allowing the currency to gradually adjust itself against global forces (to a certain extent) and as such, the currency has gradually appreciated in value (against US Dollar) from the exchange rate of 3.8 (to every dollar) in the year 2005 to around 3.1 at the beginning of 2008, aided by the weakening US Dollar due to US financial crisis. That effectively "enriched" my purchasing power by closed to 20% whenever i travel to countries where US Dollar is commonly used or accepted, or buying imported goods. Things were looking rosy as the projection by some authorities was that it could touch 3.0 by year-end and even better in 2009!

However, how things have changed for the worse, within just over a period of five months! First it was the political uncertainties, followed by the Government's infamous decision to levy 30% windfall tax on the Power Industry and the latest decision by again the Government to increase public expenditure for year 2009 to sustain the country's economic growth amidst economic slowdown, which ultimately lead to the dumping of Malaysia Ringgit and the outflow of foreign funds! The currency has now effectively depreciated half way between 3.8 and 3.1, and the outlook is not looking good until the foreseeable future!

In the midst of current high inflation and economic slowdown, a depreciating currency is like adding salt to the wounds!

Ironically, it's certainly a good wake-up call for me personally that perhaps it's time for me to work harder to earn more US Dollar instead of Ringgit, so that i can salvage my financial position from a "poorer" to a "richer" state!

Thankfully, the internet has provided me the ideal platform to do just that!

How To Stay On Top Of Your Mutual Fund Investment

Let's face it, most people out there have some form of mutual fund (unit trust) investment, whether present or past. It's also fair to assume that if you have a personal insurance protection, chances are your financial planner or insurance agent might have also sold you some form of mutual funds in the past. Many insurance policy these days are also attached with an investment linked policy, which allows policy holders to choose their choice of funds.

As per any form of investments, one should always monitor the performance periodically to make sure that your funds are performing up to expectation, and the fund continues to be invested in its original objectives and allocation. At times, reallocation of funds may be necessary to counter the cyclical trends, under-performance, etc.

In reality, sadly, many people simply leave their funds aside the moment they signed the dotted lines, and HOPE FOR THE BEST! For the "lucky" ones, their Financial Advisor may update them periodically of the funds' performances. However in most cases, they will never hear from their good old Financial Advisors any more, other than the time when the advisors "want" more money!

With the advancement of software technology and the internet, it is now very easy to track and monitor your mutual funds performance, all at one glance! I call this the "Mutual Funds In A Box"!

Introducing Morningstar. It is the most comprehensive database of mutual funds covering all major countries including US, UK, Asia Pacific and Malaysia. Besides offering up-to-date information such as fund objective, price, asset allocation, and performance on all mutual funds funds, the website also offers insightful analysis, unbiased fund ratings, and sophisticated analytical tools to help both individual and professional investors make more intelligent investment decisions.


When you are at the site, make sure you sign up as a member and it's absolutely free! Add a portfolio and assign the individual mutual funds that you have purchased. You may enter the date of purchase, amount and the unit price. With the click of a button, the system will automatically update the latest performances of all your individual funds, including market price, year-to-date and past year's performance, latest analyst rating and their respective asset allocation. Above all, you can also monitor all your trust funds COMBINED and assess your portfolio weightage for each trust fund and even individual assets!

In a nutshell, you are now able to track and monitor all your global trust funds investments by the simplest of clicks and hassle free! I strongly recommend you to check this out now! To choose different countries, simply click on the specific country located at the bottom of the website. For US residents, you may visit this link to take you there directly instead.

D End of Commodity Boom?

The year of 2006 and 2007 had seen a dramatic boom in all commodity led prices, led by no other than the dramatic surge in crude oil prices. The boom had led to many investors and commodity producers benefiting immensely from it but to many others (general businesses and ordinary folks) out there, it has caused severe hardship and pain in the pockets as soaring price increases in almost everything from petrol, food, transportation to costs of material!

Such high prices are definitely not sustainable in the long term. It seems the biggest culprit is the crude oil. Surely there must be a limit before the whole world chokes! the As such there were plenty of screams and shouts for the crude oil pricing to be regulated to prevent excess speculation (if such is the case).

Past few weeks seem to offer some ray of light at the end of tunnel, as crude oil prices corrected about 18% from a high of USD147. Correspondingly, global commodity prices have also dipped recently. The key question in everyone's mind next is whether such fall is genuine or just a temporary correction?

According to Credit Suisse's research, oil could fall as low as USD84 per barrel, assuming that demand is fully beaten down. This is based on an analysis of historical elasticity data and global GDP growth, where it found that at USD130 per barrel, global oil demand growth is almost zero, given global GDP growth forecast of 3.7%.

However, many other analysts have a different opinion, such as Goldman Sachs's recent prediction of USD200 per barrel by end of 2008.

On the other hand, just how big an impact speculators have had on prices still remain to be seen. For the matter, US regulators have initiated an investigation into possible rigging of oil futures market, with the Commodity Futures Trading Commission committed to ensuring the market is free from "manipulation and abuse". However, how exactly this is going to be done and time line to legislation also remain unclear.

Besides, the growing demand from global investment fund managers buying into commodity markets is believed to be another contributor to the rise of commodity prices. After all, these fund managers will have to continuously look for the next best "safe heaven" to protect their funds, so commodity could not be overlooked.

Last but not least, a weakening USD is believed to also contribute to the rise of oil prices. So unless USD can stabilize against other major currencies, it is likely going to be a roller coaster ride going forward.

To sum it up, the direction of crude oil and commodity prices are still anybody's guess for now. Truly, there are no "experts" in prediction until the actual event unfolds....so be prepared for a roller coaster ride!