MONEY COACHING

What's your money personality?

2010-11-14T10:18:00.000+08:00

By Milan Doshi

During my seminars and personal financial consultations, I have come across many people who have different attitudes towards money.

All of us have unique personalities - some characteristics are inborn and some are learnt along life's journey. Likewise, when it comes to money and real estate investments, we too possess various money personalities. They are:

1. Spenders / Shoppers

These personalities derive great emotional satisfaction from spending money. They need instant gratification and can't resist spending money. Spenders often shop to entertain themselves, even if the items they buy go unused. A sale is simply an excuse to spend money on the pretext of getting a good deal on things that they do not need at the moment.

A well-to-do good friend of mine was shocked to discover, during his house moving, that his wife owned more than 100 pairs of shoes and over 30 handbags! Like most guys, he couldn't see the need for his wife to own so many pairs of shoes and handbags. As money was not an issue, he didn't mind his wife buying more new shoes or handbags, provided that she gave her old ones away. He was concerned that his new house was quickly running out of closet space to store the things his wife bought.

Unfortunately, besides being a shopper, his wife was also a hoarder. She didn't have the heart to give away things that are still fairly new and seldom used. This led to frequent quarrels and my friend decided that the only way out was to build more closet space in his current house and to move to a bigger house a few years later to accommodate his wife's impulsive shopping habit. It was a small price that he could afford to pay to keep his wife happy.

Advice for Spenders/ Shoppers: Shop a lot less, save a lot more

If you love to spend, it's very likely that you are going to continue doing it. when shopping, try to seek long term value, not just short -term satisfaction.

Before purchasing, ask yourself how much that purchase is going to mean in a year. If the answer is "not much", then forgo the purchase.

This way, you can limit your spending to things that you'll actually use. If possible, set a monthly budget and stick to it. In case you over-spend in a month, make sure that you have the discipline to cut back the following month.

Another suggestion is to cut up any extra credit cards you may have and lower the credit limit on the ones you use regularly. Give standing instructions to auto-debit your bank account on the due date with the full amount for all your credit cards. This way you will not be tempted to overspend.

2. Debtors

Debtors are similar to Spenders/Shoppers.

The only difference is that they are spending money that they don't have and are living beyond their means. They are deeply in debt and often, are not in a position to do much investing.

Debtors will typically live rich but die poor!

A newly married young couple in their late twenties came to see me for a personal financial consultation. They were keen on investing in properties and stocks.

Their combined gross income was RM15,000 per month but their net worth was less than RM100,000! They had RM20,000 in credit card debts, less than RM5,000 in savings and they both drive brand new Japanese cars worth around RM70,000 each.

Their logic of purchasing new cars was that they didn't want any problems associated with buying cheaper second-hand cars.

In my opinion, both fell into the Debtor personality.

While they were earning well for their age bracket, they were mismanaging their money by accumulating credit card debts and over-spending.

Since both were desk-bound employees, there was no need for them to make a good impression by driving new cars. In fact, they could ill-afford to drive new cars at this stage of their lives, given their current financial situation.

In order to clear up the credit card debts and begin their investment journey, I strongly suggested that they sell off their two cars which were around a year old and downgrade to a three year old Proton or Perodua car which costs around RM35,000 each.

Straight away, they would be able to settle their credit cards debts and have sufficient start-up capital of around RM50,000 to begin investing.

Unfortunately, it was easier said than done.

Towards the end of our consultation, the husband blurted out that they had just placed a deposit for a new car for himself worth RM85,000 to lock-in the low interest rates.

Since both had the Debtor personality, I really had a tough time convincing them to change their spending habits. If one of them had a different money personality, perhaps I would have an easier time to get one spouse to convince and force the other to change his/her ways.

Finally, all I could do was wish them good luck. Personally, there is no way they will go far in life unless they make drastic changes to their behaviour

Advice for Debtors: Start saving, investing & don't spend money that you don't have!

If you are already in debt, you first need to get your debts sorted out before you can begin investing. If you are not able to do it alone, get some professional financial help like what the couple did when they saw me.

Also, analyse what caused you to get into trouble.

If it was easy access to credit cards, then the solution would be to cut up all "temptations" cards and sticks to debit cards. If spending was something that you used to compensate for other areas in your life that you feel were lacking, think about what these might be and work on changing them.

If your house and cars were purchased because of the need to look good, then you may even need to downgrade your lifestyles by moving to a smaller house, drive an older car, etc.

Next, focus your efforts on saving money diligently.

Pay yourself first by setting aside a certain portion of your take-home income that automatically goes into a special bank account that is used for investments. The money in this account can never be spend - it is your golden goose.

Later, when you retire, you can only spend the eggs that your golden goose laid i.e whatever interest, dividend or rental incomethat your investments generated.

3. Savers

Savers are the exact opposite of Spenders/Shoppers and Debtors.

They only shop when absolutely necessary and never accumulate credit cards debts. They generally have no debts and are often viewed as cheapskates.

Savers are not concerned about keeping up with the Joneses or following the latest trends. They are happy with their 20-year-old cars and derive great satisfaction from seeing the interest earned on their bank statements.

Due to their conservative nature, they don't take big risks with their investments. They prefer fixed deposits instead of other riskier investments where there is a possibility of a loss.

Extreme Savers unfortunately will live poor but die rich!

Most of our parents who had lived through the Second World War and experienced hard times, where they didn't have the luxury of three meals a day, will fall into this money personality type.

I met many people who live in old houses that were last renovated 20 years ago and drive well-maintained cars that are more than 15 years old. These people are the ones who have more than RM5 million in fixed deposits!

At the current fixed deposit rate of 2.5% p.a., their interest income alone is over RM10,000 per month which is more than sufficient to fund their no-frills lifestyle.

Advice for Savers: Practice moderation & take a little more investment risk

If you are a Saver, you should not let all the fun parts of life pass by just to save a few cents.

To achieve some sort of balance, it's advisable that you allocate a small sum of "Play Money" where you can nourish your inner child by living like a King/Queen for a few hours every month.

Spending a bit of money on having fun isn't going to make you bankrupt. Once you have tasted the good life, would you want more?

The answer is a definite 'Yes'. In fact, you would be motivated to challenge yourself to make more money so that you can have more of the good life.

Instead of taking little or no investment risk by leaving all your money in fixed deposits, you need to learn to take a little more risk by investing a portion of your capital into higher return investments such as REITs, properties, bond funds, etc.

After all, the key to investing success is to minimise risks while maximising returns. Avoiding investments risks completely will not get you far in the long run.

4. The Avoiders / Money Monks

These people are not comfortable with the subject of money due to their lack of interest or they feel that that are other more important issues.

Often, they will try their level best to avoid the subject completely. Money Monks are happy-go-lucky types who strongly belief that God will take care of them. At the extreme end, they may not even know whether they are rich or broke.

If you are married to an Avoider or a Money Monk, you will have to shoulder the responsibility of managing money and investing for your family. The big advantage is that you will have little or no arguments on any money matters with them.

Advice for Avoiders/Money Monks: Make sure that you do not marry your own kind. Alternatively, find a trusted professional financial planner.

It's a sad fact that people typically will not change even when they know they need to.

Hence, it is extremely tough to suggest to Avoiders and Money Monk that they should have an interest in knowing how money works.

If you are an Avoider or Money Monk, an easier alternative is to make sure you don't marry their own kinds or you should seek professional help when it comes to managing your money.

5. Investors

Investors are consciously aware of how money works.

They know where they are financially today and try to put as much of their money to work.

All investors tend to seek a day when their passive income from their investments will provide sufficient income to cover all their expenses.

Their actions are driven by careful decision making, and they are comfortable with the need to take a certain amount of risk in pursuit of their goals

Advice for Investors: Keep it up!

Congratulations! Financially speaking, you are on the right path and doing great! Keep doing what you are doing, and continue to educate yourself.

It's extremely important to know which money personality you fall into as each has its own strengths and weaknesses.

Understanding your unique money personality will help you shape your approach to spending, saving and investing.

If you are married, it will also help you understand your spouse better as most marriages get into trouble because of money issues.

Open up your mind

2010-07-03T12:39:00.000+08:00

Recently, I have shared my plan of achieving financial freedom with some people around me. However most of them don't seem to be very interested. I believe that most of the people are "too educated". They can do certain task very well for other but are not willing to try out new things to improve their own financial status. Perhaps, this story will explain why many people are not able to achieve financial freedom.

Once upon a time, there was a wise Zen master. Many people would come and ask him for enlightenment in the ways of Zen. One day, a general came to visit this Zen master. He said arrogantly and proudly to the master, “After fighting so many battles successfully, I really tired of it. So how can you enlighten my mind?” He began to laugh loudly while waiting for the master to reply.

The master slowly raised the teapot and began pouring tea into a cup. It was slowly filled up and the tea started to overflow onto the table. The general stopped his laugher as the tea began to drip onto his clothing. The general shouted, “Stop that, can’t you see it is full?”

The master stopped the pouring and smiled at the general, “You are like this cup of tea. It is full and cannot be filled up anymore. Come back to me when it is empty.”

The morale of this story is one must clear his or her opinions before learning new thing.

For those who want to achieve financial freedom, please remember to keep your mind open for any opportunities. Search for opportunities rather than waiting for the opportunities to come to you. And one more thing, "Less educated" sometime can be a good thing too.

Jack and Jill

2010-07-03T12:30:00.000+08:00

Just to share a financial story about Jack and Jill.

Jack and Jill were providing a service to their village by fetching pails of water from the hill to the villagers. They were paid based on each pail of water fetched to the villagers.

After fetching the water for 1 year, Jill thinks of a idea. The idea is to make a pipe from the hill to the village, so that they no longer had to go up and down the hill any more. After hearing Jill's idea, Jack shouted "What a stupid idea, how are you going to build a pipe from the hill to the village. Since you are so free, why not go and fetch a few more pails of water to earn more. Stop day dreaming and get back to work"

Jill ignored Jack comments and started to think of how to build the pipe. She spent one year to figure out on how to build a pipe from the hill to the village. She spent another one year to build the pipe. In these two years, she earned 50% less than Jack, due to the commitment on learning and building the pipe. Jack always mocked her as a crazy girl in the village during the two years.

After the completion of the pipe, Jack was still going up and down the hill to fetch water. Jill however has a better life now. She just needed to turned on the pipe in the village to fill up water for the villagers. Also she can now charge less than Jack.

The villagers were very happy and satisfied with Jill's service as it is fast and efficient. More villagers are willing to get the water from Jill rather than Jack as they do not want to wait and is cheaper. Sooner or later, Jack was workless as no villagers want to get water from him. He regretted what he said to Jill in the past few years.

The morale of the story:
1) Have a open heart when someone share a idea with you. Do not shoot down their ideas or mock anyone based on your ignorance. There is a saying in one of the Zen stories, "You must empty your own cup first, before other people can fill up the cup for you."

2) If you keep doing the same thing without any improvement or better services, sooner or later you will be replaced. There is no such thing as stable job now.

3) If you failed to plan now, you plan to fail in the future.

4) Building a pipe from the hill to the village is the same as building up your assets. The more assets you have, the higher your passive income will be.

Purpose of this story:

Many people are afraid of doing something different from the majority. When someone want to try out new thing, they are often mocked or discouragement by the majority due to their ignorance. My stand is do not be afraid of trying out new things.

What is financial freedom?

2010-07-03T12:12:00.000+08:00

What is financial freedom?

Before explaining what financial freedom is, there are two terms you need to know. They are active incomes and passive incomes.

What is active income?
Active incomes are incomes that you get by doing some services for other. One example of active income is money that you earn by working for other. There is nothing wrong with this type of income, but this is not the income that will make you rich. You are using time to exchange with money. Logically the more you work, the more you earn. But what if you suddenly couldn't work anymore, for example you become very sick permanently? This source of income will stop too. Normally people will only focus on this source of income, which is why very few become rich after working for their whole lives.

What is passive income?
Passive incomes are incomes that you received without doing anything at all. Yes, you can treat it as money dropping from the sky. So how can it be possible? Some examples are rental you collect by renting out your room or the whole house, interest that received in your fixed deposit and dividends that you collect from your stocks. People who focus on this source of income will slowly become richer and eventually their passive income is more than their active income.

For the term financial freedom, it means that your passive income is more than your expenses, and you will no longer need to have any active income (or need to work anymore).

Building a Billion- Dollar business

2010-05-29T15:01:00.000+08:00

Building a billion-dollar business

By NOAH KAGAN

EVER since I was a little kid I wanted to be rich. I think most of us do; however, we might not think about how to get there.

I once had a friend who was a child prodigy, highly respected by the Silicon Valley community. His sole goal was to create a billion-dollar business - nothing else mattered. Because of this, he rejected ideas that were either way too small or did not monetise well enough.

He took one year to develop different ideas and one idea in particular grew very large. However, at the end of the year, he threw it all away. This was because despite having millions of users, he had no real product, no value, no love and no engagement. His main problem was that he put the business before the users.

Having spent a lot of time both failing and succeeding, I have assembled some advice for aspiring entrepreneurs on how to build a billion-dollar business.

1. Focus

Focusing on how you can become a big business is the first mistake. Instead, it is better to focus on creating something ultra-valuable to your users.

Focusing on large billion-dollar exits only sets your business too far in the future and misses all the details you need to get there. The question you should be asking your users is, 'How would you feel if we were not around any more?' It is when they answer that they cannot live without it, that you know you have a winner.

GET SET FOR A WILD RIDE ; FENGSHUI INDEX

2010-02-19T18:27:00.000+08:00

Get set for a wild ride: Fengshui Index
By Dawn Zeng
IF YOU are an investor who likes a smooth ride with little volatility, it might pay to sit out the next 12 months.
That's because riding the Golden Tiger is anything but smooth.
Don't take our word for it. The wand bearers at CLSA Securities in Hong Kong have been crystal-ball gazing to compile their annual Fengshui Index on what lies ahead.
In short, it looks rough - and history, after all, is on their side.
They warn that the typically tumultuous Tiger years are not for the faint-hearted. Stock markets tanked in 1962 and 1998, the year of the Water Tiger and Earth Tiger respectively, then-US President Richard Nixon resigned over Watergate in 1974, and August 1998 marked the start of the Russian financial crisis.
But if you are armed with courage and conviction, opportunities abound, according to the CLSA gurus - who have nailed some trends previously but would readily admit that the tongue-in-cheek index has not always proved reliable.
Recall that some of their predictions for the Year of the Earth Ox last year were right on the money: Gold surged past US$1,000 an ounce and the market bottomed despite bearish sentiment at the start of last year.

Thinking Big Is the Plan

2009-11-10T17:28:00.000+08:00

Thinking Big Is The Best Plan

Years ago, when I was just starting my real estate investing career, I came across a property with a for-sale sign on it. I called the broker and asked, "What can you tell me about the property, and how much does it cost?"

The broker politely and patiently said, "It's a commercial building with six tenants. There's a chiropractor, a dentist, a hairstylist, an accountant, and a bail bondsman. The price is two million dollars."

Losing Big
I almost choked. "Two million dollars?! That's way too expensive!"

Thirty years ago, $2 million was a lot of money. And instead of looking at the property, I let the price frighten me off. I never looked at the deal, and just assumed that the seller was crazy, greedy, and out of touch with the market.

Today, there's a luxury hotel on the same site. It's spectacular. I estimate the property to be worth at least $150 million, and maybe more.

Cheap Lessons
Not seeing the potential of that deal taught me many lessons. Here are two important ones:
• Sometimes you learn more by being stupid and making mistakes.
• The person with the better plan wins.

In the above example, my plan was just too small. In fact, the only plan I had at the time was to collect the rent money from the tenants, cover my mortgage and expenses, and put a little in my pocket. And 30 years ago, I knew that the rent from six small tenants couldn't possibly pay for a $2 million property.

I later learned that the property's eventual owner bought it for full price – with terms. He put $50,000 down as an option and asked for 180 days to put the rest of his plan together. During those 180 days, he gathered his investors, a builder, and his tenant, a major hotel chain.

If he hadn't been able to put his plan together, he would've lost his option money. Instead, before the 180 days were up, his investors paid the $2 million in cash, and he spent the next three years getting the project through the city planning commission and finally began construction. He won because he had a better plan.

Mind Expansion
Donald Trump often says to "think big." He definitely does so, but by nature, I don't. My excuse is that I come from a small town in Hawaii. My family wasn't rich, so when it comes to money, I tend to think err on the side of caution. Over time, my thinking has become medium-sized when it comes to spotting opportunities, but I'd still like to think bigger.

One of the reasons I enjoy doing business in New York and having Trump as a partner on different projects is that he makes me do just that – because if you don't think big in New York, you get kicked out. If I thought small, I wouldn't be on television, cutting book deals with major publishers, or talking in front of tens of thousands of people in arenas like Madison Square Garden.

Currently, I'm working on a real estate project to present to Donald. Consequently, I find myself pushing my thinking, expanding my context, and thinking of luxury, not just price. Even if Donald doesn't like the project and we don't partner on it, just preparing to present the project to him has required me to think bigger and come up with a better plan.

A Blast from the Past
About a year ago, someone called to say that there was a spectacular condominium that had just come up for sale. She wanted to know if I was interested in looking at it. Of course I said, "Yes." I wanted to see what her definition of spectacular was, and trust me – it was spectacular. She then said, "And the price is only twenty-eight million dollars. But I believe you can pick it up for twenty-four million. At that price, this condo is a steal."

Once again, I heard myself saying what I said so long ago: "That's too expensive." But, as I said, that lesson from 30 years back proved to be priceless: After hearing the think-small person in me comment on the condo price, I took a deep breath and asked myself, "What's my plan?" Then I asked myself, "What's wrong with my plan?"

I didn't buy the condo, but I did come up with a better plan. Over the next few days, I realized that the reason I couldn't afford the condo was because my business was too small. If I wanted to afford such a luxury residence, I needed to come up with a better plan for my business. Today, I'm working harder than ever to improve it – not because I want the condo, but to be able afford such a condo if I someday decide I want one.

Plan Ahead
In many of my Yahoo! Finance columns, I've written about my concern over the devaluation of the U.S. dollar. As the dollar drops in purchasing power, it often pushes up the prices of real assets – quality real estate and equities. My fear is that many people may not be able to afford tangible assets and become poorer as the dollar declines. This drop in purchasing power also widens the gap between the rich and everyone else.

One method of staying ahead of rising asset prices and the declining dollar is to think bigger and come up with better plans. As important as financial and business planning is a plan for personal development and self-improvement. I'm often asked to invest in people's business plans, and one of the reasons I turn many of them down is because a big plan requires a big person who's spent time on personal development. In a lot of cases, a business plan is far bigger than the person with the plan – that is, the dream is bigger than the dreamer.

Today, I'm glad I missed out on that $2 million property all those years ago. The best lesson I learned from it is that I can have a better life if I have a better plan – and a plan to become better person. So what's your plan?

Persistence

2009-09-06T16:36:00.001+08:00

What is it that separates those who are successful from those who are not?Successful individuals have a strong personal vision of what they want and why they want it.That vision gives them the strength to stick to their strategies even when doing so is uncomfortable. It gives them the determination to persist when they are discouraged.

Back To Basics to Grow Money

2009-08-30T18:04:00.003+08:00

Back to basics to grow money
By Larry Haverkamp

DO you know the difference between a stock and a bond?
It is this: a stock means you own part of the company. A bond means you loaned it money.

Stocks and bonds are also called 'equity' and 'debt'. All investments fall into these two categories.
Both are ways for firms to get money to pay their bills or buy more assets for expansion.
A typical debt-equity split is 50/50. It means the business is financed half with debt and half with equity.
Companies get debt by borrowing, usually from banks. The equity comes from owners as well as past income that was never paid out as dividends.
It accumulates and is called 'retained earnings'.
That brings me to a new buzzword from this recession: De-leveraging. It means everyone wants fewer risks and it changes the world's debt to equity split from 50/50 to something less, like, 33/67.
Then, assets are financed one-third from debt and two-thirds from equity.
De-leveraging in action
Take 2006. A company may have had $200 million in assets, financed by $100m in debt and $100m in equity.
Now, in 2009, it still has $100m in equity, but debt would have fallen to $50m. It means only $150m in assets can be financed, and leaves the company no choice but to operate on a smaller scale than before.
De-leveraging hits households too. Banks now require that you put down more of your own money to buy a car or a home.
This is the 'new normal' and is likely to be with us for a long time.
Is it good or bad? Well, on the plus side, fewer risks mean not as many ups and downs in the economy. We will have fewer big recessions.
As explained, however, less debt means fewer assets to work with. The world will operate on a smaller scale. It will need fewer factories, office buildings and workers too.
It means lower growth and higher unemployment. Incomes will grow more slowly. Prepare to tighten your belt.
How to invest in the future
A company with more equity (ownership) and less debt (borrowing) is safer.
For an investor, it's the opposite: You take big risks when you own shares of a company (equity), and the safer investment is bonds (debt).
Which should you go for, high risk or low?
Most people say: Low risk. Why take chances?
The trouble with that is you also get lower returns.
Ok, let's try for high returns instead. Sorry. Then you have the problem of big risks. Hey, you can't win!
It is true. The pluses and minuses are exactly offsetting. As risks increases, so do returns.
Neither choice is better. Both are equal and fair. The choice depends on your risk preference. It is a personal decision.
Women, for example, often prefer safer investments while men take more risks.
Retirees usually go for safety while young people don't mind taking risks.
Here is a good rule of thumb: The per cent of safe investments should equal your age.
It means at age 50, you would divide your money equally between bonds and stocks. At age 90, you would have 90 per cent in safe assets like bonds and fixed deposits.
Risk v returns: advanced
A word of caution. Most people think higher risks mean higher returns. It's not always true.
Take gambling. The risks are very high but returns are low. In fact, they are negative. You are sure to lose in the long run.
It is also true for investments in contracts called 'derivatives'. Examples are options, futures, warrants, swaps and forward contracts.
(i) They expire after a few months and (ii) all gains and losses are offsetting, making them zero-sum before commissions. These two features make them more similar to gambling than investing.
Worse still, derivatives often come with high leverage. It magnifies the risks by 10 to 20 times while the average returns remain negative.
It isn't all bad. Derivatives can also reduce risks through 'hedging'. This is done by big companies and banks.
Most people use derivatives for 'speculation'.
This article was first published in The New Paper.

Money Law

2009-07-22T12:17:00.002+08:00

In Personal Finance or Financial Freedom . “Financial Principles” which are as useful and practical today.I’ve personally benefited tremendously and applying the principles therein and have experienced improvement in my own finances. Knowing and not doing it, is not yet knowing”. For example, You know that exercise is good for your Health yet many people are lazy to exercise. Knowledge is only POTENTIAL power. Knowledge is ONLY power when APPLIED.
1. Money comes gladly and in increasing quantity to any person who save at least 20% of his/her earnings (first step to Financial Freedom).
There are only 3 Cashflow Scenarios:
a. You spend more than you earn: This person has negative cashflows, spending future money and likely to end up owing other people money (eg. credit cards, friends, relatives, loan sharks). b. You spend all that you earn: whether this person is earning SGD$500 a month or SGD$300,000 a month, he/she is still "Just over broke".
c. You spend less than you earn (eg. save 20% or more of your earnings if possible). as time goes by, this person will automatically get richer and richer. I read SUNDAY TIMES this rich man say “every dollar you earn, do not spend more than 30cents” .Which cashflow scenario do you want to CHOOSE for yourself? 2. Money can work for you, if you become the “wise owner” of money and make money work for you. (note: you’re the Master, money is the slave, while many people are guilty of being slaves to money).

FOR EXTRA VALUE, FOCUS ON YEILD

2009-06-06T18:41:00.000+08:00

For extra value, focus on yield
By Dennis Chan , DEPUTY MONEY EDITOR
As a value investor, I am naturally attracted to investments that produce decent yields. This is because these investments tend to be more stable and less likely to give one a heart attack.
Other more gung-ho investors may prefer investing purely for capital gains, even if they are to get little or no yield.
My interest was therefore piqued when The Straits Trading Company last month offered for sale 10 units of its Gallop Gables condominium at Farrer Road by dangling a big carrot in the form of a guaranteed rental yield of 7 per cent for two years.
For those who are unfamiliar with the term, yield is the recurring annual income you get divided by the amount you paid for an investment. In properties, yield is derived from rental income. In stocks and shares, it is based on dividends that companies pay.
With savings in banks drawing a paltry annual interest of half a per cent or less these days, Straits Trading's offer was understandably snapped up by eager buyers.
Seasoned property investors will tell you that it's rare to get rental yields as high as 7 per cent, not unless you convert your property illegally into a workers' dormitory. For residential properties, a yield of 2.5 per cent to 4 per cent is the norm.
As an investment class, real estate generally provides a lower yield compared to investing in corporate bonds and equities. This is an acceptable trade-off as the risks of investing in physical properties are lower than those for stocks and shares.
The focus on yield, however, is only half the picture.
Another pertinent question an investor should ask is whether the current yield of a property is real or sustainable.
According to the Urban Redevelopment Authority, rents for private homes in the first quarter fell by 8.5 per cent. They had dropped by 5.3 per cent in the fourth quarter of last year.
In a prolonged economic downturn such as the one we are probably experiencing, there is further room for rents to fall. This is notwithstanding the recent revival in the residential property market.
On the demand side, numerous companies have slashed or are reducing head counts. Some have stopped operations altogether while many more have cut the pay of their staff. There is less discretionary income all around.
On the supply side, vacancy rates are likely to rise as more new homes are completed while some older developments that were earmarked for demolition have been put back into the rental market as their redevelopment plans get frozen.
Rising capital prices combined with falling rents spell bad news for yields, something property investors should be mindful of.
Equity investors tend to be more savvy when it comes to matters of investment yields and their sustainability.
Which is why the stock market today is littered with numerous instances of shares that seemed to be going for a song when measured against their historical yield. Stock investors are not buying these high yielding stocks because they suspect they will not repeat the high dividend payouts of the previous year.
To be sure, there are people who see real estate investing purely as a capital gain game. In the bull run from 2005 to 2007, many home owners were content to leave their units unoccupied while waiting for the right opportunity to resell them for a big profit.
Such windfalls are harder to come by in the current climate and a prudent investor cannot afford to look through the prism of 2007 and hope for a repeat of these fabulous gains any time soon.
For investors who acquire properties with the help of a bank loan, rental yield takes on added significance.
Mortgage rates currently vary from as low as 1.5 per cent to 3.75 per cent or more. As an investment, income from renting out a property should preferably be able to cover the monthly bank interest charges plus a portion of the principal repayment.
For those lucky enough to obtain a low rate such as Standard Chartered Bank's 1.5 per cent promotional offer for the first year, the bar for rental income is low.
But for those who are locked in to significantly higher rates, their rental income should at least match the interest they are paying for their mortgages if they don't want to end up working for the bank for free.
Don't forget, mortgage rates tend to rise over time as initial teaser rates give way to prevailing ones. One way for a borrower to maintain a low mortgage rate is through the regular refinancing of his home loan. But this assumes that the current low interest rate environment will remain benign.
Refinancing may not be feasible if the property's valuation has fallen sharply or if the refinancing bank decides to offer a lower loan quantum.
Unlike stocks and shares, yields on property investment are also more easily manipulated. A crafty seller can sometimes entice a buyer to overpay for a property by promising an abnormally high rental yield. To achieve this, the seller will sell his property and execute a leaseback agreement with the buyer.
In such a deal, the seller will guarantee the buyer for a limited period - typically not exceeding two years - a monthly rental income that will meet the promised yield.
The seller then sub-leases out the unit to a genuine tenant at the prevailing market rate. If the rent is below the guaranteed amount - as is likely to be the case for an overvalued property - the seller will top up the rental shortfall. But he does not lose out as he is able to count on the extra profit he had made earlier from selling his property at a higher price. The buyer ends up worse off even though he gets a higher monthly income rental for two years.
An example of how this can be done is illustrated in the accompanying table.
Rental guarantees are not illegal and, in fact, are the de rigueur practice of some developers that simply refuse to lower their selling price of unsold, completed projects during a downturn for tactical reasons.
They are also not necessarily detrimental to buyers.
Getting an attractive rental guarantee in today's market will appeal to investors who believe that home prices will recover by 2011 or 2012, as they will enjoy higher-than-usual returns in the next two years while awaiting the recovery to take place.
In the case of the Gallop Gables apartments, the buyers probably got a good deal.
Apart from getting guaranteed rental yield of 7 per cent for two years, these purchases were done, on average, at prices about 23 per cent below what Straits Trading had asked for last July.
The developer has since raised the price of the remaining few units to $1,400 per square foot (psf) from the $1,188 psf average it had sold at in the past six weeks.
But the cheapest unit still went for a tad above $3 million.
If only I had a few million dollars to spare.

ER, What is a bear market rally ?

2009-05-07T15:29:00.000+08:00

Er, what is a bear market rally?
By Alvin Foo
Where do you see this?
In newspaper articles and stock market analyst reports.
What does it mean?
A bear market rally is a temporary increase in stock prices during a period when prices are generally plunging over months or years.
This rise usually ranges from 10 per cent to 20 per cent, and even as high as 30 per cent, from the lowest point. Trading volumes also surge.
However, market fundamentals remain weak and do not offer a clue as to why the markets are going up.
Overall investor sentiment would still be negative and cautious.
Why is it important?
This term has been used commonly in recent weeks, as stock markets have seen a substantial rally since early March.
For instance, the Straits Times Index has charged up more than 30 per cent to 1,920 on Thursday, after plunging to a six-year low of 1,456 on March 9.
In the United States, the Dow Jones Industrial Average saw a six-week rebound - its best streak since 1938.
A bear market rally favours nimble traders, who are quick to buy but also swift to take profit.
So you want to use the term? Just say...
'Be wary of investing in equities despite the recent rebound. Experts have warned that this is a bear market rally as the world economy has not yet seen a turnaround.'

Make Market Cycles work for you

2009-04-09T21:24:00.001+08:00

Make market cycles work for you
By Dennis Ng

Observing nature, we will notice cycles.
There are, for instance, four seasons, with the cold winter followed by blossoms in the spring. And just when everyone is having fun in the sun, it is good to be mindful that temperatures will drop as autumn approaches. Those who are not prepared with sufficient clothing might freeze when winter returns.
Similarly in the financial markets, there are market cycles where busts follow booms and vice versa. That is why the 'party' ended with a market crash last year, after global stock prices shot up by between 200 and 500 per cent in the last four years.
According to historical analysis, 2008 was one of the worst years for stocks since 1937. For many, this might be depressing news but for me, this is exciting news. By observing market cycles and investing accordingly, one can try to time the market.
I would say that in the short term, it is difficult to time the market correctly on a consistent basis. However, it is definitely possible to roughly estimate at which stage of the market cycle we are in.
For instance, in 2007, the stock market was in its fourth bullish year. Back then, the Straits Times Index (STI) had risen about 200 per cent from a low of 1,226 in March 2003 to over 3,600 points.
As far as I remember, the Singapore stock market has never had a bull market that lasted more than five years. Believing back then that we were near the tail end of a bull market, I sold most of my stocks and avoided the market carnage that followed a few months after that.
The steps to 'market cycle investing' are simple.

First, we try to estimate at which stage of the market cycle we are in.

Secondly, we try to identify the major trend direction - upwards or downwards.

Finally, we position ourselves accordingly; basically, the strategy to take is to go with the trend instead of going against the trend.

For instance, if you bought stocks during 2004 when the stock market was on an uptrend, it was easy to make money since most stocks were moving up in price. However, when stock markets were in retreat last year, it was very difficult to avoid losing money on stocks, simply because most stocks fell in price in accordance with the general market direction.
Some people firmly believe in the 'buy and hold' strategy, holding on to their stocks through thick and thin, whether the stock market is moving up or down.
I used to be one of them until I realised I lost out on a lot of opportunities by not selling out when markets were high and buying back again when markets were low. We do have to be mindful of opportunity costs. In the last bear market from March 2000 to March 2003, I also observed that when the tide turned, almost all stock prices went down, including blue chips.
Let me give an example: DBS Group Holdings' share price was as low as $8 in 2003; it hovered between $8 and $10 for close to one year. If you practised market cycle investing, and even if you had missed the bottom, you could have easily bought the bank's shares at about $10.
In 2007, after four years of bull runs, DBS' share price shot up to as high as $25 and hovered between $20 and $25 for more than one year.
Again, even if you missed the top, you could have easily sold DBS shares when the price was about $20. By buying at $10 and selling at $20, you would have easily pocketed a 100 per cent return over four years. Not bad at all.
Similarly, by practising market cycle investing, after selling out at $20, and after one year of a bear market, you can now easily buy back DBS shares at less than $10 again.
On the other hand, if you had bought DBS shares at $10 in 2003 and steadfastly held on to them through 'thick and thin', you would have basically enjoyed the 'roller-coaster ride' of the market but would have no profits to show after five years.
Of course, nobody knows when the market will bottom. My experience is that I was early and invested all my money by early 2002. However, I was one year too early as the Singapore stock market bottomed only in March 2003.
Despite missing the bottom by 12 months, I still managed to achieve over 200 per cent in returns riding the four-year bull market that followed.
Thus, by practising market cycle investing, one would inevitably buy when prices are low, and sell out when prices are high.
By doing so, you have also reduced your risks of losing money.

BIG INVESTOR BUT FRUGAL SPENDER

2009-03-09T17:32:00.001+08:00

Big investor but frugal spender
By Lorna Tan
Despite being a multimillionaire, entrepreneur-cum-motivational speaker, Adam Khoo still hesitates before spending on consumer products like his iPhone.
However, when it comes to investments, the founder of Adam Khoo Learning Technologies Group wouldn't even think twice when investing, say, $50,000 in stocks. This is because stocks are expected to potentially generate more money, he says.
A conservative and long-term investor, he prefers to invest in cash-rich, large-cap companies that have low debts and the potential to consistently increase their earnings.
His group, which focuses on education, comprises 16 firms in seven countries with an annual turnover of $15 million. He also took over his father's advertising firm, Adcom, in 1999.
A business administration degree holder from the National University of Singapore, Mr Khoo - who is all of 34 - is also known for his motivational books. Last month, he launched his ninth book, Profit From Panic, which gives practical tips on how to deal with the current economic crisis.
He is married to Ms Sally Ong, 38, who is a director at one of his firms. The couple have two daughters - Kelly, five, and Samantha, three.
Q: Are you a saver or spender?
One of the factors that helped me build up my wealth over the years is that I am relatively frugal.
I have always saved at least 50 per cent of my income and I don't believe in spending a lot of money on luxuries. I buy clothes once a year only when I'm in Bangkok or Indonesia. Usually I visit a shop for half an hour and pick up 10 shirts and trousers at one go. I am a person of simple taste, except when it comes to cars. I like fast cars.
I invest 100 per cent of my savings consistently. But when the market gets too overvalued, I hold a larger proportion in cash as a precautionary measure.
Q: How much do you charge to your credit cards each month?
I have three credit cards but I use only one regularly for my personal expenditure. I chalk up about $2,000 to $3,000 every month. I use my credit card instead of cash whenever I can for easy tracking purposes. I withdraw about $200 from the ATM each time.
I pay my credit card bill every month and if I get charged 10 cents for late payment interest, I will scream. I don't believe in paying the annual fee too and will ask the bank to waive it.
Q: What financial planning have you done for yourself?
My portfolio, which I manage myself, is made up of the following investments: property that I rent out, private businesses, Singapore stocks, US stocks and exchange- traded funds (ETFs). My investments have generated an average return of over 20 per cent per annum.
Currently, I have about US$400,000 (S$611,000) in US stocks, such as Boeing, Google, Nike, Pepsico, and ETFs, and another $400,000 in Singapore stocks, such as CapitaLand, OCBC Bank, the Singapore Stock Exchange, Bestworld and STI ETF.
When it comes to insurance, I believe in buying term and investing the rest. Still, I bought seven traditional plans such as whole life and endowment when I was young, because my wife is a former AIA agent and I had bought them from her. About four years ago, I bought a term with cover of $1 million which brings my total life cover to about $2 million.
Q: What property do you own?
In 1998, I bought a 1,300 sq ft condominium in East Coast for $480,000 and rented it out for about $3,000. I sold it for $650,000 in 2004.
I also have a 5,000 sq ft semi- detached house in East Coast which was bought four years ago for $1.3 million.
Early last year, I bought a 900 sq ft condo at Robertson Quay for $1.3 million. I'm renting it out at $4,000.
Q: Moneywise, what were your growing-up years like?
I come from a wealthy family where my father and uncles are savvy business people and investors. That background influenced my values, beliefs and attitudes towards the possibility of building immense wealth when one is prepared to work hard and educate oneself.
My father started his advertising firm Adcom in 1972 and mum was editor of the women's magazine, Her World. I was the only child. We lived in a bungalow in Changi.
However, what gave me the drive to build my own wealth and to value money is that my father is an extremely frugal man, and that rubbed off a lot on me. In those days, my dad would not even buy a brand-new car despite his wealth. He would compare prices of toilet paper and toothpaste all over the supermarket before deciding what to buy.
Q: How did you get interested in investing?
Every Chinese New Year, from the time I was 15, my grandfather would give me hongbao with cash plus Malaysian shares like Genting, Kuantan Flour Mill and Hicom.
When I was in the army, I started dabbling in shares.
At about that time, I was inspired by a book I read, Buffetology, based on the success and work of Warren Buffett. I was amazed by a man who was able to build his wealth purely through investing.
Q: What's the most extravagant thing you have bought?
A $230,000 red Lotus bought last October. It's a reward for myself.
Q: What's your retirement plan?
My passive income from book royalties, dividends and business profits is enough to cover my expenses so, technically, I can stop working if I really wanted to.
Q: Home now is...?
I live in the semi-detached house in East Coast.
Q: I drive...?
A red Lotus Elise and a red BMW convertible.
This article was first published in The Straits Times.

Missed ! Now, How to pick yourself up ?

2009-02-02T16:24:00.001+08:00

Missed! Now, how to pick yourself up?
BUYERS now have another 'beware' to add to their long list. Beware of those who call themselves financial advisers.
Well, with faith in banks shattered, what else would you expect?
Trust no one now?
Mercifully, it's not that grim. You can still turn to the Financial Industry Dispute Resolution Centre (FIDReC) for help.
When contacted, former NTUC Income CEO Tan Kin Lian, who has been helping affected investors in his private capacity, feels that brokerages and financial advisory firms should share the responsibility, together with their clients.
He said: 'How can brokerages sell a risky product, then say that they are merely order-executors? Similarly, the financial advisers cannot make themselves out to be advisers, yet not make their roles as introducers clear to their clients.
'I cannot sell a drug which causes the people who take it to die, then say that it is not my fault. I have to make sure that the medicine I sell is okay.'
He said: 'It would be fair if the customer bears 50per cent, while the brokerage and the financial advisers bear 25 per cent each of the losses.'
Can't afford, don't buy
Mr David Gerald, president and chief executive of the Securities Investors Association of Singapore, said: 'We live in a buyer beware market, people have to be responsible for the choices they make.
'So, I always advise investors that if they do not understand the product, don't touch it. If they cannot afford it, don't buy it.'
He said that the elderly couple mentioned in the report on page 2 have two means of recourse: FIDReC or a civil suit.
At FIDReC, mediation is free, and legally-trained people will be able to advise the couple, said MrGerald.
They could also engage a lawyer, he said, but he felt it was not advisable to do so, as it was an expensive process, and they might end up paying the legal costs of the other party if they lose the suit.
The learning point is that it's not enough just to know the product you are buying now.
You also need to know who you are buying from.
Ask if independent financial advisers are only 'introducing' you to a product.
Compare this to, say, bank relationship managers who 'advise' you to buy the same product.
Not knowing the difference between the two roles can really cost you.
Getting your money back is about proving mis-selling.
Put simply, it's about proving you were given bad, wrong, or unsuitable advice.
Some independent financial advisers may even produce a document you signed, confirming they were 'introducers' - a document which, you realise too late, actually absolves them from responsibility if things go wrong.
What if you argue that some of the things said to you during the 'introduction' sounded like advice?
Well, it's your word against theirs, always difficult on either side to prove.
So how about the brokerage companies that these clients get 'introduced' to, to buy the product from?
Sorry, we were just 'executing' the order, say some of the companies. We didn't 'advise' you either. So don't blame us.
The numbers are telling. Among those who bought from stockbroking firms, only just over 10 per cent received any settlement.
The lesson for the small-time investor is this: Make it clear that you're seeking advice. Put it in writing. Fill the questionnaires to make your concerns known. Keep copies.
Trust no one, I say.

Tay Shi'an
Mon, Feb 02, 2009The New Paper

HOW TO MAKE MONEY in 2009

2009-01-02T16:25:00.001+08:00

How to make money in 2009
By Lorna Tan and Michelle Tay

What a roller-coaster ride the year 2008 has been.
Stock markets have tanked, rallied, then tanked again. Home prices are dipping, the economy is shrinking, and wages have hit a plateau.null
And let's not even talk about the people who have lost millions and millions in Lehman Brothers- linked structured products.
While the peaks have been few and far between, the troughs have left people scrambling to find the bottom - and everybody is tightening their (seat)belts and hanging on for dear life.
Yet, despite the projected gloom in 2009, the new year represents a new start for many.
If you still have the funds to invest, should you buy stocks, a car or a house?
What lessons have financial experts learnt that you can also glean wisdom from?
Invest brings you the best investment advice from 10 savvy investors.
Mr Jim Rogers, Singapore-based American investor, author of A Bull In China: Investing Profitably In The World's Greatest Market, and creator of the Rogers International Commodities Index
What was the best and worst thing that happened to you financially this year?
Best: Being short on Fannie Mae and the United States investment banks. These stocks collapsed, some by 100 per cent, so I made huge percentage gains on them in 2008.
Worst: Being long on anything at all.
How do you see 2009 panning out?
Most economies and financial markets will get worse as the year progresses.
We are in a historic period of forced liquidation which has happened only eight or nine times in the past 100 to 150 years. There is a forced reversal of positions with no regard to the fundamentals. One makes money in times like this by finding things with unimpaired fundamentals because they will become market leaders.
The only thing I know with unimpaired fundamentals are raw materials and commodities. In fact, their fundamentals are enhanced. Reserves and inventories of everything are declining while governments worldwide are printing huge amounts of money, which has always led to higher prices down the road.
So commodities are the best place to be.
Some parts of the Chinese economy will do well too.
What is one piece of financial advice you would give a person looking ahead in 2009?
Learn about real assets, raw materials and commodities as the fundamentals are improving there, while the fundamentals are deteriorating in most other sectors.
Would your answer be different for a) a single, working person; b) a married couple with school-going children; and c) a retiree?
No.
Is it a good time to buy a car or property?
I am not buying either.
One can get great deals on cars now so I guess it is a good time to buy a car, if one really needs one. Otherwise, I would wait. My view is that property will still be declining in much of the world for at least another year or two. There will be some special places in the world where property will be okay, but they will be few.
Mr Ben Fok, chief executive of Grandtag Financial Consultancy
What was the best and worst thing that happened to you financially this year?
Best: My equity portfolio was down by only less than 15 per cent. I had lightened the majority of my stock portfolio in September when the Fed was taking over Fannie Mae and Freddie Mac. I sold part of my equity portfolio bit by bit as the bad news was revealed one by one. Now I am very light in equities and heavy in cash. I also did not invest in, or advise my clients to invest in, any structured products.
Worst: I totally forgot about my Supplementary Retirement Scheme (SRS) account. I did nothing to it and it was down by at least 40 per cent.
How do you see 2009 panning out?
It will be an uneventful year for the financial markets. There will be bad news as the world slips deeper into recession and then tries to recover from it. Some people are calling a market bottom but I think, at best, the stock market will be in a tight trading range until there is strong evidence from macroeconomic indicators that growth is beginning to stabilise. But that does not mean ignoring the market at all. On the contrary, I believe it is time to take calculated risks as equities tend to react ahead of an improvement in the economy.
What is one piece of financial advice you would give a person looking ahead in 2009?
Proceed with caution when entering the stock market. While many stocks are heavily sold down and are looking very attractive, the world macroeconomic picture is not that bright.
Therefore, attractive valuations of certain stock markets must be weighed against the risks stemming from a global recession that will trigger a cyclical contraction in corporate earnings.
The world economy will take at least a year to recover from this financial shock and we cannot rule out further corrections in the coming months. Invest with what you can afford to lose and remember the stock market has no human emotions.
To protect yourself from downside risk, look to invest in undervalued stocks or stocks that are selling below net asset value. Look also at sectors with stable earnings.
Would your answer be different for a) a single, working person; b) a married couple with school-going children; and c) a retiree?
a) Now is the best time to stock-pick. Usually, this group of people has fewer liabilities and a longer time horizon to hold on to fundamentally sound stocks. The recommended asset allocation is 100 per cent equities.
b) Invest in the stock market, with some exposure in bonds. Currently, corporate bonds are attractive despite rising default rates. The recommended asset allocation is 60 to 70 per cent in equities and 30 to 40 per cent in bonds.
c) As they need to create an income stream and have a shorter time horizon, investing in bonds is the best asset class and the least volatile. However, a small exposure to stocks is also recommended. I would recommend 20 to 30 per cent equities and 70 to 80 per cent bonds.

Given the financial situation, is it a good time to buy a car or property?
Certificate of entitlement (COE) prices are down substantially...and interest rates are at rock-bottom prices. However, bear in mind that a car is a depreciating asset and the benefits of convenience also come with price tags. So before you buy that car, ask yourself if you really need one.
If you are looking for a home or even an investment property, now is the best time to shop around and you may get it at bargain prices from a fire sale. Again, before you do that, review your financial situation, make sure you can afford the monthly instalments and remember that this is a big ticket item. Buying a car and a property requires a loan which adds to your financial burden.

THRIFTY IS NIFTY

2008-12-03T11:44:00.002+08:00

Cheng Zi fell under the banner of "kou kou zu", or the "stingy group", soon after she went to university.
"I realised it was wrong for us students not to care about our finances just because we don't work," she says.
"Actually, we do have a job. We take classes and our parents pay for it."
Cheng, a senior university student in Shaanxi province, says that "kou kou zu" means maintaining a high standard of living for the cheapest cost.
For instance, she only buys new clothes when she has sold some of her old ones. She also shops online, where clothes are much cheaper, discounts are always on offer and delivery is often free. She normally eats in the school canteen and rarely eats out in decent restaurants.
She has also learned many cost-cutting ideas from "kou kou" people in the workforce.
"Students are not suffering from the financial crisis as much as those in work," she says. "Many of my schoolmates worry about how much money their families have lost or will lose in the stock market."
What really worries Cheng and other students is the impact of the global recession on their job prospects. They are being as frugal as they can to prepare for rainy days ahead.
Other "kou kous" are using more public transport, downloading free books and music instead of buying them, using credit cards less and eating homemade lunches.
Cheng adds: "They've also taught me how to pay less for electricity and water bills, by washing small clothes like underwear and socks by hand, unplugging electrical outlets before leaving the room and using leftover water to flush the toilet. I've started to implement some of these tips. It is good to prepare early for my independent days ahead."
Money savers like Cheng counter the notion that China's post-80s generation is full of spoiled, free-spending youngsters and while other students around the world face a tough Christmas, they are benefiting from their thriftiness.
Some, like Cheng, changed their lifestyles some time ago but the worldwide crisis has swelled the number of 20-something "kou kou zu".
Online communities are cluttered with their mantras: "We don't take taxis we don't go shopping there is no eating out we can manage the housework ourselves."
Once upon a time Cheng's parents gave her 700-1,000 yuan (US$100-143) a month and she would spend it all before she had realised it and couldn't figure out when and where. Now she limits her monthly outgoings to about 300 yuan and last year opened an online store selling clothes and ornaments.
The business makes a profit of 600-1,000 yuan a month and has been a life-changing experience. "My parents were taken aback one day when, instead of asking them for money like I used to, I told them that I could live on my own," she says. "Now I have several thousand yuan in the bank, 80 per cent of which comes from my online shop. Sometimes I buy them presents. I'm so proud of myself."
In Fujian province, Zhang Yan has persuaded some of her friends to become a "kou kou" but had more trouble with others. "They are lukewarm about it, since they feel little pressure from the crisis," she says. "They don't think it's necessary to be so stingy.
"But I tell them this is not just a response to the crisis--it's something you can benefit from your whole life. Plus, it is environmentally friendly and represents a healthy and positive life attitude."
Others find having a handle on their spending ensures they always have some available.
Every night for the last year, Zhang has been punching her expenses into an online accounting system to determine if she has spent her money wisely or not. Now her savings are steadily rising.
"In previous years I invested in stocks and funds because I thought saving money in the bank was quite silly," she says. "But when the bubble burst, I came to realise the importance of stable savings accounts."
Zhang's conviction grew even stronger when she read that Americans on average save at best 1 per cent of their monthly incomes. "Now they're suffering from both the economic crisis and the consequences of low savings."
Zhang's online accounting system, www.qian8ao.com, has received about 2,000 new users each day for the last two months, a 50 per cent increase on previous months.
While high street shops fear the harshest conditions since the Great Depression of the 1930s, online retailers are more upbeat, on the back of an upsurge in website shopping over the past year.
"Online products are much cheaper than those in shopping malls and are often of good quality," says Zhao Li, a young mother in Suzhou, Jiangsu province.
She also hedges her bets. "Sometimes, if I want a pair of luxury brand shoes, I will try them on in a shopping centre and then order them online, where they cost much less."
Statistics from the Chinese Academy of Social Science show that by last June there were 162 million netizens in China, 70 percent of them under 30. The Internet Society of China, meanwhile, noted in its annual China Netguide 2008 that an average netizen spent 186.6 yuan online in 2007, expected to rise to 198.6 this year.
"Consumers are shopping more on the Internet, where they can both save cash and live a high-quality life," says Zhang Lingxiao, from www.taobao.com, a major Chinese online retailer.
"Chinese people still represent great buying potential," says Zhang, "and we believe that online retailing may help businesses survive the financial winter."
by: China Daily ANN

Let Finance Crisis "Drive you to Drink"

2008-11-06T16:37:00.004+08:00

Let finance crisis 'drive you to drink'

Whisky
Why you should invest: The value of whisky has not dropped in the last 720 years since they started making it in Ireland, said Mr Bill Hedman, managing director of venture capitalist firm Delemere Enterprises, which has its own distillery in Australia.
'At the very worst, if your investment crashes, you can go and get drunk on very good whisky, instead of holding on to a worthless piece of paper,' he added.
How to invest: You can buy whisky by the bottle or by the barrel.
What you should consider: The taste, rarity and reputation of the whisky, based on reviews by critics.
Investor tips: General manager of La Maison du Whisky Emmanuel Dron, who also invests in whisky, advises investors to buy only award-winning or limited-edition whiskies if they wish to get a good return on their investment.
Some bottles Mr Dron thinks are good buys - if you can still get your hands on one - are the limited-edition Laphroaig single-malt scotch whisky from 1974, which had only 910 bottles released worldwide.
The whisky won the award for the best whisky in the world in 2003.
A bottle cost $700 two years ago, but the price has shot up to $2,500 and will 'carry on increasing', Mr Dron said.
How much you need: If you are buying whisky by the bottle, the cheapest ones start at $80. If you are buying by the barrel, you need to set aside $30,000, which would include insurance, storage and bottling costs.
Wine
Why you should invest: Fine wine has been known to outperform stocks for the last three to five years, said Mr Andrew Bassett, trading director at the Australian Wine Index.
'The price of fine wines rarely goes backwards,' he said, adding that investors can look at returns of between 1 to 12 per cent per annum.
How to invest: You can buy wines by the bottle as an individual investor, or look for brokers like the Australian Wine Index to manage your portfolio.
What you should consider: Price of the wine, the vintage report containing details of how the grapes grew that year and whether it was a good crop, and critics' ratings.
You also need to be prepared to hold on to your wines for at least three years for more attractive returns.
Mr Bassett said: 'The worst market situation we have now is that people are selling their wines at 11 per cent profit instead of their expected 28to 32 per cent profit because it is a buyer's market now, and everyone is pushing prices lower.'
Still, Mr Bassett feels that wine is a 'good, solid investment' because while the prices of stocks and shares can drop by as much as 80 per cent, the worst that wine prices can do is to stagnate.
Investor tips: Mr Bassett feels that it is a 'great time' to buy Australian wines now, especially since the exchange rate has dropped by about 30per cent, so you can get good value for money.
Two years ago, one of Mr Bassett's clients bought a bottle of 2005 Mollydooker wine. It cost $125 a bottle then, but his client sold it this year for $350 a bottle.
Mr Bassett said that investors should maintain a portfolio of 70 per cent 'blue chip' wines and 30 per cent cult and emerging wines, which are more risky but have the potential for very high returns.
Art and antique furniture
Why you should invest: For a good collectible item, the price will never come down, said The Tomlinson Collection's regional manager Jack Thew.
How to invest: Buy art pieces and learn the tricks of the trade through personal experience, or find a respectable dealer.
What you should consider: Investing in art and antiques, unlike the stock market, is not purely about money.
Potential investors should understand trends in art and appreciate the beauty of the pieces in their own right, instead of buying them just as pure investments, said Mr Thew.
Investor tips: Chinese classical designs are an all-time favourite, said Mr Thew, with hard wood furniture made of Zitan wood and Huanghuali wood fetching the highest prices, sometimes more than $100,000 a piece.
Describing them as the blue chips of furniture investment, Mr Thew said: 'The prices of furniture made of those types of wood have increased like crazy.
'This is because they are imperial wood, which was used by the rich and famous. It is also a precious timber, because it takes more than 100 years just to grow six inches of the wood.'
However, not all pieces made of Zitan or Huanghuali wood may fetch the same value because of the different styles and designs of the subject, cautioned Mr Thew.
Investors can also look at buying thousand-year-old terracotta art pieces due to their rarity, said Mr Thew.
High-end watches
Why you should invest: People who put their money in watches are holding value that is better than what they have put into their stocks, said Mr Patrick Tan, executive vice-president of Sincere and head of the Sincere Watch Academy.
One such example is the Patek Phillippe Calatrava, which has doubled in price since it was produced 15 years ago, said Mr Tan.
Prices of watches increase because the cost of producing watches has gone up, explained Mr Tan.
However, it is difficult to determine how much watches appreciate by as consumer tastes are always changing, he added.
What you should consider: Look at the heritage of the brand, the craftsmanship and the engineering of the watch.
More established brands include Patek Phillippe and A. Lange & Sohne.
However, Mr Tan was quick to add that watches are not like durians, and there are no quick tips or 'bao jia' (sure win) guarantees for investors.
The key to investing is still having a good knowledge of watches and doing intensive research.
Investor tips: Buy innovative watches and special-edition watches, such as those released by watchmakers when they celebrate their anniversaries.
However, these are available only to a select few collectors who can 'justify that they are supporters of the brand', Mr Tan said.
One such watch, the Sincere Jubilee A. Lange & Sohne Double Split, released by Sincere during its 50th anniversary celebrations, fetched its owner a 40 to 50 per cent return when he auctioned it off six months later.
Only five of the limited-edition watches were made available to customers.
But Mr Tan's most important tip is for investors to buy what they enjoy.
'It would be a sad situation if people buy the watches purely for investment, but do not enjoy the watches,' he said.
This article was first published in The New Paper on November 2, 2008.

BULL or BEAR Market, you can make money

2008-10-11T10:00:00.003+08:00

Bull or bear market, you can make money
By Lorna Tan
For the past months, many stock investors have been caught in a roller-coaster ride, no thanks to the current financial turmoil.
It is common to hear investors lamenting about how much they have sunk into the stock market, only to see the value of their stocks plummet.
If you have a stock portfolio and are bearish on where the market is heading, there are two things you can do: sell your stocks now, which may mean a loss, or just hope for the best.
Rather than do nothing, you may also want to check out the recently relaunched Straits Times Index (STI) Futures, which provide retail investors an opportunity to profit even from a falling market.
For those unfamiliar with the topic, the benchmark STI represents the performance of the top 30 stocks of the Singapore market, based on market capitalisation. They include Singapore Press Holdings, Singapore Exchange (SGX), SingTel and the local banks.
STI Futures are contracts or agreements between buyers and sellers to buy or sell the STI portfolio of 30 stocks at an agreed price (futures price) to be settled at a specific future date.
STI Futures were launched in 2000 but not many retail investors were aware of this tool. With the relaunch last Thursday, there will be firms that provide ready buy and sell prices for STI Futures. This will lead to greater liquidity of the product.
It is a useful tool for investors who wish to take a position on where the local market is heading - that is, whether they believe that the STI will trend up or down - by buying or selling STI Futures contracts.
This means trading based on broad market movements instead of single stock movements. This reduces the need for individual stock selection; your risk is also diversified over 30 stocks instead of being pegged to a single stock.
At the same time, it can help to protect you against, or help you profit from, fluctuations in the stock market.
Here are some things you need to know about STI Futures:
What is the value of one STI Futures contract?
The value of each STI Futures contract is equal to $10 multiplied by the current index trading level.
For instance, if the index is trading at 2,300, holding a futures contract will be equivalent to investing $23,000 in the stock portfolio of the 30 listed companies.
This means that when a STI Futures contract is traded, the seller has, in essence, agreed to sell $23,000 and the buyer has agreed to buy $23,000 worth of stocks, as measured by the STI.
How are STI Futures transacted?
You are not required to cough up the full payment equivalent to the contract value. But the buyer or seller must each put up an initial margin deposit with the broker in order to secure the contract.
This margin, which is decided by SGX, is typically about 5 to 15 per cent of the contract value. The prevailing initial margin is $1,625 for one contract.
The margin essentially means that the STI Futures allow the investor to trade a portfolio of 30 stocks at a mere fraction - about 5 to 15 per cent - of its value.
At the end of each trading day and all following days that your position remains open, the contract value is "marked-to-market".
Your account is credited or debited based on that day's trading session. If your margin deposit falls below a certain maintenance level - currently set at $1,300 - your broker will request additional funds to replenish your trading account. If your position generates a profit, you may withdraw any excess funds from your account.
Margin levels prescribed by SGX are based on the movement of the underlying stock market as represented by the STI. The margin levels, therefore, will fluctuate depending on the historical and prevailing movement of the STI.
Do I need to own any of the stocks included in the STI in order to trade the futures contract?
You do not need to own any stock in order to trade the STI Futures. In stock index futures trading, you do not actually deliver or receive any stocks.
How can I profit from trading the STI Futures?
Like trading stocks, the point is to buy low, sell high.
The STI Futures offer the flexibility of buying and selling in whatever order you want.
That is, you can "buy first, sell later" or you can "sell first, buy later". If you think prices are going up, you may establish a "long" (buy) position, and if you think prices are going down, you may initiate a "short" (sell) position.
In addition, with the STI comprising a portfolio of 30 stocks, you can effectively participate in the broad market movements without the hassle of stock-picking. Each index point movement has a value of $10.
In other words, you gain $10 per index point rise if you have a long position or per index point fall for a short position.
Below are two trading scenarios:
Scenario A
Day 1: You are bullish about the Singapore stock market and decide to buy a September STI Futures contract at 2,400.
Contract value = 2,400 x $10 x 1 contract = $24,000
Initial margin required (at $1,625 per lot) = $1,625
The STI rises that day.
End-of-Day 1 settlement price = 2,425
Daily marked-to-market profit = (2,425 - 2,400) x $10 x 1 = $250
You now have a paper profit of $250.
Margin account balance = $1,625 + $250 = $1,875
As you have not liquidated your contract, you have one lot of open position.
Day 2: Market rallies further to 2,438. You feel the price is good and decide to take profit, selling your September STI Futures contract at 2,438.
Daily marked-to-market profit = (2,438 - 2,425) x $10 = $130
Margin account balance = $1,875 + $130 = $2,005
Total net profit = $130 + $250 = $380
In this scenario, your bullish outlook holds and you ultimately make a net profit of $380 when you liquidate your position.
Scenario B
Day 1: You are bearish about the short-term prospects of the Singapore market and decide to sell a September STI Futures contract at 2,400.
Contract value = 2,400 x $10 x 1 contract = $24,000
Initial margin required (at $1,625 per lot) = $1,625
Contrary to your initial bearish view, the market turns bullish; the STI closes higher.
End-of-Day 1 settlement price = 2,435
Daily marked-to-market loss = (2,435 - 2,400) x $10 x 1 = $350
You now have a paper loss of $350.
Margin account balance = $1,625 - $350 = $1,275
Maintenance margin required (at $1,300 per lot) = $1,300
You have a margin call and must deposit additional funds now because your margin account balance of $1,275 is below the maintenance margin of $1,300.
You need to top up $350 to bring it back to the initial margin level of $1,625.
Day 2: The market shows a decline.
You want to cash in on this move by liquidating your position by buying a September STI Futures contract at 2,388.
Daily marked-to-market profit = (2,435 - 2,388) x $10 = $470
Total net profit = - $350 + $470 = $120
In this example, you ultimately make a net profit of $120 on Day 2 when you liquidate your position.
How long should I hold on to a position?
As stock markets can be volatile, you take advantage of price movements by getting in and out quickly. Depending on your personal preference and perspective, you may wish to adopt a short-term trading approach (taking a position for one day, one hour, or even just a few minutes); or medium-term approach (several days to several weeks); or long-term (months at a time).
What are the risks?
The initial margin deposit is relatively small compared to the contract's value. The transaction may lead to quick and substantial profits, but the reverse is true for losses too when prices do not move in the expected direction. Investors should also be mindful of margin calls if the margin account falls below the maintenance margin.
It is possible that you may lose more than the amount you have in your margin account under circumstances of extreme market movements. Investors are strongly advised by financial experts to use only excess funds that they can afford to invest.

This article was first published in The Straits Times on October 5, 2008.

Looking on the bright side of the financial collapse

2008-10-01T12:59:00.002+08:00

Looking on the bright side of the financial collapse
By Michael Lewis

One of life's rules is that there's bad in good and good in bad. The total collapse of the US financial system is no exception. Even in the midst of the current financial despair we can look around and identify many collateral benefits.
A lot of attractive office space seems to be opening up in midtown Manhattan, for instance, and the US government is now getting paid to borrow money. (And with T-bills yielding 0 per cent, they really ought to borrow a lot more of it, and quickly.) And so as Morgan Stanley chief executive officer John Mack blasts short-sellers for his problems, and Goldman Sachs CEO Lloyd Blankfein swans around pretending to be above this little panic, we ought to step back and enjoy the positives.
To wit:
We finally get to see what's inside these big Wall Street firms.
We've just witnessed the largest bankruptcy in US history and we know neither the inciting incident (though there is speculation that sovereign wealth funds decided to stop lending to Lehman Brothers Holdings Inc), nor the deep cause. But there's now a pile of assets and liabilities smouldering in New York awaiting inspection.
The assets include sub-prime mortgage-backed bonds and no doubt many other things that aren't worth as much as Lehman hoped they might be worth. But it's the liabilities that are most intriguing, as they include more than US$700 billion in notional derivatives contracts. Some of that is insurance sold by Lehman, against the risk of other companies defaulting.
The entire pile might be benign, but somehow I doubt it. We may well find out that Lehman Brothers, in liquidation, has a negative value of hundreds of billions of dollars. In that case the natural question will be: How much better could things be inside Morgan Stanley and Goldman Sachs, both of which were engaged in the same lines of business?
We are creating the financial leaders of tomorrow.
Remember when everyone believed in Alan Greenspan? When John McCain, running for US president in 2000, said that if Mr Greenspan died he'd have him stuffed and propped up against the wall at the Federal Reserve, where he'd remain chairman?
No sooner did Mr Greenspan shuffle off the stage and sell his memoir than the financial system he helped shape fell apart. He's left not only a mess but a void.
No matter how well-educated we become in our financial affairs, we still need public officials to look up to, unthinkingly. And there's nothing like a government bailout to create new public-sector heroes. US Treasury Secretary Hank Paulson, 62, is probably too old; in any case, he's tarred by his association with both George Bush and Goldman Sachs. But 47-year-old Tim Geithner at the New York Fed is perfectly positioned to make Americans feel as if their financial system is in good hands for many years to come.
Getting the credit
I have no real idea if Mr Geithner knows what he's doing and he may not either. ('Bail out that one. No! Not that one - the other one!') It doesn't matter. He's in the middle of great events and should, by the end of them, know more about what happened than anyone.
Whatever happens to the US financial system someone is bound to get the credit for something even worse not happening and, as no one really understands what Mr Geithner does, he's the obvious choice.
Ordinary Americans get a lesson in low finance. It's been expensive but, then, so is kindergarten.
Americans' willingness to believe that we can hire some expert to tell us how to outperform markets is a big problem, with big consequences. It underpins Wall Street's brokerage operations, for instance, and leads to a lot more people giving out financial advice than should be giving out financial advice.
Thanks to the current panic many Americans have learned that the experts who advise them what to do with their savings are, at best, fools.
Merrill Lynch & Co, Morgan Stanley, Citigroup Inc and all the rest persuaded their most valuable customers to buy auction-rate bonds, telling them the securities were as good as cash. Those customers will now think twice before they listen to their brokers ever again. Many, I'm sure, are just waiting to get their money back from their brokers before they race for the exits and introduce themselves to Charles Schwab.
Bank of America Corp will soon discover that the relationship between Merrill Lynch and its customers isn't what it used to be, but Bank of America's loss is America's gain.
America has lots of new houses. Not all of them have people in them, sadly, but that's a minor detail. Even better, no one has had to pay for them, and probably never will.
I'm betting that the US government will soon have no choice but to take the final step and guarantee every bad mortgage loan ever made by Wall Street.
I can hear you thinking: Doesn't that mean the taxpayer foots the bill? That's so negative! Sure, one day some taxpayer will foot the bill but if the government does what it does best, and continues to borrow huge sums from foreigners, it doesn't have to be you or me.
Huge numbers of Wall Street executives will have the time to raise their children.
For years now Wall Street has been far too lucrative for a certain kind of energetic and ambitious person to justify anything but the most perfunctory personal life. Now that the market for his services has collapsed, he has time to go home and figure out which of the children roaming around the mansion are actually his.
In time, he will learn to love them and they him, and they will gain the benefit of his wisdom and experience. Perhaps one day they will put it to use as traders and investment bankers on the Wall Street of the future, where they will report to those exalted creatures of high finance: loan officers.
There, slowly, they can earn the money they will need to pay off the mortgages defaulted upon by their forebears. - Bloomberg
The writer is a Bloomberg News columnist and the author of 'The Blind Side'. The opinions expressed are his own.

This article was first published in The Business Times on September 19, 2008.

Starting Kids on Managing Money

2008-09-01T12:19:00.001+08:00

Starting kids on managing money Teach your kids good money management. -->

By Lorna Tan, Finance Correspondent

My son was nine when he popped this question: 'Who gets the house when you and Dad pass away, Mum?'
Startled, I retorted: 'I'm giving it to the church.'
In case my parish priest is reading this, I'm sorry, I lied. I wanted to avoid giving the boy the impression that he could depend on his parents financially for life. Better for him to stand on his own two feet and be responsible for himself when he grows up than to depend on handouts.
But what am I doing to ensure this?
The recent media reports highlighting the undesirable trend of younger Singaporeans facing credit woes were a wake-up call for me. It appears that most of these young adults are snared by materialism and a desire for the high life. With easy access to credit, they splash money on cars, branded goods, clubbing, gadgets and overseas holidays.
As a parent, I would be devastated if my kids became bankrupts through bad money management. In fact, it will be an irony because a large part of my job is to advocate in my articles the importance of financial literacy.
Like all parents, I want my children to be useful and upright people leading fulfilling lives. However, it is becoming evident that having reasonable levels of IQ (intelligence quotient) and EQ (emotional quotient) is no longer adequate to get through life successfully. We've neglected the importance of FQ (financial quotient).
Finally, Singaporeans are slowly waking up to the reality that it is not enough to 'study hard and earn money' but also how to save and invest it. This was why I decided to register my kids for a two-day financial literacy programme during the June school holidays. It was called the MoneyTree programme, conducted by home-grown firm Young Entrepreneurs' Secrets. It costs $680 to $880 per person, depending on the level.
My 15-year-old daughter was receptive to attending the programme but I had difficulty convincing my 14-year-old son to do so because he did not see the necessity for it. Neither did he want to give up two days of his precious vacation time. Frustrated, I ended up giving them $50 each as an incentive.
I sat through half of the first day's session and was impressed with what the children were put through.
In an informal classroom environment, some 14 children were taken through a series of key topics, including how the forces of demand and supply determine prices of goods, the types of income and their sources, managing money and prioritising expenditure.
To simulate the real-world environment, the children were provided 'play' currency and 'credit cards', which gave them a feel of the financial pitfalls that exist in the real world.
I found myself gritting my teeth when my son was the first among the participants to use his 'credit card' to pay for a transaction, without considering the interest-rate charges that would snowball. I was tempted to intervene but I quietly consoled myself that it was better for him to make mistakes now than learning them the costly way later in his adult life.
The youngsters were taught the importance of budgeting and 'paying yourself first' so as to prevent overspending. Another key lesson was to differentiate between needs and wants. 'It's not how much you make, it's how much you keep' was something that the trainers emphasised throughout the programme.
Useful takeaways from the programme include the importance of saving early to take advantage of the benefits of 'compound interest' and the 'Rule of 72'. The former refers to interest paid on both the principal and accumulated interest over time, while the latter shows how long it takes to double your money by dividing 72 with the expected interest rate.
For instance, if you invest $10,000 in an instrument that gives you an annual return of 6 per cent, that sum will double to $20,000 after 12 years.
In the same vein, the price of a burger will double to $8, 12 years from now, assuming it is currently sold at $4 and the annual inflation rate is 6 per cent.
On the second day, the children learnt more about bank savings and making their money work harder by having multiple income sources and investing in stocks and unit trusts, and the differences in risk and reward between saving and investing.
I hope the lessons my two kids gleaned from the two-day workshop will go a long way, but I'm aware that I, too, have a role to play in instilling good money habits in them. One method recommended by experts is to encourage the saving habit by matching the kids' savings. I should also hold back from giving in too easily to their demands when they badger me for gadgets and consumables like mobile phones.
Recently, I started involving them in my financial planning by giving them an idea of the various instruments I use to make my money work harder for me. By doing so, I hope they will understand the need to plan for their financial future early by inculcating good money-management skills and discipline.

This article was first published in The Straits Times on August 17, 2008.

Start saving to get on to the wealth track

2008-08-08T13:27:00.003+08:00

WEALTH is often measured by a posh home, luxury car, several private bank accounts, and a fat salary.
But Paul Clitheroe, probably one of Australia's most visible spokesmen for financial literacy, says it is not how much you earn that makes you wealthy. It is how much you spend.
That is, frugality and a savings habit will help you get started on the wealth track. 'Globally no one understands that,' he rues.
He recounts that just the day before, he had a four-hour conversation with a bank chief executive earning a $3 million salary, and saving nothing. 'That's common. When he got home at night, doing his own budget was the last thing he wanted to think about. He spent the whole day doing the bank's budget. I could teach him nothing. Every good principle of money advice he knew. He will see a financial planner next week; he will know more than the financial planner.
'I told him - you're far better educated, but you have to shut up and listen. What the planner will do is to make you do the basics, a budget. You should be saving $1 million a year. Then he said - 'I got it! I thought the financial planner was a genius who is going to make me rich.' '
Mr Clitheroe was one of five founders of Australian financial advisory group ipac in 1983. The five friends pooled personal savings of a total of A$100,000 (S$127,000) to start ipac. In 2002, ipac was sold to AXA for about US$250 million. Today the group, which has an office in Singapore, manages more than US$14 billion in assets. Four of the founders remain active in the business.
Mr Clitheroe, who has written books, says: 'My role was always to be out in public to talk about the value of advice.' Between 1993 and 2002, he hosted a Money programme on Australian television, and has been chairman and chief commentator of Money Magazine since 1999. Currently, he is ipac executive director, and also chairman of the Australian government's Financial Literacy Foundation.
'What is financial literacy? Of every dollar I earn, I spend 80 cents and put aside 20 cents. You have financial literacy. The more educated people are, the more they earn, the less likely they are to save. The people in Singapore who most understand budgeting will be the poorest who wonder how they are going to buy rice tonight.
'They actually possess more financial literacy than many others put together. As a community like Singapore develops, the less people worry about how they will buy rice, we lose financial literacy.'
Mr Clitheroe says one of the great and persistent fallacies is that a financial adviser can make you wealthy. He tells aspiring entrepreneurs - who tend to be Asian - to take their savings, start a business, and return to see him in five years. Ipac's audience, instead, tends to be wage-earning executives.
'I don't believe financial advisers make people rich. People make themselves rich. The adviser's job is often a strategy to turn career earnings into wealth. But with a business owner, the time to save is likely to be when the business is sold, and that's a significant amount of money.'
People, he says, tend to chase 'false prophets' - in this case, the myth that an adviser can be a 'magic pill' to wealth. He recounts that earlier in the day, he exchanged pleasantries with a passing Australian couple here who recognised him. 'As they walked away, the question they asked was - Do you have a hot tip for us?
'What are the true hot tips? Be nice to your mother and don't stand on a canoe. That's valuable information,' he guffawed.
'It's like the diet industry. Would I prefer to eat chocolate doughnuts and eat a magic pill to keep slim? Give me the magic pill! Who is tricking us? If it looks too good to be true it will be.'
As Asians tend to be entrepreneurial, Mr Clitheroe say ipac's growth in Asia is likely to be slow. He shrugs off competition from private banks, however. 'When we sold ipac, I became a classic private bank customer. But a private bank is a money manager; they're not my life counsellor.' This is because a bank makes money from transactions, deposits and loans, and thus is more likely to churn clients' accounts.
Ipac charges a fee for advice, although this isn't common in the advisory market here. 'If you don't pay someone an annual retainer, how do they possibly give you trusted advice? I'm a very happy private bank customer, but the bank is transactional. My banker gets promoted every couple of years, and I get a new banker. In (ipac), clients that talked to me 25 years ago still talk to me. I have the same business cards with the same number. That's what I call a trusted advice model.'
He adds: 'We're not pretending this will be a dominant model in Asia; it won't be. But we feel very strongly it will be a powerful niche. Over time, most of our clients will come from other clients.'
Meanwhile, some of Mr Clitheroe's efforts goes towards getting employers in Australia to offer financial literacy courses to their staff. 'Around the world, employers say, that's not my problem. But the best argument for financial literacy is that it is in the interests of profitability and shareholders.'
Research in the US and Australia increasingly shows that financial stress in employees leads to lower productivity, absenteeism, demands for higher pay, and higher turnover as staff chase higher salaries elsewhere.
'I tell companies that building financial literacy through workplace training is not only a good statement about their role as a community citizen, it will make money for shareholders. The second I talk about making money, the conversation shifts dramatically.'
Some employers, he says, are concerned that staff who are financially comfortable will quit their jobs. 'Employers say, if they're broke, they'll need to work for me ... I say let's look at the research. People get bored with early retirement. Ten years ago the typical Australian retired at 55. But most went back to work at 57, and it's not due to money. It's the social contact they miss. Financially independent people are better employees. They go to work because they want to work.'

This article was first published by The Business Times on Aug 6, 2008.

When ' GOOD' debts turn 'BAD' things get ugly

2008-07-07T21:58:00.001+08:00

When 'good' debts turn 'bad', things get ugly
By Alok Kumar
Today's uncertain economic outlook calls for consumers to think about what they actually need to spend to maintain the lifestyle they are accustomed to, and to carefully assess if they have the financial flexibility to cope with any change in circumstances.
Although consumers may start thinking about spending on big ticket items like holidays, home improvement and car purchases to take advantage of the strength of the Singapore dollar before prices increase further or to enjoy current low interest rates, consumers should still exercise prudence in their spending.
A recent survey by GE Money Singapore revealed that 66 per cent of respondents felt that the uncertain economic climate has made them more cautious when considering a loan.
If a loan is required, one needs to evaluate the loan that one is taking.
Debt can be a complex issue and it is thus necessary for consumers to be able to differentiate between 'good' and 'bad' debt.
'Good' debt essentially helps one make purchases for items or essentials that one may not have enough savings for at the moment, but can well afford in the long run. It is essentially debt that can create value.
When used intelligently, debt can be positive and even be of assistance in building wealth. Examples of 'good' debt can broadly be divided into three areas.
These include loans taken to purchase assets such as property that may appreciate in value; for activities or items that are beneficial such as education to enhance one's qualifications that will likely increase one's earning ability and long-term returns; loans for business ventures for which business owners need cash that they do not have at the moment to fund or expand their facilities, with the aim of getting better returns in terms of business profits.
In addition, debt, if used prudently, can often be leveraged to one's advantage in certain circumstances. For example, one of the most common uses of loans applies to the purchase of cars.
We often see cars as depreciating assets but very often, it is a necessity or a mode of transport that gets one to work to earn a living.
While some consumers may be able to pay for their cars upfront or even pay for a property with existing cash without taking a loan, most will prefer to leverage debt so that they can free up cash for other purposes that may yield greater benefits in their opinion.
Depending on the individual's unique circumstances, the 'freed-up' cash can be used as emergency reserves to prepare for a rainy day.
Or, it may be used by savvy investors who can generate returns in excess of the interest rate they pay on their car loans. For example, there are also some small business owners who find it cheaper to take a car loan, and use the available cash to finance business needs, and hence gain better returns.
For instance, take a car loan quantum of $100,000 with a flat interest rate of 2.5 per cent (effective interest rate of about 4.61 per cent per annum).
A business owner who can afford to pay cash for the car might take full financing at these rates and use the cash to finance his business needs instead, considering that current business loans have an interest around 9 to 13 per cent per annum, effectively leveraging debt to his advantage.
A debt is considered 'bad' when a person has to stretch himself beyond his means, overspends and as a result, is unable to settle his loan repayments.
As a general rule of thumb, most financial experts recommend that an individual's total personal debt should not exceed 36 per cent of gross income.
Besides the debt-income ratio, keep in mind that a person can fall into a debt trap through the accumulation of late payment and interest charges as well.
For example, the concept of 'bad' debt often comes into play when discussing the purchase of discretionary items using high-interest credit cards and not having the ability to pay off the credit card bill in full.
The discretionary item, especially if purchased without considering one's financial situation, continues to lose value, while the amount one paid for it continues to increase.
Exacerbating the 'bad' debt factor, some consumers may be tempted into applying for in-store credit cards for the savings offers that range from 10 per cent to 20 per cent off the cost of purchases upon signing up immediately.
What people often do not realise is how much of that savings may be destroyed by the high interest rate, sometimes as high as 24 per cent per annum, on the card if they fail to pay for these items immediately.
Penalty charges for late credit card payment can also be incurred and amount to additional expenses on top of the higher interest rates.
Be careful to avoid turning 'good' debt into 'bad' debt by considering factors such as other existing monthly payment obligations, both fixed (eg housing, car, insurance) and variable (eg food, clothing) as well as possible shifts in the economic climate, to ensure that you are comfortable with the monthly repayments, and prevent unnecessary late payment charges.
Of course, even after careful planning, there may be instances when consumers need to make adjustments to their cash flow, or would require a loan.
Consumers appreciate and look for flexibility when considering a loan. In the GE Money consumer survey, 95 per cent of respondents stated that flexibility was an important or very important consideration when taking a loan.
Yet, more than half viewed their current personal loans as restrictive and felt imprisoned by the inflexibility presented by current industry offerings.
There are in fact, flexible personal loans in the market that cater to the consumers' needs for repayment flexibility. For example, personal loans that offer flexible repayment options including payment holidays and the option to pay interest only at the start of the loan, etc.
These payment features help individuals manage changing financial circumstances, by allowing customers to allocate cash to where it is needed most, without incurring heavy penalties for taking a break from the loan payment.
In fact, the GE Money survey showed that 43 per cent of consumers appreciated flexibility at the start of the loan, the time when they are usually strapped for cash, while 43 per cent felt that it was important to have flexibility to deal with unexpected events that can possibly take place midway through a loan's term.
Ultimately, a loan can help an individual, and can be a positive affair when taken responsibly. Consumers need to consider what is needed to leverage debt to their advantage and to prevent 'bad' debts.
Consumers need to build a good credit history that not only shows accountability and maturity about the individual, but will help the individual obtain other future loan facilities when needed.
Exercising financial responsibility and prudence when it comes to taking a loan will help individuals take steps towards building a better future for themselves and their families, and facilitate their future requirements at different stages of life.
The writer is chief marketing officer of GE Money, Singapore.
This article was first published in The Business Times on 4 July 2008.

START EARLY, and TIME IS ON YOUR SIDE

2008-06-04T23:10:00.003+08:00

Start early, and time is on your side
It's embarrassing to say this because it makes me seem money-minded, but I sleep with my financial calculator at my side.
The reason is very simple.
I enjoy playing with figures, and one of my favourite bedtime activities is punching different permutations of numbers into my calculator to work out the number of years it will take for me to fill up my pot of gold, which to me means financial independence.
PAY YOURSELF FIRST
When you sit down to sort out your bills, the first cheque you write should be to yourself. Work out what you can realistically save every month and pay that 'bill' first by depositing the money in the bank or investing it. Then, and only then, pay your other bills. Start with a modest sum and stick to it. Set aside more when your income goes up. If you get a bonus, sock part of it away.
It never fails to amaze me that it is possible to grow a modest sum into a sizeable one simply through the power of compounding.
For instance, do you know that $68 a month invested for annual returns of 8 per cent over 30 years will generate a sum of $102,020? But if your investment horizon is shorter, say, 10 years, you will need a larger monthly sum of $554 invested at the same rate of 8 per cent to generate $102,020.
Consider this: If you start saving at the age of 20, putting away $2,000 a year until you reach 30, and you continue to stay invested without any further input of cash till you turn 63, you will have nearly the same amount of money socked away as a person who also saves $2,000 every year but starts a decade later, between the ages of 30 and 62.
To illustrate this, let's assume Mr A started a yearly investment of $2,000 at age 20 and stayed invested for 10 years, at a rate of return of 6 per cent. Then, from age 30 to 63, he allowed his investment to continue growing at 6 per cent without any further annual inputs of $2,000. At age 63, his investment would total about $191,150.
In contrast, take the case of Mr B, who embarked on a yearly investment of $2,000 only when he turned 30. He must continue putting in $2,000 a year all the way till he turns 62 before the total value of his investment grows to about $192,690.
A handy and easy tool that illustrates the effects of compounding is the Rule of 72.
To work out how long it would take for your investment to double in value, divide 72 by the expected percentage return. With a return of, say, 9 per cent a year, to double your money, you would need eight years, that is, 72 divided by nine.
This means that if you invest $10,000 in an instrument that gives you an annual return of 6 per cent, that sum would double to $20,000 after 12 years.
I've concluded that to make compounding work for you, two things have to be present: a good savings discipline and a long investment time horizon.
Set up a saving routine and stick to it
Let's look at the first one. Without the discipline to save, there can be no surplus for investments.
Not long ago, I ran into a former colleague who complained that she was unable to save every month, after settling her bills and paying for entertainment. It was clear to me what the problem was: She was paying others before she paid herself. Being disciplined about saving includes learning to 'pay yourself first'.
It is not that difficult to make savings your priority. Decide how much you can realistically save by taking into account your monthly liabilities. Start with a modest sum and stick to it. Increase this portion when your income goes up. Don't spend all your year-end bonuses.
Over the years, I have found that most people have trouble saving for the long term. They might be disciplined at the beginning and save for a short time, but then, they throw caution to the wind by blowing all their hard-earned savings away on some big-ticket purchase such as a holiday or a car.
I have money automatically channelled from my pay and deposited into regular savings plans so I have no access to it. After all, if I don't see it, I'm much less likely to spend it.
Financial experts typically advise clients to save 20 per cent of their pay. Learn to distinguish between needs and wants, limit expenditure on depreciating assets such as consumables and live beneath your means. Don't give in to compulsive buying habits and make it a habit to question every purchase.
Start as early as you can
The second factor required to make compounding work for you is a long-time horizon. This refers to the amount of time you have before you actually need to cash in your investments.
Generally, if you have less than one year, your investments should be kept liquid, in savings and money market funds. If you have a medium- to long-term horizon of five to 10 years, your money should be kept in a mix of cash, lower-volatility instruments such as fixed income, and equities.
If you have an even longer horizon, you have enough time on your side to ride out the volatility of investing in equities, so more of your investments could be channelled there, depending on your risk appetite.
This is why it's just good sense to start saving early as well as regularly. In fact, get started as soon as you get a job because you will have more time on your side. Check out regular saving schemes, which include savings plans offered by banks as well as insurance plans. Many unit trusts also let you make regular savings plan contributions from as little as $100 to $200 a month.
We work hard for our money, so let's make sure our money works just as hard for us. Focus on the long term and make time your best ally.
This article was first published in The Sunday Times on May 25, 2008

Dispelling 10 money myths

2008-05-16T19:36:00.002+08:00

AMID the backdrop of a beleaguered stock market and challenging economic conditions, it is even more imperative that you manage your wealth well. More often than not, our wallets are lighter than they should be because of unsound beliefs in how to amass and grow our wealth such as the following:
You cannot lose money with high grade bonds
With the stock market is facing more challenges today, investing in the safety of good grade bonds seems like an excellent idea. But nothing can be further from the truth. In fact, investing in long-duration bonds or 'long bonds' may be one of the greatest investment mistakes of the next decade.
This is because bonds are effectively IOUs issued by corporate bodies or governments to raise money. They pay a fixed rate of interest over a fixed term, say 10 years. But while the income may be fixed, the price is not. A bond holding bought one year ago, for instance, is likely to be worth a lot less now if interest rates start to surge. In fact, the longer the duration of the bond, the sharper will be the drop in its value when interest rates go up.
You can time the market
A client asked me recently whether it is true that many unit trust investors lose money. There is some truth in this but it is not entirely accurate.
Let us compare the following: The annualised return for the S&P 500 over the last 20 years, with dividend invested, is about 11 per cent a year. Meanwhile, the average investor of unit trusts, investing in S&P 500 companies, earns only 6 per cent a year during the same period. As for the average direct stock investor, he earns a meagre 3 per cent a year during that time.
The only plausible explanation for such great discrepancies is poor timing, which just goes to show that timing the market accurately is an almost impossible task. Most investors are in fact consistently worse off due to the poor timing of their investment.
Bluechip stocks are low risk
Remember previously local hot favourites like ACCS, Citiraya and China Aviation Oil? Their rise was meteoric but their fall from grace was equally spectacular. Over in Europe, shares of Northern Rock Bank of the UK are almost worthless. In the US, the collapses of Enron, Worldcom, and more recently the plunge in Bear Stearns' share price from US$160 to US$10 is still fresh in our minds. Many top Wall Street banks are now scrambling to raise cash to beef up their depleted reserves from the sub-prime write-offs.
Much of the stockmarket losses may well take more than a generation to recover. For example, the US stock market hit a peak in 1967 and did not cross that mark until 15 years later in 1982. The Japanese stock market reached its secular peak in 1989. Even today, the Nikkei is trading at less than one-third of its historical high. Many global technology funds are also trading at less than 50 per cent of their all time highs from 2000.
I will start saving when I have enough money
It is never too early to cultivate the good habit of saving, because the sooner you start, the longer the period your money gets to grow. This is my general advice to people of all ages, but young people in their 20s and 30s should take special heed as they tend to overspend.
Despite our grand new year resolutions to start saving more, many seem to always fall behind their planned saving schedules. It is best that you put money aside in a systematic manner through an insurance plan, a regular savings plan or a recurring investment programme. Start with an amount you feel comfortable with and gradually step it up when you gain more confidence in setting aside the committed amount.
I am too young for life insurance
You may be young, but you are not immortal. As soon as there is someone who depends on you financially, you will need life insurance. That may be a partner whom you share a mortgage with, a spouse, or children - anyone who would struggle for money as a result of your death.
Statistics show that you are five times more likely to suffer a critical illness than you are to die before age 65, as heart attacks and cancer are becoming more survivable than ever before. In fact, most people who contract multiple sclerosis are aged between 20 and 40, and half of all testicular cancer cases show up in men under 40. As such, all Singaporeans should make sure that they have adequate critical illness cover in their life insurance programme.
There is no need to teach children about finance
Ignorance and money are a dangerous combination, so it is very important to help your children understand the value of money. Parents should start discussing the concept of money with their children once they start saying they want something. For a start, you can begin by teaching them that they get things only when they earn them.
As your children get older, you can introduce them to the concept of stocks. You could buy them some Singapore Airlines (SIA) shares and tell them that when they fly on an SIA plane that they partly own the plane and the company, so if SIA makes money, they will too.
This way, they will understand from a young age the importance of saving and investing wisely, so they will be able to take better care of you when you get old.
I am changing my car because the new car is better for my cash flow
This is one of the silliest notions I keep hearing over and over again from clients. To be fair to the salesman, we, the buyer, want to believe him. Our ability to exercise good judgment is often obscured by our innate desire for that flashy piece of metal. We figure that life is going to be much easier when we are the object of envy among friends, colleagues and relatives.
The moment a new car is out of the showroom, its resale value would already be much lower. Also, you would have to take a huge loss when you sell off your old vehicle. Lower maintenance cost of a new car is largely an illusion, as most Japanese or European cars are made to last for at least 10 years without major problem. Although the monthly loan financing of the new car may be lower, this is usually because you are stretching your loan repayment period and you have also ignored the par value of your current car in your calculation.
Nevertheless, this remains largely a lifestyle decision, and if your income can support it, it is really no great sin to spend some money for that extra attention. To me, I am too much of a miser to consider it.
I should pay off my mortgage as soon as possible
Liquidity should be the No 1 consideration in any prudent investment. Many Singaporeans believe that home equity (defined as the excess of your property valuation over your remaining mortgage) is a convenient nest egg which they can tap when they are in financial trouble. But the opposite is true instead.
You see, banks are income lenders, not collateral lenders. They associate assets with liens, but their first requirement is that you must show your ability to repay your loan. The irony is that you almost have to prove that you don't need the money before they loan it to you.
But note that what I am advocating is not piling up excessive debt but the proper management and utility of debt to enhance your wealth. In fact, most people do not realise that mortgage interest can be used to offset their rental income in their income tax computation, thus reducing their effective borrowing cost of a rental property.
A shortage of land in Singapore means property prices cannot fall
It is true that land may be scarce in Singapore but it is mathematically impossible for residential prices to appreciate faster than income over long periods of time. Think about it. If home prices go up more than income over time, nobody would be able to buy a place to live in, apart from inheriting one.
Other common property-related myths include:
Prime properties never fall in price.
During the last property market correction in Singapore from 2001 to 2005, property across the entire spectrum of the market was affected, regardless of whether it was high or low-end. Remember, there is a difference between high prices and increasing prices. Prices may be high, but they may not be increasing.
House prices do not fall to zero like stock prices, so it is safer to invest in real estate.
It is true that house prices do not fall to zero, but your equity in a house can easily fall to zero and even below that. It just takes a fall of 30 per cent to completely wipe out people who only have 25 per cent equity in their house. This means that house price crashes may actually be worse than stock crashes. Singaporeans should take note especially since most of their retirement funds are locked in their property, and the money may be leveraged.
I do not know why I always overspend
The cause may appear unclear initially but actually the following are some of the common reasons why people spend beyond their means:
Buying happiness: This is an easy trap to fall into, since most advertisements go to great lengths to associate a product with happiness. They lead you to purchase things by persuading you that doing so will make your life better. While the purchase itself may give you pleasure, the feeling is fleeting. You will end up having to purchase something else to find more 'happiness'.
Keeping up with the Joneses: Spending to bolster your image is dangerous. In many cases, the Joneses are doing exactly the same thing to keep up with you.
Embarrassment: Often it is hard to admit to friends that you do not have the money to take part in certain activities, so you play along instead and pay for things that you cannot afford. These could be anything ranging from a weekly dinner at a fancy restaurant to regular golfing sessions.
Lack of patience: Some people want instant gratification. When they see something they fancy, they want it immediately, regardless of whether they can really afford it.
Laziness: Instead of doing some research, looking for deals and spending their money wisely, they often pay too much for things. When bargaining, a sure-fire technique is to ask dispassionately, 'What is the lowest you can go?', even if you feel that the price is already very good and you really want that item. Often, the seller will give you a better offer.
Hopeless optimism: Many people spend with the expectation that they will earn more money soon as a result of a pay rise or bonus. But if the bonus or raise does not work out as expected, there will be a lot of debt to account for.
Charge and charge: Some people who do not have the cash in hand see credit cards as real money. This, of course, can get them into a lot of financial trouble.
These are just a few reasons behind overspending - some people may be motivated by a combination of several reasons. Whatever your reasons, understanding the motivating forces behind overspending can help you address the issue and get a new 'lease of life', financially speaking.
This article was first published in The Business Times on May 14, 2008

THE POWER OF COMPOUNDING IN INVESTING

2008-05-06T15:38:00.001+08:00

The power of compounding in investing
Time could help regular-savings-plan investors chalk up a considerable sum of returns.
Clearly, the initial investment sum plays an important role in the sum of returns. Let's say you invest $100,000, assuming an investment return of 20%, you would get $120,000 in total. The sum would diminish to $12,000 if you had invested only $10,000 at the same rate of return. So some people may have an illusion that investment only work well for people who invest large sums of money.
Well, not exactly. Even if you invest a relatively smaller amount, you could make a very good return by utilising the power of compounding. What you need to have on your side is TIME; or simply to invest early. Let's illustrate how much $100,000 would grow at steady rates of return over different periods as shown in Table 1.
Assuming a long term rate of 2% per annum, the initial amount of $100,000 would grow to $ 122,000 in 10 years, and $181,000 in 30 years' time. However, if you chose to just invest into fixed deposits at this point of time, you would probably expect a lower rate to be used for compounding. The current fixed deposit rates from three largest local bank ranges from 1.4% to 1.5% per annum as at 20 February 2008. If you chose to invest in a diversified balanced portfolio with a 40% weighting in fixed income funds and 60% weighting in global equity funds, you would probably expect returns from 5% to 7% per annum over the longer term.
Thus, if an investor chose to invest in a diversified portfolio with an average rate of return of 7%, the investment could grow at a faster pace. Assuming a rate of return of 7%, in 10 years, the investment will grow to $197,000 and to $761,100 in 30 years' time.
You may wonder, "What if I am good at building an aggressive equity portfolio and I invest early?" Assuming an annualised return of 12% - in 10-year's time you would have made $311,000, which is 3.1 times of the original investment amount. The sum balloons to almost 30 times the original amount in the span of 30 years. A great value investor like Warren Buffet generated annualised returns of 21.4% in the past 42 years (since 1966). With the power of compounding, the investment grew tremendously to 336 times the original amount in 30 years.

Source: Fundsupermart.com compilations, all figures rounded off to the nearest thousands
The table above illustrates that fixed deposit may look safe but would entail substantial "opportunity cost" of giving up investment. As long as you invest early and pick the right asset class or portfolio, even a decent annualised return of 7% would bring you a long way. Investing for the long term also helps investors to tide over short-term volatility in equity markets. Long-term value investors are less-likely to exhibit too much fear during volatile times unlike many ordinary stock investors who just look into momentum investing.
Other than investing a lump sum for the long term, investors may also choose to invest regularly by using the Regular Savings Plan. This investment strategy is suitable for long-term investors to make use of the power of compounding. by Kelvin Yip

10 ways to overcome the shrinking dollar

2008-04-12T22:35:00.003+08:00

10 ways to overcome the shrinking dollar

It takes discipline and a sound investment strategy to combat the corrosive effects of inflation, say financial experts.
1. Cut down spending, live within your means
IPP Financial Advisers investment director Albert Lam's advice is to review your lifestyle and consumption patterns.
For instance, you can substitute a branded item with a no-frills one, or switch to a cheaper mode of transport like the bus.
2 Try to save 20% of your pay or more
This is a useful tip especially for those just starting their careers, says head of ipac financial planning's advisory team, Mr Bill Castellas.
Establishing a disciplined pattern of 'money behaviour' will go a long way towards building surpluses for long-term investments.
3 Do not be overly conservative
Invest your money instead of leaving all of it in savings deposits or fixed deposits, said Mr Lam.
New Independent's financial advisory manager Stanley Sim also suggests that instead of parking spare cash in savings deposits, investors can place it in money market funds that have zero sales charges and offer better rates.
Impact of inflation on purchasing power
4 Don't rely solely on guaranteed products
Mr Castellas feels that such products, like bonds, might provide peace of mind but only marginal protection against inflation over the long term.
5 Save regularly via an investment platform
The earlier you start investing a small amount that you can afford to set aside, the quicker your investment will grow till it builds up into a significant sum in later years.
'Set aside an affordable sum from your daily expenses each month via a regular savings plan,' said Mr Castellas.
'You can put it into growth-oriented assets like equities and or real estate investment trusts.'
6 Take on sensible level of investment risk
Build an investment portfolio with a reasonable spread of defensive and growth assets that suit your lifestyle.
7 Invest for returns that will beat inflation
In order to beat inflation, consider investing in a globally diversified portfolio of stocks and bonds with a long-term horizon, said Mr Sim.
A moderate-risk portfolio, comprising 60 per cent equities and 40 per cent bonds, should be able to generate a 6 to 8 per cent return a year over the long term.
8 Understand the power of compounding
Start planning, saving and investing as early as possible so you can enjoy the benefits of compounding, said Mr Lam.
He suggested investors apply the Rule of 72, a handy tool that illustrates the effects of compounding.
To work out how long it will take for your investment to double in value, divide 72 by the percentage return. With a return of, say, 9 per cent a year, to double your money, you will need eight years, that is, 72 divided by nine.
Mr Sim noted that if you can invest $10,000 in an instrument that gives you an annual return of 6 per cent, that sum will grow to about $32,000 after 20 years.
If you start early, the compounding effects will help you fight inflation by preserving and growing your wealth.
9 Invest in asset classes that appreciate
Both Mr Lam and Mr Sim gave property as an example. But invest in this asset class only if it is within your means.
If rents increase at a faster rate than inflation, your property rental yield will provide a healthy return, they said.
10 Limit exposure to depreciating assets
Such assets include consumer goods like cars.

by Lorna Tan

10 TIPS TO SAVE YOU MONEY

2008-04-01T23:10:00.005+08:00

IT is tax time again.
You have until 15 Apr to file your tax form or until 18 Apr if you e-file.
The Inland Revenue Authority of Singapore (Iras) expects that 85 per cent of the 1.5 million taxpayers will e-file this year, up from 80 per cent last year.
Most employers are in the auto-inclusion scheme. That means you can view your employment income at https://mytax.iras.gov.sg, check that the information is correct, and click 'submit' to file your tax return. It's easy.
Here are 10 more tips to help you save money on taxes.

Tip 1: You have no tax to pay - if you earned less than $22,000 last year.
If you receive a tax form or PIN mailer, however, you are required to submit your tax return to Iras regardless of your income.
To check if you need to file a tax return, send an SMS message with your IC number to 91164900 using this format: Filetax S1234567Z.

Tip 2: Paying through Giro
About 60 per cent of taxpayers pay through Giro.
It allows you to make up to 12 months of interest-free instalments, from May 2008 to April 2009.
Otherwise, you have to pay within one month of receiving your tax bill.
You can download the Giro application form at www.iras.gov.sg.
Tip 3: Wife Relief

If your wife was not working or earned less than $2,000 in 2007, you can claim 'wife relief' of $2,000.
There is no corresponding 'husband relief' in the case of a non-working husband.

Tip 4: Qualifying Child Relief
QCR is $2,000 per child for the first three children. Either parent may claim the full amount or it may be split between both parents.

Tip 5: Working Mother Child Relief
For first, second, third and fourth children, the relief is 5, 15, 20 and 25 per cent of a working mother's wages.
Both this and the QCR can be claimed for Singaporean children up to 16 years old, or above age 16 if a full-time student with income less than $2,000 in 2007, excluding scholarships.

Tip 6: Parenthood Tax Rebate
This is $10,000 for your second child and $20,000 each for your third and fourth children born in 2004 or later. The rebate may be split between the parents in any way they choose.
This one is huge since it is a rebate, which you deduct directly from your taxes. It reduces taxes more than a relief, which is subtracted from your income.

Tip 7: Parent Relief
You can claim parent relief of $5,000 if your parent is staying with you and $3,500 if not.
The parent must be 55 years or older, live in Singapore and earned less than $2,000 in 2007. You can claim for up to two parents.

Tip 8: Foreign Maid Levy
A working mother may claim this relief even if the husband paid the levy. It is twice the amount of levy paid. So the maximum you can claim is $4,440 if you qualify for the concessionary levy of $170 per month with effect from 1 Jul 2007, and $6,720 if you don't.

Tip 9: Grandparent Caregiver Relief
Are you a working mother with Singaporean children aged 12 or younger in 2007?
Then you can get a relief of $3,000 for one (only one) of your parents or in-laws who help to look after your children. They must be living in Singapore and not working in 2007.

Tip 10: One-off 20 per cent rebate
As announced in this year's budget, resident taxpayers will receive a one-off personal tax rebate of 20 per cent, up to a maximum of $2,000.
This rebate is automatically included by Iras, so you need not declare it in your tax form.
-By
Larry Haverkamp
Mon, Mar 24, 2008 The New Paper

Retire young, retire rich

2008-03-07T11:15:00.002+08:00

ACCORDING to the annual world wealth report compiled by Merrill Lynch and the Capgemini Group last year, Singapore registered the fastest increase in the number of US-dollar millionaires in 2006. More than 11,000 people joined this wealthy club that year, raising the number of high net worth individuals to a total of 66,660.
With more and more people making it into the group of the wealthy, it appears that joining their ranks is no longer as unattainable as once thought. No wonder many young professionals and undergraduates here are dreaming of joining that select group sooner rather than later. If you are one of those with that goal in mind, it may be timely to start planning how to get there. After all, the earlier one starts, the higher the chances of getting there in time. Here are some tips culled from various sources.
Start saving now and let compound interest work your way
'Tip number one is you have to start saving immediately,' said James O'Shaughnessy, founder of O'Shaughnessy Funds and author of How to Retire Rich in an earlier CNN Money report. 'The younger you are when you start, the better chance of retiring in style.'
Easy as it seems, most people have trouble saving for the long term. 'Saving is often a vicious cycle for most people. They are only disciplined enough to save in the short term before blowing all their savings away in a big ticket item like a car,' said Alvin Chia, a private investor who turned financially free at the age of 27. 'It is important to live below your means and avoid splurging on unnecessary items if you want to achieve the retirement dream early.'
Both early savings and living below your means allow you to take full advantage of the power of compound interest. If you save $2,000 a year starting at the age of 20 until you are 30, you will still have more money than a person who saved the same amount between the ages of 30 and 60. Enough said.
Pay yourself first
Taken from David Bach, who shared the powerful concept of automated savings in his book, The Automatic Millionaire, the trick to this is to have money automatically channelled from your payroll and deposited into your savings account before you even have access to it.
Invest for the long term
Equities offer the best form of long-term growth among most classes of investments. From 1926 through 2004, stocks - using the S&P 500 index as a measure - have posted an average annual return of 10.4 per cent versus a mere 5.4 per cent for bonds, according to Ibbotson Associates.
Both Mr Chia and Laura Oh, a 26-year-old home tutor, have their investments mostly in equities as well. They both have achieved their financial freedom.
Interestingly, they are both long-term value investors who invest in undervalued companies that pay high dividend yields and use these dividends to re-invest again when the right opportunities strike. Miss Oh, for one, started paper trading at the age of 19. 'Starting to invest early and putting your money into the right class of investments definitely helps you grow your money faster than putting it in fixed deposits,' she said.
Have a detailed game plan and monitor your progress
Set realistic goals by projecting your retirement expenses based on your needs. 'Know how you want to live in retirement and be honest about it,' said Mr Chia. 'Then calculate how much savings you need to put aside a year to achieve your ultimate goal.' One rule of thumb is that you will need at least 70 per cent of your annual pre-retirement income to live comfortably.
Review your status at least every couple of years to make sure you are still advancing towards your goal.
Don't be discouraged by failures and remain focused
It is not uncommon to meet with obstacles along the way. Don't lose faith or be daunted by the goals that you set for yourself. Break that impossible goal into a million achievable bite-sized goals and conquer each one at a time. As Mr Chia recalled, he was relentless in the pursuit of his retirement dream and took small steps to build up his investment pool. He said: 'When I was 19, I worked as a security guard at night to make sure I was making money sleeping. My main duty was to open the gates for the staff every morning and in that process, I earned myself $1,400 extra a month just from sleeping.'
Find a mentor to guide you
Having a mentor to constantly give you personal advice on your financial state and the allocation of your investment portfolio is a major plus. Very often, your mentor should also be someone who shares the same life and investing philosophy as you. Only then can the mentorship be very successful.

By Jason Low

How Much to Give Mum and Dad

2008-03-07T11:08:00.001+08:00

MONEY talk can be a taboo topic not only among couples but also between parents and their grown-up children.
Once the children start working, how much of a cash allowance they give their parents on a regular basis often becomes a touchy issue.
Give too much and the children might suffer financially; give too little and their parents might not be able to maintain their current lifestyle.
Let's look at two contrasting examples. Computer consultant Diana Low, 42, gives a token monthly sum of $200 to her parents, who are retired comfortably.
This is in contrast to her colleague, Ms Joyce Chua, 43, who gives $950 per month to her parents, who are less well-off than Ms Low's parents. She also pays the phone bills at her parents' house.
Both earn about $11,000 monthly and are married with two children.
Clearly, Ms Low's amount will look meagre compared with Ms Chua's.
But advisers such as Mr Stephen Teo, Alpha Financial Advisers' business director, believe that the amount that one gives ought to be a matter of financial capacity and not filial piety.
"Filial piety to me is about the commitment to take care of your parents when they need you and should not be measured by the amount of money you give them," he said.
Mr Tony Tan, a consultant with independent private wealth manager Providend, suggests that if parents are working and can comfortably support themselves, "the gesture of giving is more important than the amount itself".
He explains that this is especially so in traditional Asian societies that hold filial piety in high regard. "This act of giving symbolises our gratitude to our parents for their unconditional love and nurturing all these years," he said.
Ms Low said: "My parents don't need money from me, so the $200 monthly allowance is just a token sum."
On the other hand, Ms Chua considers herself part of the "sandwich generation" - those who have one source of income but two sets of dependants' financial commitments to be fulfilled - ageing parents and growing children.
Anecdotal evidence suggests that many children do not discuss budgets or other money-related issues with their parents early enough.
Nevertheless, good communication regarding finances is critical to a healthy relationship not only between couples, but also between adult children and their parents.
Many start communicating only when it becomes unavoidable - for instance, when their parents are suddenly taken ill and the question surfaces as to who should foot the bill for long-term care.
In Ms Chua's case, her brother Alvin, 37, gives a monthly allowance of $800 to his parents, in addition to footing the annual premiums for their hospitalisation plans.
Ms Chua's parents are retired and totally reliant on their two children to support them. In this case, it is important to know how much would be sufficient for them to lead a comfortable lifestyle.
Mr Teo proposes that before deciding what amount to give your parents, you should have a clear idea of your own financial situation. Only then would you know how much you had in excess to meet various other financial commitments.
Factors that affect your financial capacity to give an allowance to your parents include: income, expenses, the number of dependants that you have, and other financial goals such as housing, education and retirement.
Mr Tan estimates that, as a minimum, $600 a month "should provide a decent standard of living" for one retiree living in his own flat. This is based on certain assumptions such as a fully paid-up home mortgage and a moderate lifestyle, including one annual regional vacation.
For two parents, he worked out that the minimum monthly allowance would be about $1,000.
This amount is sufficient to cover basic monthly expenses such as utilities, groceries and transportation.
As for himself, he gives $1,000 every month to his parents, to be split equally between his mum and dad.
The actual payment can be made in various ways such as cash, Giro, cheque or directly into an investment portfolio.
from: Lorna Tan

Father of index funds

2008-02-06T11:11:00.000+08:00

JOHN Bogle may not rank among the Buffetts and the Soros in the investment world today but he is well respected around the world for being the father of index funds and founder of one of the two largest mutual fund organisations in the world. He started the Vanguard Group in 1974.
He has since retired from the company but is still active in the financial world as the president of Vanguard's Bogle Financial Markets Research Center where he continues to write and lecture about investment issues. While at the helm of Vanguard, he started the world's first index fund, Vanguard 500 Index Fund in 1975, and oversaw more than 100 mutual funds with current assets totalling over US$550 billion.
Born in Montclair, New Jersey in 1929, Mr Bogle studied the mechanics of mutual funds in college and laid the foundation of index mutual funds in his thesis report. Being the pioneer of no-load mutual fund and a champion of low cost index investing, he sees himself as an advocate for the retail investors. Bogle is always seen putting the interest of the investors first and constructively criticising the mutual fund industry - the very industry that he created.
He feels that mutual funds today are overly profit-motivated and charging investors too hefty a fee. And today, he is still seen championing the cause for individual investors by setting forth to tackle the rampant mutual fund marketing problem of excessively promoting performance and charging.
Below we'll take a look at some of the main rules of Bogle's investing philosophy.
INDEX FUNDS ARE THE WAY TO BEAT THE PROS
Mr Bogle has always been a strong advocate of index funds, the financial instrument that he himself created and therefore understands so well. An index fund is, as he explains, 'simply a basket (portfolio) that holds many, many eggs (stocks) designed to mimic the overall performance of any financial market or market sector.' That is to say, the effective returns of the investor will be equivalent to that of the market return less a relatively low fee of 0.1-0.3 per cent.
He believes that the low cost and low turnover nature of index funds will allow investors to earn better returns as compared to allowing investment professionals out there manage their money in an actively managed fund. Such professionals charge substantially high commission fees of between one and three per cent.
Simply put, Mr Bogle believes that in the long run, the passively managed index fund investment will outperform the actively managed fund, taking into account the fee most active managers charge in aggregate.
Looking at the 36-year period from 1970-2006, he found that only three out of 355 funds beat the index consistently, a clear indication that the investor with a multi-decade horizon should choose the index fund.
Mr Bogle also recommends putting nearly all of the US portion of an investor's stock portfolio into the S&P 500 as it is considered as the quintessential index to track the performance of companies in the US.
His style of buying the haystack rather than trying to find the needle (in the market) strikes a chord with investing great Warren Buffett who commented that the know nothing investor can actually outperform most investment professionals by investing in an index fund. Thus it seems that such an investing style will provide a perfect way for new investors to get started investing in the market and yet outperform professionally managed funds.
TIME IS YOUR FRIEND, IMPULSE YOUR ENEMY
Mr Bogle's style encompasses a long term horizon for all his investments. He discourages investors from letting transitory changes in stock prices alter their investment programmes. He once said: 'There is a lot of noise in the daily volatility of the stock market, which too often is 'a tale told by an idiot, full of sound and fury, but signifying nothing'.'
Stocks can remain overvalued or undervalued over the years. But with time on the investor's side, he should exercise patience and enter into these stocks at the right time (when they are undervalued) and wait for them to realise their true value over the years.
Time is indeed an investor's friend if he is able to utilise this time to his advantage by doing his own research into his watchlist of stocks and waiting for the most opportune time to get invested in some of them when they are undervalued. When the investor is able to do that, he will almost definitely be getting a bargain for his buck and also effectively decreasing his risk-reward ratio.
Mr Bogle also once said that the greatest sin of investing is 'to be captured by the siren song of the market, luring one into buying stocks when they are soaring and selling when they are plunging.' Impulse, therefore, is an investor's worst enemy because emotions will come into play leading to irrational decisions. Moreover, it is simply impossible to time the market, especially during a period of market volatility.
PURSUE THE RIGHT FORM OF RETURNS - EAT THE BAGEL NOT THE DOUGHNUT
Mr Bogle also has a sense of humour when it comes to dealing with serious stuff like investing. He uses two different kinds of baked goods - bagel and doughnuts - to symbolise two distinctively different elements of stock market returns.
Investment return - dividend yields and earnings growth - is the bagel of the stock market: nutritious, crusty and hard-boiled. By the same token, speculative return - the change in prices that investors are willing to pay for each dollar of earnings - is the doughnut of the market: reflecting changing public opinion about stock valuations, from the soft sweetness of optimism to the acid sourness of pessimism. He urged investors to enjoy the bagel's healthy nutrients but don't count on the doughnuts' sweetness. Investors should have realistic expectations of the returns that they will gain and avoid relentlessly speculating in the market to gain extraordinary returns.
Owning the entire stock market through an index fund might be a winning philosophy for some investors mainly due to an index fund's cost efficiency, tax-efficiency and assurance of earning for them the market's return. But only if one follows one of the most important rules for successful investing: Stay the course and do not be deterred by investment losses. In the long run, the true investor will eventually win given that he has time on his side, is well-researched in identifying undervalued stocks and is not tempted to eat the sweet tasting doughnuts!

Jason Low
Mon, Jul 30, 2007The Business Times

The pitfall of performance chasing

2008-02-03T14:14:00.000+08:00

SOME people liken investing to gambling - you pick a game (market) you like, calculate the risks involved, put a bet (investment), and with a combination of luck and odds, you hope to walk away with a gain.
The truth is, investing is actually a lot more complex, and perhaps why it's not called gambling is that, while factors such as economic circumstances and local/global events (ie, what some call 'luck') play a part, these risks can be managed, or at least mitigated.
That said, investing really is all about odds. It's about figuring out how likely a stock, bond or other investment will yield returns, by how much, and by when.
And despite claims to the contrary by some individuals, we do not have the benefit of a crystal ball to gaze at to reveal the future. So instead, we have to look at current - and past indicators - to help us predict the future.
Last week, we talked about financial ratios, and how they could help us determine the health of a company. This week, we expound on one of the most important principles when investing: that the past performance of a company or investment is no guarantee of future results.
Many investors brush this statement off without realising how often they break this particular principle. In fact, there's an industry term that is used to describe such behaviour - performance chasing.
Some investors jump on the band wagon whenever brokers or industry watchers start touting a hot new asset class or sector.
They dump huge amounts into this new-found love affair, only to come away disappointed with the returns, which can sometimes even be in negative territory.
Worse still, some investors pull out current investments in order to help finance these new ones, and thus incur frictional expenses like commissions and fees, thus compounding the situation.
For instance, the latest high-end property boom has seen some people making amazing sums of money by buying and 'flipping' their units.
However, don't be fooled - there are also plenty of stories of those who assumed that there was quick money to be made, but ended up instead being unable to flip the million-dollar apartments which they had no intention of keeping in the first place.
In fact, history has often showed that in many cases, the best time to invest in a particular sector is after it's suffered some horrible industry trends.
So before you jump into that new investment you might want to ask yourself some questions:
Has this particular sector, industry, or stock experienced a sudden increase in price recently, and does this still make the investment attractive?
Have the prospects for better earnings already been priced in?
What makes you think the returns from this investment will be materially higher in the future than they are at the present time?
Another very important question you have to ask yourself is, how well do you know the investment, sector or business you intend to invest in? As a general rule of thumb, you should only go into businesses you understand.
For example, if you are thinking of buying into the stock of a property company, then you should understand the economics of the property sector. Based on your understanding of the sector, how far ahead can you forecast how profitable the company will be? How certain are you of that prediction?
So it really isn't a good idea to just jump into a sector or investment because you're afraid that you're going to miss out if you don't.
A more recent - and painful example, for some - was the Internet boom, which saw thousands of investors rushing head first to grab a piece of the pie.
As an intern at The Business Times then, I remember attending countless launches of new companies which had hit on the 'next big Internet technology that would revolutionise the world'.
And at every turn, gleefully heady angel and seed investors regaled me with tales of how the Internet would change the way we live our lives, and make plenty of companies rich, to boot. Well, it has - but today, less than a handful of the dozens of companies I interviewed are still around, and many investors have lost staggering sums of money.
The corollary to that is that there were also some stunning successes, and some very rich - and probably very retired - investors. So, there are risks, and there are rewards, but don't be silly and jump into an investment just because everyone else is.
As my grandma always said: 'If everybody decides to jump off a building, you also want to jump?'

Daniel Buenas
Mon, May 21, 2007
The Business Times

When money divides brothers and sisters

2008-02-03T13:59:00.000+08:00

IT IS often said that blood is thicker than water. However, when money is involved, relationships between siblings can turn ugly.
The potential flashpoints include real estate, bank accounts, wills and so on. Whatever comes to mind, brothers and sisters have fought over it.
Chief executive of Grandtag Financial Consultancy (Singapore) Ben Fok said: 'There are many scenarios in which money can break down the bonds between siblings.
'For example, when a joint account is shared by a parent and only one child, it can trigger inheritance battles. When a parent dies, it is not uncommon for difficulties to arise over the disposition of personal effects. Another minefield is lending money to a family member.'
Sibling disputes
THE Sunday Times has compiled an X-File of legal disputes that show the legal and financial minefield that could lie under any family tree.
Case 1: Dispute over sale proceeds of an HDB flat
MR HARRY Lim (not his real name) bought an HDB flat in his and his mother's name.
He paid for it and allowed his mother and his three siblings to live there.
Mr Lim was later allotted another HDB flat.
As the rules clearly stated that he cannot own two flats simultaneously, he moved to his new one and had HDB transfer his share in the first flat to his mother by way of a gift, putting it in her name.
Mr Lim understood that the arrangement was for the mother to occupy the flat in her lifetime. He continued to allow his three siblings to stay there while he paid all the expenses and the mortgage instalments.
But when his mother died without a will, the three siblings asked the court to declare that they were beneficially entitled to the flat.
They claimed it belonged to the mother and should be distributed according to intestacy laws, which meant they would have a share in any property or its sale.
'This is a curious case whereby the outcome would have been very different depending on whether it was a private property or an HDB flat.
'Had it been a private property, the court would have found that the mother held the flat in trust for Mr Lim solely,' said Ms Lie Chin Chin, managing director of law firm Characterist.
Unfortunately for Mr Lim, HDB flats are subject to different laws which do not allow a flat to be held in trust unless the Housing Board has approved the arrangement first.
Mr Lim did not have this approval.
Even though the court noted his generosity to his mother and siblings in contrast to the siblings' own lack of contribution to buying the flat, it found the property to belong to the deceased mother and ordered that the sale proceeds be shared equally among the four children.
Case 2: Dispute over the inheritance of a bungalow
EVERYONE in the family had expected the father to leave the 36,000 sq ft prime district bungalow to his favourite son even though his daughter lived there and looked after her dad.
After the father made a will, the son told his sister that he was concerned for her as he would likely inherit the bungalow while she would be left out in the cold and was not entitled to public housing.
He proposed an agreement: If one of them were to wholly inherit the bungalow, it would be shared equally between them.
After the father died, it was found that he had left the bungalow to the daughter solely and not the favourite son.
The daughter then sought to rescind the agreement with her brother.
It was found that her brother had in fact secretly read the will and had realised that the bungalow was bequeathed to his sister solely.
He then fraudulently induced his sister to sign the agreement on the pretext that it was to her benefit since it was likely that he would be the beneficiary of the bungalow.
The court set aside the agreement, ruling that the sister had signed it due to her brother's fraudulent misrepresentation.
Case 3: Dispute involving a deceased mother's $3m estate
IT WAS an eventful two years.
Madam Irene Lee (not her real name) made a will appointing her son Aloysius Lim (not his real name) as the sole executor.
Shortly after, she transferred her business to him and sold her property - she also passed the sale proceeds to her son.
Madam Lee then amended her will, giving everything to her son.
After she died, Mr Lim's siblings alleged that the transactions - the business transfer, the property sale and the amended will - were invalid as their mother did not have the mental capacity to carry out the decisions.
Doctors testified and the court found that the mother either did not have the mental capacity or if she did, was under undue influence from her son.
The court ordered Mr Lim to refund the sale proceeds of the property to the mother's estate. He was also told to account for the assets - worth about $3 million - that belonged to the estate.
The estate was to be distributed according to intestacy laws as if she had not made a will.
Other common disputesMaintenance of parents
Mr Stephen Teo, Alpha Financial Advisers' business director, observed that conflicts do not usually arise from the different cash allowances parents get from their working children.
It is the unexpected costs that cause problems.
'Conflicts usually arise from additional out-of-pocket expenses that are unexpected, such as medical expenses, funeral expenses, probate costs or long-term care expenses for the parents.
'The conflict can be more intense when the parents do not have any savings to absorb these costs,' he said.
One way to avoid such unpleasantness is through the pooling of monies from all siblings or as part of the allowances to parents, to purchase a hospitalisation and surgical insurance plan, added Mr Teo.
Loans to siblings
It can be tricky to say the least if a sibling asks for a loan.
They are hardly strangers so saying no can be difficult. However, if they are likely to be unreliable, no one likes throwing good money after bad.
So what should you do?
Mr Goh Yang Chye, the managing director of GYC Financial Advisory suggests that you should do so only if:
You can afford to;
You are not feeding a bad habit;
You are willing to give selflessly based on personal values;
You are willing to forgo the amount;
Your spouse pre-approves the loan; and
Your personal relationship can survive any business problems.
Guarantor to a debt
However, when a sibling serves as guarantor to another sibling's debt to the bank or other institutions, the issue becomes more complex.
Mr Goh said that many people may not be aware that when they sign on the hospital's consent form giving permission to provide treatment for your sibling (or anyone), you also accept legal responsibility for the medical fees and other responsibilities that come with it.
You become liable for your sibling's financial obligations so a bank, hospital or appointed collection agency will have the right to demand payments from you and bring you to court for defaulting on payments.

Lorna Tan
Sun, Dec 30, 2007The Straits Times

Riding the Highs and the Lows

2008-01-26T17:59:00.000+08:00

IT was a wild ride in 2007. The stock market hit its low of 3,000 on 8 Jan. After that, shares marched steadily higher, hitting a peak of 3,865 on 9 Oct.
That's a 29 per cent rise from trough to peak.
Then we hit the November downdraft. Yet today, the Straits Times Index (STI) closes out the year with a respectable 15 per cent gain.
It is a remarkable fifth straight year of double-digit increases. Shares rose 27, 14, 17 and 31 per cent in the past four years.
And it isn't just Singapore. The stock market boom has been worldwide.
The biggest gainer for the year is China. Its share prices nearly doubled, rising an incredible 97 per cent in 2007. That is on top of a 125 per cent gain last year.
The second biggest winner is India. It rose 53 per cent this year. Last year, it was a 40 per cent increase.
In third place is Singapore's small cap index. It rose 46 per cent in 2007, following a 63 per cent rise in 2006.
What lies ahead?
Will the rally continue for a sixth straight year? Should you jump in and buy shares now?
It is hard to say. A great irony is that it is easier to predict long-run than short-run stock returns.
Long-run data - since 1800 - is available from the US. It shows the average return for shares is 12 per cent per year.
To that, you should add another 3 per cent because of our fast growth economy and its focus on technology. It boosts our expected yearly returns to 15 per cent which, by coincidence, is also this year's gain for the STI.
The problem is, it's not a steady 15 per cent. The market bounces from minus 30 to plus 50 per cent per year. It makes for a nerve-racking ride to prosperity.
You can be sure of earning 15 per cent only if you hold for the long run.
How long is that? Ten years is a good start. Since 1980, there has never been a 10-year period when the STI has finished lower than it started.
In the US, there has never been a 17-year period when stocks have earned less than 6 per cent per year.
As for the 15 per cent average return, you need to hold 30 years to get that.
At that rate, your money doubles every five years - an investment of $15,000 will grow to just under $1 million in 30 years.
How much to invest?
Before investing, take care of your basic needs like food, transportation, education and insurance.
If you have spare cash after that, I recommend investing it in this order:
First: A home.
Because you hold it for a long time, it gives high returns with low risk.
Even if you sell to buy another home, this is a like-for-like transfer and doesn't change the long-run nature of your investment.
Another advantage is a home requires regular savings. Many of us would fritter away the money if we weren't forced to pay our monthly mortgage.
Finally, a home is the only investment that includes a place to live. This unique benefit is called "imputed monthly rent".
If your mortgage payments are less than the imputed rent, your home is actually free. Think about it.
Second: Central Provident Fund.
The new CPF rules state that from 1 Apr 2008, you cannot place the first $20,000 of your ordinary and $20,000 of your special account savings into investments.
That's okay since the CPF's returns are excellent, considering that they come with no risk.
From tomorrow, you will earn 3.5 per cent on the first $20,000 in your ordinary account and 5 per cent on up to $40,000 in your special, Medisave and retirement accounts.
Third: Shares.
If you still have cash left over, consider shares, unit trusts and exchange traded funds.
How much to invest depends largely on your age.
Most of us prefer safer investments as we grow older. That's because it gets harder to earn back the money if risky investments go bad.
A good rule of thumb is to set the proportion of safe assets equal to your age.
At age 30, you would keep 30 per cent of your money in CPF accounts and fixed deposits (safe), and 70 per cent in stocks (risky).
At age 50, the investment mix would be 50/50.

By:Larry Haverkamp
Mon, Dec 31, 2007The New Paper

He invests for challenge, chance to learn

2008-01-26T17:39:00.000+08:00

ASK financial expert Mr Michael Mauboussin, 43, for investing tips and he humbly replies that he has no advice that is 'out of the ordinary'.
Based in the United States, the chief investment strategist at financial firm Legg Mason Capital Management told The Sunday Times in an e-mail interview that investors should try to match their strategies with their objectives.
'If you're saving for the distant future, it's all about the long term. You should think about risk and reward, and carefully assess your own risk tolerance - which can change over time.
'Also, be mindful that when an asset value rises sharply, the investment opportunity has often slipped away. For investors who play the markets for fun, make sure you deploy only money that you can afford to lose,' he said.
For his own finances, he believes in contrarian investing, which means buying into what other investors avoid and avoiding what's hot.
Recently, he wrote a guide to investing wisely, More Than You Know: Finding Financial Wisdom In Unconventional Places - Updated And Expanded. It was named the best business book by BusinessWeek and best economics book by Strategy+Business.
Before joining Legg Mason, Mr Mauboussin was managing director and chief US investment strategist at Swiss banking giant Credit Suisse.
He has been an adjunct professor of finance at the Columbia Business School since 1993. In 2001, BusinessWeek's guide to the best business schools highlighted Mr Mauboussin as one of the school's outstanding faculty members, a distinction only seven professors earned that year.
Mr Mauboussin is married and has five children aged between five and 14.

Q What kind of an investor are you?
A I'm a boring, long-term investor. There is virtually no activity in my account. I tend to buy and hold.
Most of my liquid net worth is invested in our funds, so I am side-by-side with our fund holders.

Q What's your investment philosophy?
A My goal is to make good financial decisions consistently. Knowing markets are subject to probability, I realise not all of the decisions will work out. But the key is good process. For me, that translates into buying and putting away what other people are worried about and avoiding what's hot.
As Roman philosopher Horace said in Ars Poetica, his classic treatise on poetics: 'Many shall be restored that now are fallen and many shall fall that now are in honour.' But following this mantra is easier said than done.
Q How did you get interested in investing?
A My first exposure to markets was in a high school class. Shortly into my first job on Wall Street, I realised that investing specifically and markets in general present a perpetual challenge as well as a learning opportunity.
What I have also learnt over the years is that temperament - not just smarts - is one of the keys to long-term success.
Q What has been a bad investment?
A In the throes of the dot.com era, I invested in an Internet start-up. I knew the probability of success was not high and I certainly did not invest any money that was essential to my financial future.
However, I lost virtually all of my money, which did not feel good. I knew going in that a total loss was a reasonable probability. Still, in retrospect, it looks like a lottery ticket investment.

Q Your best investment to date?
A One individual stock that has served me well for years is that of Berkshire Hathaway.
I'm a big fan of its owner Warren Buffett and have been enriched by both his teachings and the stock of the company.
I have also been a long-term shareholder in Legg Mason Value Trust which, despite some challenging results recently, has been a terrific investment.

Q What's your retirement plan?
A I can't imagine ever retiring. I love what I do too much, and the investing world has more than enough intellectual intrigue to keep me busy.
My role model is investment industry legend Peter Bernstein, who's still going strong in his late 80s. He wrote five books after he turned 70.

Q Do you believe in giving back to society and how do you do it?

A There are two parts to this answer. First, I have been an adjunct professor at Columbia Business School since 1993, in part as a way to try to give back to the investment community. I believe I have gained more from my teaching than I have given, but I have been gratified over the years by students who have told me the course was useful.
Second, my wife and I offer financial support to a number of institutions, most of them related to education. For example, I have donated all of the royalties for my book, More Than You Know, to the Santa Fe Institute, a leading centre for multi-disciplinary research in complex systems theory.
Lorna Tan
Sun, Jan 13, 2008The Sunday Times

Li Ka Shing Success Stories Part 1-1

2007-12-13T16:03:00.000+08:00

Li Ka Shing Success Stories Part 1-2

2007-12-13T16:00:00.001+08:00

Li Ka Shing Success Stories Part 2-1

2007-12-13T16:00:00.000+08:00

Li Ka Shing Success Stories Part 2-2

2007-12-13T15:59:00.002+08:00

Li Ka Shing Success Stories Part 3-1

2007-12-13T15:59:00.001+08:00

Li Ka Shing Success Stories Part 3-2

2007-12-13T15:57:00.000+08:00

Li Ka Shing Success Stories Part 4-1

2007-12-13T15:56:00.001+08:00

Li Ka Shing Success Stories Part 4-2

2007-12-13T15:52:00.000+08:00

The GREED of a MAN part 35

2007-09-20T13:33:00.001+08:00

The Greed of a Man part 34

2007-09-20T13:31:00.000+08:00

The Greed of a man part 33

2007-09-20T13:21:00.000+08:00

The GREED of a MAN part 38

2007-09-20T13:20:00.000+08:00

The GREED of a MAN part 37

2007-09-20T13:18:00.001+08:00

The GREED of a MAN part 36

2007-09-20T13:15:00.001+08:00

RAT RACE

2007-09-20T12:56:00.000+08:00

My Viewer comment

2007-08-23T10:19:00.000+08:00

My viewer comment on "Entrepreneur is a lousy employee" Please feel free to give your comment....thanks..

Eliteease said..
Hm,.. speak as an entreprenuer who just started 3 years ago, i think we are not really a lousy employee but we had lousy employers? And usually it caused the initial thought of starting up own company as when you are employed you are at your immediate boss's mercy not even the TOP level, your dreams, vision, even good suggestion might not even pass thru due to "middle level management" or political issue. Hence, if you have dreams to fulfil, work on it, why let others dominate your thinking and ways of doing? Explore your potential while you are young.

August 17, 2007 3:06 PM
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Anonymous said...
Well, it might be due to they encounter LOUSY EMPLOYERs who trigger their thoughts of starting their own to fulfil what they believe. Start up your own biz to realise your full potential, why let your dreams fade away because of "middle management's short-sightedness / over protective their position or power struggle etc.. political issues?

August 17, 2007 3:09 PM

BORROW RESPONSIBLY

2007-08-23T10:04:00.000+08:00

As life closes in on someone who has borrowed far too much money on the strength of far too little income, there are no fire escapes.

--John Kenneth Galbraith

Face this truth: If you let them, lenders are only too willing to advance you more than is good for your family. Mortgage banks and credit-card issuers don't care if your monthly payment makes it impossible for you to sock away money in your 401(k) or fund your kid's 529 plan. You need to set your own rules, including:

No credit-card debt. Period. It's never okay to pay 15% to borrow for consumption.

Borrow only to buy assets that appreciate. A home, yes. Education, sure. A vacation, a fancy dinner or even a 50-inch flat-screen TV? No way.

Entrepreneur is a lousy employee

2007-08-14T13:48:00.000+08:00

Entrepreneur is a lousy employee. No need to honey-coat this one. People who start their own businesses tend to have been sack or resign more than one job. I'm not saying you were lazy or laid off for lack of work or moved from one job to a better-salary one. You were asked to leave, or you quit before they could terminate you. Think of it as the marketplace telling you that the only person who can effectively motivate and manage you is yourself.

Entrepreneur couldn't work for someone else, I don't mean that in a negative way. I have a friend who is now a Millionaire have the same experience mention above. When he was 18 he work as an assistant Photographer with a salary of $300 only. All the other Photographer is earning double or triple salary from him. He end up learning nothing just like cleaning up the studio every morning, used as delivery boy by sending film and photo using his personal motorbike(no bike allowance given) . He was sack due to asking for higher pay after the second month.

Master your finance

2007-07-17T13:00:00.000+08:00

This is a summary of what was discussed in the First episode of Financial Talk Show “Li Cai Zhang Men Ren” on 3 July 2007. This is a one-month program on Capital Radio 95.8 FM, every Tuesday 4.15 pm to 5 pm. This program will end on 31 July 2007. Each week we will discuss a different topic. The program is conceptualized by both myself and Capital Radio 95.8 FM DJ Lee Jeng. Cheers! Dennis Ng How to Master your Finances Who is “Li Cai Zhang Men Ren”? DJ: many listeners might be wondering why is this program entitled Li Cai Zhang Men Ren, so is the Zhang Men Ren Capital Radio DJ Lee Jeng or Certified Financial Planner, Dennis Ng? Dennis: we want to educate the public and the objective of the program is to empower listeners to learn how to “master” your finances, thus, each and every listener would be empowered to be the “Li Cai Zhang Men Ren” of their Households. That’s why we named the program Li Cai Zhang Men Ren. DJ Lee Jeng: Dennis, What is Financial Literacy to you? Dennis: One aspect of Financial Literacy is for you to know how to “look at numbers” from the right perspective. For instance, when members of the public were interviewed about the changes in GST from 5% to 7%, most of them said that the increase is marginal, just a 2% increase, not much of an impact. DJ Lee Jeng: yes, that’s how most people view the GST increase, so is there anything incorrect about this view? Dennis: certainly. Because when we look at “increment”, basically we use the latest GST rate of 7% to be divided by the original rate of 5%, if we do so, the ACTUAL percentage increase in GST is not 2%, but 40% instead! Similarly, when coffee shops increase coffee prices from 80 cents to 90 cents, the increase is not 10% but 12.5% instead. Thus, one key step to Financial Literacy is to learn how to look at numbers correctly. DJ: What good news were announced in Singapore recently? Dennis: one good news is CPF Contribution by employer is increased from 13% to 14.5% from 1 July 2007. If we use an example of a person earning S$2,000 a month, the actual increase in CPF contribution per month is about S$30 per month. DJ: yes, this is good news, but the increment is not exactly a lot. Most people overlook the Power Of Accumulation and Compounding Dennis: another thing most people overlook is the POWER of ACCUMULATION and COMPOUNDING. Yes, the increment of S$30 per month does not seem like a lot, however, in actual fact, over a period of 30 years, this represent additional RETIREMENT funds of S$16,061! More than 50% of Singaporeans do not even have $50,000 in their CPF account when they retire at age 55. Thus, this “small” increase in CPF actually can help them boost their retirement savings by a not insignificant S$16,061! And if this person invest this additional CPF and earns 4% instead of 2.5%, the increment would be S$20,821, or an additional of 30% compared to leaving the money in CPF Ordinary Account. Thus, most people IGNORE the fact that each little bit of savings and money can actually be the seeds of a MONEY TREE if you allow the seeds time to grow into a tree. For instance, when I was born, my family is actually quite poor. However, my mother is a very frugal person and very disciplined in savings. She managed to nurture all 6 of her children and even planned enough for her own retirement, not from earning big bucks, but all through just disciplined savings. I remembered when I was about to enter university, my mum passed me back a savings passbook to me. She said this savings is what she saved for me all these years and she is passing it back to me since I’m grown up and know how to use the money wisely. It was like over S$10,000, (I know some of you might say it is just “peanuts”). However, when I looked through the passbook, I realized the money was accumulated over a long 20 years of time, with deposits as low as S$10, S$20…..so basically, my mum saved on a regular basis, about S$30 per month and the money grew to over S$10,000. The morale of the story is that you don’t need to start saving a lot of money, just a little on a disciplined basis and it can amount to something over a period of time. So for all those people out there who give excuse you don’t have much money to save, well I guess now you have no more excuse. DJ: some people complained that prices of most things in Singapore seem to be rising, coffee, GST, taxi fare etc, etc? Financial Literacy: Learn how to focus and TAP on opportunities to grow Richer Dennis: well, most people only focused on 1 side of the coin. On the other side of the coin, Singapore’s economy is growing by more than 5% in the last 3 years, many foreigners are attracted by the many opportunities in Singapore and are coming to set up business and buy properties. Property market has recovered, in fact prices increased by more than 20% in last year itself. Imagine if your house was worth S$400,000 1 year ago, now it is worth about S$500,000, or in other words, your NETWORTH has increased by S$100,000 without you doing anything at all. Many Singaporeans are “blind” to the opportunities in Singapore. For instance, the Company tax in Singapore is only 8.5% for companies with Net profit of below S$300,000 a year, this is possibly the lowest in Asia, even lower than Hong Kong. Many foreigners are attracted by the opportunities in Singapore. The question Singaporeans need to ask themselves is how can we tap on the opportunities in Singapore, rather than just focus on the price increase of some of the things. DJ: thank you Dennis for sharing with us some useful tips on Personal Finance today, next week we’ll discuss about Singapore Property Market Outlook, stay tuned.

WARREN BUFFET

2007-07-15T01:24:00.000+08:00

here was a one hour interview on CNBC with Warren Buffet, the second
richest man who has donated $31 billion to charity. Here are some very
interesting aspects of his life:

1. He bought his first share at age 11 and he now regrets that he started too late!

2. He bought a small farm at age 14 with savings from delivering newspapers.

3. He still lives in the same small 3-bedroom house in mid-town Omaha ,
that he bought after he got married 50 years ago. He says that he has
everything he needs in that house. His house does not have a wall or a fence.

4. He drives his own car everywhere and does not have a driver or security people around him.

5. He never travels by private jet, although he owns the world's largest private jet company.

6. His company, Berkshire Hathaway, owns 63 companies.
He writes only one letter each year to the CEOs of these companies, giving them goals
for the year. He never holds meetings or calls them on a regular basis.
He has given his CEO's only two rules. Rule number 1: do not lose any
of your share holder's money. Rule number 2: Do not forget rule number 1.

7. He does not socialize with the high society crowd. His past time
after he gets home is to make himself some pop corn and watch Television.

8. Bill Gates, the world's richest man met him for the first time only
5 years ago. Bill Gates did not think he had anything in common with
Warren Buffet. So he had scheduled his meeting only for half hour. But
when Gates met him, the meeting lasted for ten hours and Bill Gates
became a devotee of Warren Buffet.

9. Warren Buffet does not carry a cell phone, nor has a computer on his desk.

His advice to young people: "Stay away from credit cards and invest in yourself and

Remember:
A. Money doesn't create man; it is the man who created money.

B. Live your life as simple as you are.

C. Don't do what others say, just listen to them, but do what you feel good.

D. Don't go for brand name; just wear those things in which u feel comfortable.

E. Don't waste your money on unnecessary things; just spend on those who really are in need.

F. After all it's your life so why give chance to others to rule your life.
-----

copy and paste from ilovesg, i onli change the header to "advice from warrent buffet" to make it more prominent in case others miss it

the story of pipeline and buck

2007-07-05T12:02:00.000+08:00

Why saving money is just like bodybuilding

2007-07-03T18:39:00.001+08:00

Why saving money is just like bodybuilding

It takes lots of discipline, says former varsity champion who saves a third of his income, of which 20% is invested

By Lorna Tan
Jul 01, 2007
The Straits Times
BODYBUILDING and money management seem worlds apart but Sean Toh reckons the discipline and focus needed to build impressive muscles are equally useful when it comes to building financial freedom.

Mr Toh, 35, a former varsity champion bodybuilder, distils his views into his book, 4 Steps To Financial Freedom. 'The difference between the rich and the poor is that the rich have more financial muscles. Money management is a skill that needs discipline to practice those saving habits.'

His own approach to investing is to buy when nobody dares to invest and sell when the herd is buying. He prefers to do his own research and execute his trades personally via online platforms.

Mr Toh's determination to get to grips with the investment learning curve involved reading more than 200 financial books and magazines.

He has been teaching design and technology at Henderson Secondary School for seven years, and also facilitates innovation and enterprise programmes for students.

An air steward before pursuing his studies at the Nanyang Technological University (NTU), Mr Toh managed to save $100,000 during his 31/2 years with Singapore Airlines. That was enough to settle some family debts and pay the tuition fees of his engineering course.

He is married to Australian Heather Parry, 39, and has two daughters.

Q Why did you decide to go into bodybuilding?

A I fractured my knee in Secondary 1. As part of the therapy, I underwent weight training. Since I had always wanted to have a muscular body, I began to fulfil my dream of being a bodybuilder.

I spent every available moment in the gym training. In 1998, I participated in Muscle War, an inter-varsity annual bodybuilding competition, and came in third.

Q What lessons can you draw from bodybuilding that are relevant to money management?

A Managing your money is like a bodybuilder dieting for a contest and having to restrict his fat and salt intake. We are always tempted to break away from the strict diet, like saving money, to have a pinch of savoury foods - overspending.

Saving money is hard for some people because they lack the discipline to save for future investments but tend to overspend on things they don't need. Saving money is like building your biceps.

Being rich is about having more discipline to learn, save and use those financial muscles to leverage on investing to build more wealth, like a competitive bodybuilder preparing for half a year just to win on competition day.

Q What are your money habits?

A I save about 30 per cent of my income, of which 20 per cent goes into investments.

Q What financial planning have you done for yourself and your family?

A Cashwise, I have about $50,000 in stocks and $70,000 in fixed deposits. I also invest my CPF in stocks and unit trusts.

I've made more money from unit trusts than stocks. I own shares in Singapore Petroleum Co, Singapore Exchange, Hyflux, Aussino and Creative Technology. As for funds, I have NTUC Income Prime fund, Aberdeen Japan and Indonesia funds.

I typically buy a unit trust when the value has dropped 6 per cent and practise dollar-cost averaging each time it drops further by doubling my next investment. When I make 20 to 30 per cent, I exit the fund.

Q What about insurance planning?

A I have bought personal life insurance, term life insurance and disability insurance for my family and myself. My annual premiums amount to $5,000.

Q How do you reward yourself?

A By spending 10 to 30 per cent of my investment return on books, food and holidays with my family so that I will be motivated to create even more wealth. The rest of the capital is re-invested.

Q Moneywise, what were your growing-up years like?

A I am the eldest child with two brothers. My father was a butcher. Money did not come easy and I worked to earn extra money when I was schooling.

Q How did you get interested in investing?

A I was having problems managing my personal finances after getting married in 1998, my final year at NTU. I was the sole breadwinner. I challenged myself to explore the option of one person earning two or more incomes without taking on more jobs.

Q What has been a bad investment?

A Investing in units trust without understanding the operating mechanism. I invested in an Indonesian equity fund in the 1990s which was touted as the best-performing fund then. Luckily, I invested only $1,000 so I was able to manage the risk. I advise investors to record their investment lessons in a logbook so that they will not repeat the same mistakes.

Never forget the No. 1 rule of master investors: Don't lose your investment capital.

Q Your best investment to date?

A It is my book. Although I enjoy better returns from units trusts and stocks, my book offers me returns that are tangible as well as intangible.

I broke even and got back my $10,000 capital five weeks after the book's launch. This book offers tangible returns such as royalties and intangible returns like my self-actualisation of being a best-selling writer at Popular bookstores and the ability to empower others with the knowledge to control their financial destiny.

Q What is your investment philosophy?

A These four steps to financial freedom: get healthy and strive for great health; adopt an open mindset to learn; invest your time in your financial and health education; and enjoy the wealth that you have created.

Q And your home now is...?

A It's a fully paid-up four-room HDB flat in Woodlands.

Q And your car is ...?

A I don't own a car and I don't have a driving licence.

Adam's secret revealed 2

2007-06-29T23:48:00.000+08:00

Adam Khoo's secrets revealed 3

2007-06-29T23:44:00.000+08:00

First Stage of Accumulate Wealth

2007-06-16T12:25:00.000+08:00

In Personal Finance or Financial Freedom . “Financial Principles” which are as useful and practical today.I’ve personally benefited tremendously and applying the principles therein and have experienced improvement in my own finances. Knowing and not doing it, is not yet knowing”. For example, You know that exercise is good for your Health yet many people are lazy to exercise. Knowledge is only POTENTIAL power. Knowledge is ONLY power when APPLIED. 1. Money comes gladly and in increasing quantity to any person who save at least 20% of his/her earnings (first step to Financial Freedom). There are only 3 Cashflow Scenarios: a. You spend more than you earn: This person has negative cashflows, spending future money and likely to end up owing other people money (eg. credit cards, friends, relatives, loan sharks). b. You spend all that you earn: whether this person is earning SGD$500 a month or SGD$300,000 a month, he/she is still "Just over broke". c. You spend less than you earn (eg. save 20% or more of your earnings if possible). as time goes by, this person will automatically get richer and richer. I read SUNDAY TIMES this rich man say “every dollar you earn, do not spend more than 30cents” .Which cashflow scenario do you want to CHOOSE for yourself? 2. Money can work for you, if you become the “wise owner” of money and make money work for you. (note: you’re the Master, money is the slave, while many people are guilty of being slaves to money).

Be positive, Don't complains

2007-06-16T12:21:00.000+08:00

THE PERSON WHO COMPLAINS THAT HE OR SHE NEVER HAD A CHANCE PROBABLY HASN’T THE COURAGE TO TAKE A CHANCE. Thomas Edison once observed that the reason most folks don’t recognize opportunity when it comes along is that it is often dressed in coveralls and look like work. Often opportunity involves a great deal of work and a willingness to take a chance on something, the outcome of which may be uncertain. Eventually you reach a point when you must either accept an opportunity with all of its unknowns or else turn your back on it. No one can tell you when you have reached that point; you alone know when it’s time to make your move, to have the courage to take a chance.
by:Dennis Ng

The Rich Dad Television Show

2007-06-06T12:24:00.000+08:00

THE SECRET

2007-06-03T15:07:00.000+08:00

Rich Dad Poor Dad Robert Kiyosaki

2007-06-03T14:00:00.001+08:00

MR SIM is my Singapore Idol

2007-06-03T12:02:00.000+08:00

To me, my Singapore idol is Mr Sim Wong Hoo from Creative Technology who sponsor the Singapore Idols. He create the best sound card Sound Blaster ,ZEN Vision M and X-FI. Hope I have the chance to meet him one day. Do you think he deserve to be my Singapore idol? http://www.creative.com

Singapore Idols

2007-06-03T11:56:00.000+08:00

90% of people think Singapore idols is this young and pretty Girls and Boys who sing well.

Convenient and Inconvenient

2007-06-03T11:19:00.000+08:00

Convenient means easy , It is easy to be broke cause everything is so easy. You just pay and spend till you broke. No hardship at all. Everybody like convenient that is why people choose convenient end up broke.

Inconvenient means difficult, Always difficult to build wealth cause a lot of inconvenient. You got to challenge with others, think of new ideas, accept NO, save money...etc... Spend money is so easy and happy. Saving is so difficult. This is one of the steps to create wealth, AGREE ?

For Example: Credit card gives you so convenient credit to spend. The more you spend the more broke you get into plus the high interest.

For long term. Create your money making machine that gives you passive income every months. Spend your passive income ( other people hard earn money) rather than credit card or other money with high interest. You will be the slave to the money/credit if you cannot pay up. You control money, don't let money control your life.

BE HUMBLE-Don't judge the book by the cover.

2007-06-02T14:12:00.000+08:00

There is a Shopping Complex manager who bring his boy walking around the complex during weekend. His little boy keep throwing the snacks and tissue paper on the floor of the complex. There is an old man with his old t-shirt and faded shorts while watering the plant at the complex saw it. So, the old man quickly go and tell the little boy not to littering the complex in a nice way. Then the boy quickly run to his dad who is the Manager. The manager raise his voice saying" Don't teach my son what to do" . The old man reply said is is not very nice for the little boy who keep throwing tissue and snack on the floor although I pick up so many times . Then The Manager said , do you know that I am the manager of this complex? You go back and water your plant, if not I will make sure you will be terminated.

Then old man walk away, 5minutes later the Manager receive a call ask to go to the office immediately. The manager surprise to see the same old man in the office. The Manager was stunt by hearing that the Directors address the old man "BOSS" because he is the owner of the big company who own this complex. The old man said to the manager, from tomorrow onwards, I do not want this manager to work for me anymore".

The Moral of the story is...be humble and don't judge people what they wear or what they do.

MONEY MAKING MACHINE

2007-06-01T12:18:00.000+08:00

What is money making machine? Central Bank printing money ? To me MONEY making machine means passive income. How many people can survive without a job ? How long does your savings last you? Build your money making machine that gives you every month passive income.

5 Keys To Financial Freedom

2007-05-31T22:57:00.000+08:00

People in Common

2007-05-28T10:27:00.000+08:00

After reading many books, attending many seminars and my observation of all the successful people in the world, I discovered that there's several things that differentiate them from the rest. That's how they stand up from the rest and become successful. Here're the things that successful people share in common: 1. they know exactly what they want and their purpose in life. Most people are not "outstanding" becos they have not really thought through what do they really want. They ended up just drifting through life with little purpose and end up not achieving much. 2. they have a burning desire (passion) in what they have chosen to do (purpose). Most people do not achieve success not becos they are not smart enough or anything like that. Most people do not achieve success becos they "give up too soon". Successful people have a burning passion in what they set out to do. In fact, they might even be ridiculed for what they "dream" of doing when they initially started. And they had "many failures" before they finally tasted success. I can just name you a few examples and you would know all these people were ridiculed for their "dreams" before they finally made their dreams a reality. eg. Thomas Edison (who tried inventing light bulb), Wright brothers (who tried to invent a flying machine), Henry Ford (who tried to invent a horseless carriage), Walt Disney (who wants funding to build "the happiest place on earth" - Disneyland), Alexandra Graham Bell (who tried to make people talk through long distance through wires). Locally, Sim Wong Hoo who tried to make computer play fantastic sound. What is the driving force that kept them going and going when others have given up? I discoverd it is becos they have immense passion for what they set out to do. 3. Not only do they have immense passion, they also have "strong belief" in themselves. As Henry Ford said:"Whether you think you can or you can't, you're right". They have strong belief in themselves even when doubt surrounds them. 4. How they view failures is also a main reason for their success. Most people "avoid failures". When they fail, they might try again for a 2nd time. Most do not try the 3rd time, and rarely do people try for 4th time after 3 attempts. I discovered that successful people have a different way of looking at failures. They treat failure as "feedback" that they need to try to do it differently. For instance, when Thomas Edison was asked how he felt about his 9,999 times of failing to invent the light bulb. He corrected the reporter that he found 9,999 ways of how not to make a light bulb light! To the successful people, the only time they really fail is when they give up. So they know that as long as they don't give up, success will be theirs, sooner or later. 5. Please note that successful people don't keep repeating the same mistakes. While majority of people tend to repeat their mistakes. For instance, people keep falling for scams even when the "modus operandi" of scams have been known for ages. When they fail, successful people know there's no point doing things the same way they tried before, they would make some changes and try again. Remember, the definition of "insanity" is to keep doing the same things and expect a different result. 6. Successful people keep learning and they don't rely on themselves alone. They know how to "leverage" on other peoples' experiences, knowledge, expertise etc. For instance, Henry Ford is not a "technical expert on cars", he just assembled a team of "experts" and tap on the experts' knowledge, experience, expertise to make a better car. 7. Successful people are very clear of what the end result they want to see. They have clearly painted "picture" of the end result. In fact, they are so clear of the end result they want that they can even describe clearly how it would look like so as to gather support for others to support their dream. As Albert Einstein said:"They can "preview" the future. And in their mind, they can already picture themselves achieving what they want even when many people said to them it is impossible. The best thing is that everyone can be successful in whatever we want to do. Here's wishing everyone out there success in whatever you want to succeed in.

By: Dennis Ng

The Secret to Money, Wealth, Rich

2007-05-21T19:10:00.000+08:00

SMOKING is BAD for Health & Wealth

2007-05-21T17:10:00.000+08:00

Learn how to SMOKE ? Think twice. Is really bad for your health and wealth too.

Example: $10 a packet x 365 days (a Year) = $3650 Confirm lost

not included interest% and hospital bill in future.

How To Create Wealth Using Secrets of Millionaire Mind

2007-05-19T17:10:00.000+08:00

Mr Li Ka Shing

2007-05-18T11:48:00.000+08:00

Age: 78

Fortune: self made

Source:Diversified

Asia's richest resident. His fortune is centered on conglomerates Cheung Kong and Hutchison Whampoa. Through them Li is the world's largest operator of container terminals, a major supplier of electricity to Hong Kong, a cell phone provider, retailer and real estate developer. Also has a nearly $10 billion stake in Canadian oil company Husky Energy.Eldest son, Victor, helps run massive empire; son Richard struck out on his own in early 1990s. Once a poor immigrant, Li got his start selling plastic flowers in Hong Kong in the 1950s. Source:Forbes.Li Ka-shing was born in Chaozhou in the Guangdong Province, China in 1928. In 1940 the Li family fled to Hong Kong to avoid the turmoils in China.[5] Li's family stayed at the home of his wealthy uncle. The arrogance of Li's uncle with his immense wealth ignited Li's determination to make a place for himself in the world.Li's father suffered from tuberculosis and died in Hong Kong. Shouldering the responsibility of looking after the livelihood of the family, Li was forced to leave school before the age of 15 and found a job in a plastics trading company where he labored 16 hours a day. By 1950, his hard work, prudence and his pursuit of excellence had enabled him to start his own company, Cheung Kong Industries. From manufacturing plastics, Li led and developed his company into a leading real estate investment company in Hong Kong that was listed on the Hong Kong Stock Exchange in 1972.

Teach your Children

2007-05-17T16:50:00.000+08:00

Teach your children to fish.

If a person always received money,

they do not know how to make money.

teach them how to fish instead giving them the fish all the time

MY IDOL Mr LI Ka Shing

2007-05-11T21:05:00.000+08:00

My Idol

Mr Li Ka Shing........ Hope I can meet him one day in Earth.

WORKING LIFE

2007-05-10T14:37:00.000+08:00

A Normal Person have only 20 to 30 years working life average .Take this opportunity to keep/save money.
1. Look beyond the CPF
2. Don't let your lifestyle outpace your income
3. Know how to replace your paycheck

GROWTH your wealth

2007-05-08T11:47:00.000+08:00

If you have 10 beans, you cook all the beans and eat. In the end, you left nothing. If you cook 5 and take another 5 to grow, in the end you will have more and more beans to eat. You will enjoy watching it grow

Human weak point

2007-05-05T13:46:00.000+08:00

The Problem is ,

many of us BUY things we don't NEED,

with the MONEY we don't have ,

to impress PEOPLE we don't know.

How to determine if you're Wealthy ?

2007-05-05T00:44:00.000+08:00

Multiply your age times (x) your realized pre tax annual household income from all sources except inheritances. Divide by 10 . This, less any inherited wealth, is what your net worth should be.

Financial Freedom

2007-05-04T09:47:00.000+08:00

NEVER USE FUTURE MONEY

2007-05-03T17:10:00.000+08:00

When I was 18 years old after taking my freedom key I described myself "Enjoy myself first" strategy, which works fantastic in a short term because I'm able to spend what I don't have, but in the long term let say $10,000.00 x 8% interest for 20 years end up about $46,600.00 . This is where being frugal comes in once i realise it. ........

Live below your means

2007-05-03T00:05:00.000+08:00

Work Hard + Spend all = End up nothing

Work Hard + Save = End up nothing due to money devalue

Work Hard + Save+ Invest = You wealth will remain or increase

MONEY LAWS

2007-05-02T20:05:00.000+08:00

In Personal Finance or Financial Freedom . “Financial Principles” which are as useful and practical today.I’ve personally benefited tremendously and applying the principles therein and have experienced improvement in my own finances. Knowing and not doing it, is not yet knowing”. For example, You know that exercise is good for your Health yet many people are lazy to exercise. Knowledge is only POTENTIAL power. Knowledge is ONLY power when APPLIED. 1. Money comes gladly and in increasing quantity to any person who save at least 20% of his/her earnings (first step to Financial Freedom). There are only 3 Cashflow Scenarios: a. You spend more than you earn: This person has negative cashflows, spending future money and likely to end up owing other people money (eg. credit cards, friends, relatives, loan sharks). b. You spend all that you earn: whether this person is earning SGD$500 a month or SGD$300,000 a month, he/she is still "Just over broke". c. You spend less than you earn (eg. save 20% or more of your earnings if possible). as time goes by, this person will automatically get richer and richer. I read SUNDAY TIMES this rich man say “every dollar you earn, do not spend more than 30cents” .Which cashflow scenario do you want to CHOOSE for yourself? 2. Money can work for you, if you become the “wise owner” of money and make money work for you. (note: you’re the Master, money is the slave, while many people are guilty of being slaves to money).

WHY PEOPLE SAY AN ENTREPRENEUR IS NOT A GOOD EMPLOYEE ?

2007-05-02T17:49:00.000+08:00