Kamis, 15 September 2011

Single People Need Budgets Too

Many financial experts highly recommend a household budget in order to keep family spending and savings goals on track. It makes sense that proper money management for a household is a necessity to ensure financial security for all family members. For those who do not yet have families, it is equally important to establish a budget to prepare for the future as well as survive day to day, especially when single individuals are just starting out on their own, financially independent from their parents.

Why Singles Need Budgets

Overspending income is the reason why so many people are facing debt problems. With a budget you can properly account for where all of your money goes on a weekly or monthly basis. Without a budget, it can be all too easy to spend cash as a single person because outside of basic financial obligations, there are likely no other responsibilities to tend to such as children who need things or spouse who should have a say in money matters.

As a single person without a budget, it is also easy to lose sight of the big picture. Spending what you earn as you earn it leaves little room for saving for the future or building a truly solid financial foundation.


How to Start a Single Person Budget

A budget is simple to get started. Sticking with the methods is what gets many people who end up ceasing their good financial habits. It makes sense to develop a simple budget that allows you to make simple entries that doesn’t waste time. A weekly review of a budget is all it really takes to ensure you are on target.

Developing a budget requires that you gather all of your financial obligations for a month including utility bills, credit card bills, mortgage or rental payments, and any other monthly expense paid out on a regular basis. You will also need to gather your income statements so you know how much you bring home each month.

These amounts along with the creditors who receive your monthly payment should then be listed on a personal budget worksheet. Once all of the information is entered, the total amount of expenses should be deducted from the total amount of income. If the difference is negative, it is a clear sign that you need to make cuts to your budget or find a way to earn more money. If there is an overage, the funds that are ‘left over’ each month should be allocated into a proper savings account for emergency situations, vacations, or retirement.

In addition to the compilation of expenses and income, single consumers should also take a solid month to track the money they are spending and where they are spending it. This is for all expenses outside of regular financial obligations, including coffee stops, dining out, and transportation-related expenses. By tracking every penny spent in a month’s time, you are able to develop a more accurate budgeting system and as a result, establish a much more solid and reliable financial foundation for the future.

This is a guest post by Tisha Tolar.

Minggu, 11 September 2011

Understand Market Trend Before You Trade - NASDAQ and KLCI

If you have no idea what is stock at all, I suggest you read the following first: Stock Market 101: Understand How Stocks Get Started.

To be successful in stock investing, the first thing that you want to do is to analyze the entire stock market as whole and learn how the majority investors behave in the stock market. The stock market index is the indicator to tell you how the market moves. It represent everyone present in the market place. :D

I personally invest in US stock and Malaysia stock market. So 2 stock market indices that I"m interested are Nasdaq Composite Index and KLCI.. The following charts show the 1 year histrory trend.
 

KLCI - FTSE Bursa Malaysia Large 30 Index

KLCI comprises of 30 largest companies in Malaysia with approximately 70% of the total market capitalization of the FTSE Bursa Malaysia 100 Index.

Nasdaq Composite Index


Nasdaq Composite Index comprise of over 4000 innovative and fast growing technology companies in United States of America.

Note: What I like about this chart is when you click on it, it shows you the technical analysis of the chart. You can then perform the "Technical Analysis" on those chart. Basically technical analysis helps you to make investment decisions based on the study of charts rather than the stock fundamental. Interesting isn't it? But this is still something new to me but I will share with you more later on once I"m familiar with it. :)

What I don't like about this chart is only able to display up to 1 year trend. To view more than 1 year trend, you will have to use Yahoo Finance.  But Yahoo doesn't have a way to embed the stock chart in a website or blog.If you know, feel free to share with me.

P/S: What about you? There are lot of stock market indices out there. Which market index do you refer?

Minggu, 21 Agustus 2011

4 Steps to Set Your Investment Goals

Some people just feel lost in investment especially when they start investing in stock or when they don’t make a lot of money out of their investments. They will start wondering, what the hell am I doing here? This is all because of they don’t set clear investment goals.

When you do not have investment goals, you basically do not have measure of success.. When you do not have the measure of success, you do not know whether you’re at the right track. When you do do know whether you’re at the right there, you do not take actions (e.g. sell your stocks or mutual funds) and lastly you are lost because you simply do not know what to do. So, I hope this makes sense to you that why you must have investment goals for each investment that you make.

Let’s look at the following 4 steps on how you can set your investment goal. Check it out…


Step 1: Identify Your Personal Inflation Rate – X%

Well, before you even start thinking about setting your investment goals, you must first understand one of the most important elements in investing is to protect yourself from inflation killer.  Thus, it is important to identify your personal inflation rate before you start investing. Let’s look at my previous article how you should get your own personal inflation rate rather than the reported inflation rate by your government:
You identify this as X% and don’t be surprise if your personal inflation rate is a lot higher than the reported national inflation rate especially if you’re a big spender. The chances this will happen is high too if you keep earning more and more every years. 


Step 2: Identify Your Safest & Highest ROI – Y%

Your safest ROI could be your saving, fixed deposit (i.e. FD), or your retirement saving fund such as EPF in Malaysia, CPF in Singapore or 401(K) plan in United State.  I don’t know what the rest of the countries call this. :) Usually the retirement saving fund (e.g. the EPF) has the highest ROI as compared to your FD or your savings. You identify this as Y%


Step 3: Identify Your Minimum Investment Goal – Z%

Once you have identified X% and Y%, your minimum investment goal that you set should be based on which one has the highest %. For example, if your Y% > X%,  you minimum investment goal should be Y%. Hopefully your X% is less than Y%. If that doesn’t happen, you may want consider to change your lifestyle. If you don’t want to, that’s fine too. Then your minimum investment goal should be Y%. In short, Z% = MAX(X%, Y%). Hope this is not too engineering for you… :)


Step 4: Set Your Investment Goals

This is the final step is to set your investment goal after you have identified Z%. Basically, there are 2 types of goals that you can set. One is normal and another one stretch investment goals. If you achieve your stretch investment goal, you have basically exceeded expectation. Sound something familiar like your focal? Hahaha…

Well, no hard rules how you want to set the investment goal as long as you make sure it is > Z% but this is what I think normal and stench investment goals should be:

Normal Investment Goal  = 2Z% (2 times of Z%)

Stretch Investments Goal = 3Z% (3 times of Z%)

Note: Z% is your mininimun investment goal.


Let’s take myself as an example. If my Z% = 6% (based on the latest EPF data in 2010) , my normal investment goal will be 12% ROI. If my actual ROI is 12%, I’m meeting my goal. However, what if my ROI is > 18%? I’m basically exceeding my investment goal because I”m achieving my stretch goal.  In order to meet these goals, I"m investing in mutual fund or unit trust, stock, gold, property and etc.

This is how my investment goals look like. So whatever I invest in mutual fund/unit trust, stock, gold, property and etc, my measure of success is based on 2Z% and 3Z%. What about you? If you don’t have any investment goal, probably you can start having one now…


Summary

What do you think of my formula? Sounds reasonable or unreasonable to you? If not, what do you think how one should set their investment goals? As mentioned before, setting investment goal is essential which as important as that you need to have clear financial goal. Without goals, you do not know your direction. In this article, I show you 4 simple steps how you can set your investment goals for both normal and stretch goals. Of course, you can define your own formula. Good luck!

P/S: Hope this is something useful to you guys. I”m going to take vacation off in 4 more days and will not be blogging for about 2 weeks. Yeah! Feel free to comment on this article and hopefully I can get back to you before my vacation. :)

Jumat, 12 Agustus 2011

Refinancing Your Mortgage: What You Should Know Before You Do

Refinancing your mortgage may seem like a godsend at the moment, but before you jump in headfirst, there are some things you should know. For instance, are you prepared to shop around with at least three different lenders and three different title companies? Even though you might do less paperwork with your current lender, others might be able to offer you better rates, so it's definitely worth checking them out.

Here are some of the other things you should think about with a refinance.


There may be extra fees involved

All too often homeowners get caught up in that one little number – the interest rate. Sure, a drop of a half a percentage or more can save you big bucks on your monthly payment and on the total interest you'll pay for your home. However, you have to remember that refinancing comes with some of the same fees involved in buying a home originally, so the interest rate change may not end up saving you all that much after all.

Another thing to consider is something plaguing homeowners today: do you owe more on your home than it's worth? A high loan-to-value ratio these days can mean extra fees for your refinance, as the company doing your refinance has to protect itself, too. You might even end up paying private mortgage insurance, which can increase your monthly payment by $100 or more a month.

So, before you refinance, make sure you look at all the numbers and take everything into account. Unless you're getting significant interest rate savings, the refinance may not save you that much money after all.


You could tack more years onto your mortgage

Another thing to consider with a refinance is what loan term you'll use for the refinanced loan. Many homeowners who have been in their homes for five years or more take out another thirty year loan, not considering that it will be yet another five years before they pay off the house. Thirty-five years is a long time to be paying on one home!

In some cases, a longer-term mortgage may make sense, especially if the lower monthly payments mean keeping your home instead of going into foreclosure. In some cases, it may be in your best interest to pay extra on another thirty year mortgage, which will pay it off earlier and save you money. However, in many cases, it's better to take out a shorter-term loan – like a fifteen or twenty year – depending on how much you have left to pay off after the refinance.

Just keep in mind that by taking out another thirty year loan, it will take you some time to get traction in your mortgage and start paying off the principle significantly, so this is really only a good option if you plan to stay in your home for a while.


Find your break-even point

The best way to determine whether or not a particular mortgage deal is a good one for you is to find your break-even point. This is the point at which the extra costs of refinancing will break even for you. If you plan to be in your home through or well past your break-even point, then a refinance could be a good option for you. If not, though, it's probably better to hold off and just sell the house when you're ready.

There are plenty of great online calculators that will help you determine your break-even point with the best refinancing deal you can find.


Keep your credit score up during the refinance

Finally, just like when you're buying a house, when you're refinancing, you need to be sure that your credit score stays up the entire time – until your rates are actually locked in. Most lenders will quote you a rate at the outset of the refinancing process but will check your credit score again before locking in that rate.

One of the best ways to keep your credit score high during a refinance is to cut back on credit card usage. Use your cards responsibly, and pay off new balances every month. If you can, try to pay down your balances a little, too, so that your credit score is even a little higher at the end of the refinancing process than it was at the beginning!

This is a guest post by Katheryne Taylor.

Sabtu, 30 Juli 2011

Latest Malaysian Tax Scheme for ESPP is Stupid

If you do not know what ESPP is, you may skip this article.  Basically, ESPP stands for employee stock purchase plan. ESPP is one of the company’s compensation which allows you to purchase the company share with discount (e.g. 15%). Your company may or may not have this benefit and every company has slightly different way to implement this ESPP.

How this ESPP works is you can enroll this ESPP program for about let’s say 6 months. During this 6 months window, your company will deduct up to maximum certain percentage (e.g. 10%) of your salary every month and use this money to purchase the company share at the 6th month - the closing window (e.g. June 30) based on the “Subscription Value” with discount (e.g. 15%).

Let’s assume number of shares you have purchased with this ESPP is 50 shares and see the following example to illustrate the previous and the latest tax scheme for ESPP:

Subscription value                       = $30
Purchase price at 15% discount   = $30 X 0.85% = $25.5
Stock price on June 30 (highest)  = $51
Stock price on June 30 (lowest)   = $49
Stock price on June 30 (average) = $50
No. of shares purchased              = 50



Previous Tax Scheme for ESPP

Based on the previous tax scheme for ESPP, the taxable gain  is based on the discount (e.g. 15%) the company gives you.  In this example, the taxable gain will be $225 -  see the calculation below. This tax scheme makes a lot of sense because if the company doesn't offer you the discount, you will still need to purchase the share price at $30 not at $25.5  Because of the 15% discount, $225 is the extra money your company gives to you. Thus,  $225 to be considered as taxable income makes a lot of sense.

The taxable gain calculation based on previous tax scheme:
   = ($30 – $25.5) X 50 or ($30 X 15%) X 50
   = $225


Latest Tax Scheme for ESPP

However based on the latest tax scheme for ESPP, the taxable gain is no longer based on the 15% discount. but based on the average price of the last day of your ESPP closing window (e.g. 30 June). In this example, the average price on June 30 is $50. So it is automatically assumed that you gain $50-$25.5 = $24.5 although you didn't sell the share at June 30. Huh, what a crap?

The taxable gain calculation based on latest tax scheme:
   = ($50 – $25.5) X 50
   = $1225

So technically speaking, if you sell your ESPP share later at price lower than $50, you're actually being taxed more. Well, you may argue that what if you sell higher, then you're getting taxed less. Isn't that a good thing?Well, don't you know that capital gain in Malaysia is not taxable? If it is not taxable, why I sell higher, then I need to be taxed more? Think again!


Conclusion

Honestly if you ask me, there is something wrong with the latest Malaysian tax scheme for ESPP. The previous tax scheme is  reasonable but definitely not the latest. Although similar tax scheme is being applied to the restricted stock units (RSU) and stock options, I'm still okay with that because we do not fork out our own money. It is just like you're getting less compensation, not really that a big deal. However for ESPP, we basically fork out our OWN money to purchase the shares and now you simply tax me. This is not acceptable!

Well, what can you do? You can protest to the government or  just be alert of the price at the ESPP closing window (e.g. June 30) and if the price is high, you may want to consider a quick sell rather than keep it. I know this is suck...

[Update: 19 August 2011]: Let's look at the comment in this post from "HS Ooi". He gave a very good explanation why market gain is classified as the compensation instead of capital gain. Thus, it should be taxed. What do you think?


P/S: By the way, please don't confuse that you can claim back your money if your sell your ESPP share at lower price. I"m talking about taxable gain here and not the tax deduction in your monthly payslip. If there is extra tax deduction, you can only claim them back but this is not the case. The $1225 is reported as a taxable income in your EA form and it is part of your income.

Minggu, 24 Juli 2011

Veterans, Baby Boomers, Gen X, Y and Z

I do not know about this generation stuff after I have gone through a training. So I think that is worth to share with you all about these 5 generations (i.e. Veterans, Baby Boomers, Gen X, Gen Y and Gen Z). I think it is important to understand the behavior or characteristics of these generations which may help you in all aspects. Here you go the high-level summary of all these 5 generations:


High-Level Summary

Veterans Baby Boomers Gen X Gen Y Gen Z
Born Year < 1946 > 1946
< 1964
>1965
<1979
>1980
<1995
> 1995
Behavior Very conservative and discipline
                  Very respect law and order
Very optimistic and work-centric
          Believe employment is for a life.
Well educated generation
            Not interested in long-term careers
Very technology wise
         Expect great workplace flexibility
Never known a life without the internet
   Communicate through social network.

Veterans are very comfortable with directive, command and control management style. They prefer live to be predictable and not willing to change and not flexible. This is probably due to the effect of world war I and world war II because they have seen the worst.

Baby boomers tend to be very optimistic and work-centric. They will never think the employer will fire them. The reason why it is being called as baby boomers in this generation was due to the sudden increase of birth rates after the world war II.

Gen X has the “slacker” or “lazy” mentality because they born with almost everything ready. They are the first generation that has gone through day care, tuition and etc. Thus, most of the Gen X people are well educated. Loyalty is no longer in their mind, they change job or career frequently as long as they;’re unhappy. Work-life balance was invented by this generation!

Gen Y is very technology wise. They love gadget! They are way optimistic than the previous generations. They really want to do something that they really enjoy. Similar to Gen X but more extreme, they don’t give a damn about loyalty at all.

Gen Z is also know as Internet Generation. Most communication are gone through social network (e.g. Facebook, Twitter) and they do not understand or have not experienced the life without an internet.


Conclusion

Well, there is no hard rule. Let’s say if you’re Gen X, you must behave like Gen X. From one generation to another, they are always an overlap. Let’s take myself as an example – I belong to Gen X but I do not change job often, does that mean I”m baby boomer? At the same time ,I love gadget every much too! Well, I love to communicate through social network as well! It seems like I overlap 4 generations!

What it really means here is I can understand all types of generations and be part of them. lol When you’re one of them, it is easier for you to communicate or manage them.

Which generation you belong to? I bet you’re from Gen Y. : ) If wrong, then it should be Gen X! :) lol Hope article is useful to you!

Senin, 11 Juli 2011

My Boss is Weak In Technical

My boss doesn’t know what I”m doing! My boss is lack of technical skills! I lazy to talk to my boss because he is weak in technical. A good boss supposes to know better than me, why he still ask me? Does this sound familiar to you? Well before you complain, let’s look at what are the management skills needed from a single contributor to first-line, middle and top managers in a company.

Notes
  1. Technical skill is a skill to perform each single detailed tasks. Human skill a skill to deal with human and resources to accomplish the company’s goals. Conceptual skill is a skill to understand the business need and set directions for the company.
  2. The area of the shape tells you how much the role should spend their time in technical, human and conceptual. The total area for each role or shape should be the same. We have only 24 hours a day. :)

Is My boss Really Weak in Technical or….

Well I agree your boss is weak in technical. So you expect your boss should be better than you since he/she has worked so many years in the industry? If this is the case, you’re really in deep trouble because when your boss is better than you technically, you’re actually underperformed. Let’s look at the diagram above, a first-line manager supposes to spend less time in technical than a single contributor. How could you expect your manager is better than you since he spend less time than you? Yes, you’re underperformed!

If you look at the other way, let’s assume you’re not underperformed and you boss is really damn good in technical. You should start asking if your immediate boss focus on the right things? He should spend more on the human side for the skills. Does he do that? That is the reason why not all managers are suitable to be managers. In this case he is probably better to stay in the technical path (e.g. group lead, team lead) rather than in management path.

So think about it again. Is your boss really week in technical? It is expected your boss has less technical knowledge than you, and your role to explain to him and make sure he has the right amount of detail information.


Discussion

That is the general understanding of management skills. The higher you go, the less technical you’re as you’re now moving towards more human and conceptual management skills. Please set at least the right expectation to your manager. Having said so, one may still challenges this statement. The first argument of this is does this also apply to a technology company? Basically in a technology company, even managers are expected to be strong in technical? Is that true?

I myself work in a technology company and I have seen middle managers are damn good in technical and also both human and conceptual skills? Those are usually the outstanding manager. Is the expectation now set to the manager in a technology company somehow different? If that is the case, looks like being a manager in a technology company is a lot more harder. What do you think?

Minggu, 03 Juli 2011

Simple Way to Explain Black Swan Theory (Book Review)

You may have heard before the “Black Swan” movie but have you heard of the “Back Swan theory”? At first I thought the movie talks about the “Black Sawn theory". So I went to watch it. But after watching it, it turned out that there are 2 independent subjects. One talks about psychology and another one is economy. :)

The black swan in fact is a book which was written by Nassim Nicholas Taleb, a practitioner of mathematical finance. The book was published in 2007.  Yes, I know it is old book but I only have a chance to read it now after introduced by my VP in few years back. However, I did not finish reading the book simply because I find this book is too difficult to understand. A very simple idea but the author makes it so complicated for layman to understand. I do not know why. Perhaps this is called “expert”?  or it is probably not meant for layman to read. So if you think you’re layman like me, read my following post will do or else you can go to the bookstore to purchase this book for in-depth understanding.






What is Black Swan Theory?

Let’s understand what is black swan. First of all, it is an event and not a bird! lol. The reason why black swan is used is an event is because before discovery of Australia, all swans were convinced to be white. It was then proven wrong. Does this sound familiar to you? That is what happen to the subprime mortgage crisis. Real estate were convinced to be the best reliable asset but it was then proven wrong again. The black swan is used to explain such phenomena that is unpredictable and creates major impact. The black swan event term was then also referred as the Black Sawn theory or the theory of black swan event.


Can You Predict Black Swan Event?

Well if the answer is can, then it is no longer called Black Swan. :) Probably the answer is yes for the economy in 20 years ago. One could still possible to predict future using statistic based on historical data. However during this 21’s century,  this is no longer be true. Statistics has failed!

2 reasons why statistic has failed. The first reason - based on the statistics calculation or any type of economy’s formula, the probability of such black swan event is always very small and nearly impossible to happen. Another words, the formula has failed to model the economy. The second reason - people have build-in physiological biases that make them unable to predict.  For example, I have been getting salary since day one of working and never going to have pay cut for 10 years. Thus, I predict my future will NOT have pay cut as well regardless of my job performance. The technical term for this prediction is called “Inductive Reasoning”.


What is the solution?

At first when I was reading this book, I expected the author will give a better solution to replace the existing statistic formula to model the economy. Unfortunately, I don’t think the book offers such solution. Offering advice, probably yes. This also makes the whole book is completely useless in my opinion at least to me The reason is I have already known all these facts since the day one I learned about physics:
  1. Whatever proven right today, doesn’t mean it will be right forever. It can be proven wrong tomorrow.
  2. Whatever proven wrong tomorrow, doesn’t mean it will NOT be proven right again.
  3. Whatever proven wrong today, doesn't mean it will be wrong forever. It can be proven right tomorrow.
  4. Whatever proven right tomorrow, doesn’t mean it will NOT be proven wrong again.
This books basically in a way tells the same thing that I have learned since my secondary school.:)


What are the takeaways?

You may ask what are the takeaways then? If you ask me, I only have 2. The first thing is you should not deny the black swan events. It happens to everyone. Another important thing to understand is, a black swan event to me might not be a black swan event to you. For example, getting pay cut is a Black Swan event (i.e. unpredictable event ) to me while it could be White Swan event (i.e. predictable event) to you. This is just an example. Black swan event could happen in personal too and not always global.

The second takeaway is plan for the worst case. What could be the black swan event for you? You lost a job tomorrow? You get a job demotion? Property house price bubble burst? Car accident? Something serious happen to your family? Your health problem? You should not be too optimistic but always identify your worst case scenario. Once your worst case is identified, plan for a defense strategy. This is also called "Personal Financial Planning"! :) :) :)


Summary

I honestly do not really understand why this book get the New York Times Bestseller. It is definitely not a book for layman. The content of this book is also questionable as the ideas that being brought up in this book is really nothing new. Everyone knows that  the statistic’s formula is just a prediction and it could be wrong. Not to talk about the human’s greediness, whatever statistic data that you have seen out there could be designed to blind you from the truth too based on their own biasness. Basically smart people will know all these technical analysis based on statistic cannot be trusted and you have to use it at your own risk.

This book has 444 pages with plenty of words and very less graphic or diagram explanation that makes me really no mood to continue reading. The worst part of this book is it explains a very simple idea with 444 pages and I could summarize these 444 pages into one sentence below:

“No one can predict the future, so you have to plan for the worst case and do not over optimistic.”

P/S: I have no intention to shoot the author of this book and I was just giving my opinion from a layman reader’s perspective. If you do think this book is good or beneficial to read especially for layman, I’m happy to hear your opinion.

Jumat, 01 Juli 2011

How Do Insurance Companies Determine Your Life Insurance Premium?

Understanding how life insurance companies determine their premium rates can help you get better life insurance rates!
Life insurance companies work with actuaries and underwriters to calculate the risk of insuring your life. There are several factors they consider that influence these rates. You may find that some of these factors are modifiable in your life. In order to fall into a premium classification that offers better rates, all you have to do is work on those modifiable factors.


Life Insurance Rates

Life insurance is a business, and in order for any business to remain healthy, there is a reasonable amount of profit that must be made. Life insurance companies profit from probabilities. A major factor they consider is your probability of dying soon. Looking at your personal profile, life insurance underwriters determine the probable age you will die. If you’re likely to die soon, they will charge you a higher premium rate. Conversely, if you are likely to live a long life, your premium rates will be much lower. To make it simple, life insurance companies will divide people into at least four different groups based on their personal profile and consequent risk of death. In descending order of preference, these are usually referred to as:
  • Best Preferred
  • Preferred
  • Standard
  • Smokers

Factors that determine your life insurance rates

Age
Mortality rates are tools that underwriters use to determine the risk of insuring your life. For this reason, those who are young usually get the best life insurance rates. The older you are, the more likely you are to have health concerns. The premiums for a 20-year old will be significantly higher than premiums for a 65-year old, even in good health. Buy life insurance when you are young and lock those rates in for a long-term period!

Health
The second most important factor that determines your premiums is your health. Those who are young, and in top health, will be offered the Best Preferred rates. By purchasing a level-term life insurance policy at an early age you can lock in those rates for the entire term period.

Most life insurance companies require you to undergo a medical examination that is conducted by a company-appointed medical officer. Being slightly overweight or having a higher than normal blood pressure can knock you down to the next premium rate class. Other factors that are considered are high cholesterol counts, diabetes, any medication taken regularly, and mental health. A company may also look at your family health history to check whether there are any genetic dispositions. Health may not always be an area we can control, but following a good diet, incorporating a daily exercise regime and practicing weight management may help!

Your Occupation
Life insurance companies check out the kind of job you do and your workplace environment. If your job exposes you to dangerous health risks, requires extensive travel, or is considered a high-stress job, be prepared for higher premium rates. A safer job would attract low cost life insurance rates.

Your Hobbies
You may not think it matters, but the type of hobbies you engage in may be considered a risk to your life. Some of these hobbies may include skiing, bungee jumping, rock climbing, scuba diving, car racing, or any other such extreme sports. Engaging in one or more of these activities on a regular basis may cost you in terms of premiums that you will need to pay.

Smoking
If you are a tobacco user, you will qualify for smokers’ rates. Tobacco, in any form, is dangerous to health, and will substantially increase your premium rates by 20 to 30 percent. To give you an incentive to quit smoking, some companies will offer you better rates if you can prove you have quit smoking for at least a year.

Your Credit Card Score
What does your credit score have to with your life insurance rates? The way you handle your money may give life insurance companies a little more insight on your personality traits. If you’re rash with your spending, you may be applying same principle to your health.


It must be noted that if your risk of death is extremely high, a life insurance company holds the right to deny you any coverage. However, you need to remember that just because one life insurance company gives you standard rates, this does not mean that another life insurance company will not hike you up to preferred class. While life insurance companies generally use the same criteria to determine life insurance rates, they may specialize in some areas in order to give them a competitive edge over other companies. For instance, most life insurance companies will charge you higher premiums if your cholesterol is above normal. But, there are some life insurance companies that will combine this fact with other factors in your life, such as your weight, age, job and lifestyle. If all other factors are favorable, you may be eligible for better rates these life insurance companies.

In many cases, it is possible to obtain better premium rates by kicking the smoking habit, losing a few pounds, or even changing jobs or hobbies!


Compare Life Insurance Rates

Online life insurance quote providers have made it easier than ever to compare life insurance rates of top-rated life insurance companies all in one go! Their huge database instantly locates life insurance carriers that specialize in the weak factors of your personal profile, making it easy for you to obtain the best life insurance quote that suits your personal needs!


This is a guest post by Denise Mancini.

Sabtu, 25 Juni 2011

Worldwide House Price Trend (2006–2010)

This is the worldwide house prices trend in the past 5 years which includes USA, Japan, Britain, China, Australia, Singapore and Hong Kong. Too bad, there is no data for Malaysia but you can kind of guess that  Malaysia should be somewhere  below China and follow the similar uptrend like China. Let’s check it out the graph below:
Source: www.econmist.com

The house price fell in USA was due to the subprime mortgage crisis in 2006. The house price drops by ~35% after this crisis and has never been recovered until today. By the way, this trend is also similar to Ireland which is not shown in this graph (I don’t want to make the graph too crowded) . As for Japan, the house price has never been recovered after the Japanese asset price bubble from 1986 to 1991. Surprisingly if you look at the house price trend in Britain, it was that badly affected by the subprime mortgage crisis if compare to USA. 

The house price for the rest of countries especially for Asia (except for Japan – i.e. China, Hong Kong, Singapore) and Australia, is moving uptrend. The slight downtrend in 2008 – 2009 was probably due to the stock market crash during that time.  After the stock market crash, investors start moving their target to real estate or property. That is probably the reason why you see the house price has been increasing dramatically after 2009 until today.
 

When is the next bubble burst?

You can kind of expected the house price in the western countries will probably stay flat in the coming years. But what really interesting here is the property market in Asia. Will it be keep going up or is it already at peak? Bloomberg reported Hong Kong is the world’s most expensive place to buy home. 65 million apartments in China are said to be empty creating “Ghost Cities”. Are these obvious enough to tell the property bubble is going to burst soon?


Well, I do not know but if you ask me about Malaysia, I think generally most of the investors in Malaysia have the strong holding power and this makes me think the property bubble bust is unlikely to happen in Malaysia. Could I be wrong? Another very interesting discussion is the property price in Penang and KL seems to have huge gap as compared to the other states or cities within Malaysia. Can the bubble burst only happen within certain states or cities (e.g. Penang and KL)?

So, what do you think? Do you think property bubble burst is forming in your country? What is the next trend?

Kamis, 16 Juni 2011

6 Debt Reduction Tips to Keep You in Sound Financial Health

Debt is a curse. The sooner you put in efforts to reduce the level of debts that you owe, the better it is for you. To reduce your debts substantially, the debt relief programs are of paramount importance. This is nothing but partial or total elimination of debt as well as stalling debt growth. Here is a list of some debt reduction strategies that you can follow to curb your debts significantly.

(1) Don't incur debts

In majority of the cases, you fall into debt because of your own imprudent financial behavior. Don't use your credit cards recklessly. Take out loans only to purchase home or car. Try to live within your means. In fact, if you can successfully limit your spending below your income, you will never fall into a debt situation.


(2) Create a realistic budget

It is very important to build up a realistic budget. You categorize your items of expenditures and then allocate money to each category. Make sure that you don’t spend beyond the amount allocated to each category. This will indeed be helpful to keep a lid on your spending behavior. Your budget should be such that you are able to contribute some money to the emergency fund. The emergency fund can be utilized to meet unintended expenses. 


(3) Be well aware of your liabilities

When you have fallen into debts, you have to be well aware of how much you owe to others. You should be well-acquainted with the monthly payments that you have to make, your interest payments as well as the outstanding balances. Don't default in making payments. Only regular payments on your debts can make you debt free.


(4) Close credit card accounts

It is not a wise financial behavior to keep many credit cards. And, if you already have many credit cards, it would be wise to close as many credit card accounts as possible. The underlying rationale to keep less number of credit cards is to curb the temptation to abruptly spend money using cards.


(5) Make more than minimum payments

Make efforts to pay more than your monthly payments. Use the additional amount of money to pay off your lowest outstanding debts. This helps you pay off your lowest outstanding debts even before the scheduled time period. And, once you have successfully paid off your lowest outstanding debts, switch your target to the next lowest outstanding debts. Persist with this process. This helps you clear off your entire debts in a relatively shorter period of time. 


(6) Seek professional help

Sometimes, it is a good ploy to seek professional help to repay your debts. A debt relief company can negotiate a pay off strategy for you after working with your creditors.


These are indeed smart tips that you can start following from today only. Seriously following these tips, will keep you in good financial condition.


This is a guest post by Nancy.

Sabtu, 11 Juni 2011

Open for Guest Posts and Guidelines

I have been receiving many guest post requests in the past and recently getting even more guest post requests in the past few months. I truly appreciate for those of you who interested to write a guest post in my blog. At least this tells that my blog is worth for you to write. Thank you so much! Having said so, I would also like to apologize to you that until today I have NOT even done a single guest post. Sorry, guys!

I usually do not able to get back to you in a timely manner due to busyness of my schedule. I know this is an excuse. So this is my fault then, please forgive me. But I will still definitely get back to you later on with some delays and I usually throw you ton of questions. First, probably I”m new in this guest posting stuff so I have a lot of questions to ask. Second, I want to make sure that whatever you write will be useful to the readers of this blog. Third, I also want to make sure I don’t want to waste your time to write an article that eventually I do not post it here. At the end of the day, I usually do not get any respond from you after that. I guess I have make you pissed off already? Again, sorry if this is the case…

In order to reduce my questions to you, I thought it will be easier for me to come out the guidelines for guest posting in this blog:

[Updated: Feb 7, 2012]: Added perquisite guideline to raise the bar slightly higher to encourage the guest post author to be more interactive and also to encourage the blog commenters to do a guest post. 

[Updated: May 27, 2012]: Added content guideline that the link must be related to personal finance website.. I want ultimately the provided link is the useful one. Sorry for any inconvenient cause.

[Updated: April 29, 2013]: Updated for no link is allowed requirement. Yeah I know, this will turn away you. :)

Prerequisite Guideline
  1. You had posted at least 5 relevant comments in this blog. 

Content Guidelines
  1. Anyone can do guest post (e.g. readers of this blog, other bloggers and etc.)
  2. The post cannot be for advertising purpose and must be relevant to personal finance. The post should be focusing on providing useful personal finance tips to the readers.
  3. Your post must be original and has never been be published anywhere else which including your own blogs or other places.
  4. Your post does not need to be agree with my line of thinking. I love and enjoy to accept different points of view. 
  5. No link is allowed unless I know who you are (e.g. frequent readers of this blog). 
  6. Your guest post is preferable written in simple HTML format. If you would want to submit in DOC format, it is also fine but please avoid fancy stuff. :)
  7. If you have picture, please include your picture in your guest post submission and mark it clearly where the picture or image should be displayed in the content.

Submission Guidelines
  1. If you’re okay with all these guidelines above and still interested to do a guest post in my blog, please send your guest post to me at champdog@gmail.com.
  2. I will try to reply within 48 hours and tell you whether I will accept the guest post or not. I may have questions or requests to the guest post and once we get the consensus, I will post that up as soon as I can. If I reject your post (I hope I won’t), you’re obviously free to use it anywhere as you like.
  3. Once I posted your article, I will drop an email to you for you to review.
P/S: Hope I don’t turn you guys off! Have fun writing!

Minggu, 05 Juni 2011

High Pay with Low Stress or Growth?

A friend of mine resigned from his company last month. So, I asked him why and his answer was very stressful to work there, and he didn’t see a reason to reject since he got an offer with 30% increment and promotion. According to him, the new company (i.e. which is also his ex-company) is a lot more less stressful than the existing one. So the conversation continues:
Me: Are you doing a same job like what you did previously?
Friend A: Yupe. No difference and I know in-out of everything.
Me: Even with a promotion, will you still do the same thing like what you did last time?
Friend A: Kind of. I'm supposed to get a promotion previously but they didn’t give me. I can perform at that level. No problem for me at all.
Me: So, can I say you will be in comfort zone?
Friend A: Definitely. So lucky I am. Get a raise to do an easy job!
Me: What about personal growth? Will the new job help you to grow?
Friend A: Hmm…  Is that important? I don’t take that into my consideration. I will be stupid if I don’t take this offer for doing something easier and less stressful.
Me: Okay. You’re right. Good luck, man!
So, what do you think? Was my friend making a right decision? There 2 things to consider here:

First, you get a promotion with a same job scope before? Think about it carefully, why a company want to do this? It still makes sense assuming if you’ve already over-performed in a lower grade as what my friend told me.

Second, no growth versus money. Which one is the right thing to decide if you can only choose one? Well, this is not an easy decision especially when it comes to you. I bet most people will choose money and sacrifice growth like what my friend did. If you were my friend, what will you do?

If I were my friend…

I will make sure there is a growth for me before I take the new position. I will start discussing with the hiring manager the opportunity to growth. Keep in mind that doing a same job, doesn’t mean no growth. Assuming after the assessment, I find that there is no growth or no significant growth in this new job,  I will NOT take this offer! Ops. but with one exception, guess what? The exception is there is also no growth in my current or existing job.


Conclusion

One more thing is missing here before you consider to switch job is company stability. You don't want to join that no strong in fundamental. Anyway to make the discussion easier, let’s put aside this into the consideration
.
Well this is what I think. You should make decision based on the following criteria in priority order:
  1. High Pay, Low Stress, and High Growth (Ultimate goal, don’t you think so?)
  2. High Pay, High Stress, and High Growth (Okay, not that bad. Learning to manage stress is a skill.)
  3. Low Pay,  Low Stress, and High Growth (Eventually your growth will translate to money, don’t worry!)
  4. Low Pay, High Stress, and High Growth (Don’t worry again, money will come later.)
  5. High Pay, High Stress and Low Growth (Try to make use of your high stress to become your growth)
  6. High Pay, Low Stress and Low Growth (Yes, only if you really want to be in comfort zone!)
  7. Low Pay, Low Stress, and Low Growth (This should be your retirement strategy.)
  8. Low pay, High Stress, and Low Growth (Too obvious right? Please avoid this.)
Look at 3,4,5 and 6. Guess some of you may disagree with me?

P/S: Btw, guess what is the top 5 high-paying and low-stress jobs? That is Physical Therapist,  Computer Software Engineer, Civil Engineer, Massage Therapist, and Technical Writer (Provided by: Investopedia).

Minggu, 29 Mei 2011

Check Your EPF(KWSP) Nominations of Beneficiary

If you do not know what EPF or KWSP is, you can safely ignore this post...

Around few years back in 2007 I think, it had been rumours saying that EPF(KWSP) may screw up your nominations when they upgraded their system to the new one. A friend of mine also told me that recently he went to check and found out that his nominations are no longer there. What a crap?

So, I made up my mind to go and check last week. Fortunately, all my nominations of beneficiary were there. BUT, today I look at it carefully again, I notice one of my nominations I/C number is incorrect.  What a crap again? Guess I have to go back to EPF office gain to correct it. :(

This is what you need to do to apply for checking your EPF nominations:
  1. Go to the KWSP/EPF office, tell them you want to check for your EPF nominations. They will give you a form.
  2. After you fill up the form, go to the queue up again and they will give you a number.
  3. Wait for your number, after that they will print out all your EPF nominations for you.

Good luck to you! or else you need to go to the EFP/KWSP office to correct it again like me. You know what, even all your nominations are correct, I suggest you to check again perhaps after 2 years.

P/S: But, I feel like kind of stupid to check this in every 2 years. Is that necessary? Why can’t they do a better job? Some say they do it in purpose, what do you think?

Senin, 23 Mei 2011

Malaysia Property Market ROI by States in 2010

When you buy a property, the first thing that come to you mind will mostly likely to be “What is my potential return of investment (ROI)? However you know that no one can guarantee you the exact ROI. What you really can do is the study the past history or so called track record. What do you think of the property capital gain in Malaysia for all the states? Let’s see…

Malaysian State Average Transaction Value (RM) 2010 House Price Increase (%)
Kuala Lumpur 488,522 25.3
Putrajaya 310,625 -27.2
Pulau Pinang 265,078 17.1
Sabah 222,698 17.4
Labuan 204,852 -11.6
Johor 166,802 12.3
Sarawak 142,927 7.9
Pahang 127,159 8.4
Melaka 127,081 4.4
Kedah 122,772 -5.2
Negeri Sembilan 116,808 -2.4
Perlis 106,562 7.6
Perak 94,764 3.3
Kelantan 82,337 39.5
Terengganu 74,056 7.7
Source: NAPIC, 10MP, RAM Economics
This table concludes few things as in general:
  • The most expensive houses in Malaysia is at KL. Well, I thought is Penang but Penang is not even at the second price. So, can I say Penang property is still considered cheap as compared to KL and Putrajaya?
  • The cheapest houses in Malaysia is at Terengganu and followed by Kelantan. Well, this is not a surprise to me. Want cheap house? Go to Terengganu!
  • The highest ROI of property investment in Malaysia is at Kelantan! Wow, again my impression is either KL or Penang. Another Blogger (i.e. Kris) told me is Sabah which is kind of surprise to me too. It has the same capital gain (i.e. 17%) with Penang.
  • The lowest ROI of property investment in Malaysia is at Putrajaya! Who say property sure make money? Look at Putrajaya, Labuan, Kedah and Perlis. They have –ve ROI. I’m surprise that Kedah is –5.2% or perhaps I should said I”m sad to hear the news. Hopefully this doesn’t apply to my property in Kedah.

Discussion
Having said so, this data is only for 2010 and if you look at it for long term (e.g. 10 years), the property price should appreciate around 3% to 4% (based on my personal observation), not as much as you think and due to the compound interest you should see the capital gain is around 30% for 10 years or since year 2000. 
The property price went up crazy in the past 2 years (i.e 2009 and 2010) was due to the severe stock market crash of 2008 and therefore investors switched their focus to the property market (safest investment vehicle). 
So what is next? One high possibility is the property market may be stable down for the coming years as now the investors are switching back to stock market. What do you think?

Rabu, 11 Mei 2011

Do You Believe Feng Shui in Property Investment?

Do you believe in Feng Shui? If you do, I’m sure you do consider Feng Shui as part of your decision making process before you invest or buy a property. But if you don’t, will you still take Feng Shui into consideration?

Before we can answer these questions, let’s look at what type of Feng Shui believers out there in the market. So I interview my friends, relatives and strangers too. The conclusion is there are 4 different types or 4 different level of Feng Shui believers:


Type 1: Person who does NOT believe in Feng Shui at all.

This type of person does not give a damn about Feng Shui at all. These people are usually my non-Chinese friends such as Malay and Indian friends. Well, I have one Indian friend who believe in Feng Shui too but I think that is the minority.


Type 2: Person who believes in Feng Shui only at surface

This type of person believes in Feng Shui only at surface level. They know the basic rules of Feng Shui and some basic Feng Shui’s fundamentals such as house should not face directly to the road and etc.


Type 3: Person who believes in Feng Shui based on common sense

This type of person do their own research about Feng Shui and make common sense out of it. For items or Feng Shui practices that are out of their common sense, they choose to NOT believing in them. These are usually an educated people with strong analytic skills (e.g. an engineer). So, I”m actually belong to this type.


Type 4: Person who very believes in Feng Shui by knowing the rules

This type of person are the strong believers in Feng Shui and they know almost all the Feng Shui’s rules. However, they need someone who they think is reliable to tell them the rules of Feng Shui. So, they listen from friends or relatives about all these Feng Shui’s rules. For those rich one, they usually hire a Feng Shui master to tell them these “rules”.


Which Type of Feng Shui’s Believer You Want to Be?

No matter which type of Feng Shui believers are you, ultimately you should always invest or buy property at least like type 3 or type 4 of Feng Shui’s believer. The reason is very simple because type 3 and type 4 are the superset for the rest of the types. Look at the diagram below for better illustration.


The diagram basically tells you few things:
  • If you’re type 3 and type 4 of Feng Shui’s believers, you can sell your house to type 2 and type 1.
  • If you’re type 2, you can only sell to type 1.
    Note: The reasons why you see there is overlap between type 3 and type 4 is because there’re rules that doesn’t make sense to Type 3 and also Type 3 of Feng Shui’s believers tend to always create or invent their own Feng Shui’s rules.

    So now, which type of Feng Shui believers you want to be? Even though you don’t believe in Feng Shui or even Feng Shui is a fake thing, you should also start to change by analysing your property with your Feng Shui.

    This is a demand and supply rule and has really nothing to with whether you believe in Feng Shui or not. Good luck in your property investment!

    Senin, 02 Mei 2011

    Useful Top Personal Finance and Investment Blogs in Malaysia

    If you’re looking for very useful and informative personal finance or investment blogs in Malaysia, this is the right place for you. Having said so, you won’t able to find all the personal finance or investment blogs in Malaysia here because I’m only going to list those that I follow very closely.

    But please don’t get me wrong that for those blogs that are not listed here are not the good one. I’m sure there are many good personal finance and besides blogs out there in Malaysia besides that the one I listed here.
    • Journey to Become Financially Independent by ChampDog - I like this blog because this is my own blog which I share everything that I think is useful to my readers towards my journey to become financially independent and achieve financial freedom.
    • Personal Finance Money Tips by KC Lau – He is probably the pioneer of personal finance blogger in Malaysia because when I started to blog, he was there already until today. If you want me to vote for who is the most successful personal finance blogger in Malaysia, I probably will vote for him! He did a lot of stuff lately to increase his influence. :D
    • Malaysia Personal Finance (MalPF) by Michael Tsen – This is the blog that I enjoy to read and learn a lot. Some of the articles in this blog are very interesting and the author always use an unique way of bringing up his ideas. 
    • KnowThyMoney by Kris – Well, he is probably the blogger that I interact the most among all the authors listed here. I think we share a lot of common things. We both engineers who interested in not only finance or money but also girls too! lol…
    • Malaysia-Finance Blogspot by Salvatore Dali – This is probably the most difficult blog to understand because my standard is not there yet. He analyses the market like a fund manager and you may not able to follow unless you have a depth investing knowledge. Thus, many fund managers are actually reading his blog too. 
    • 1-million-dollar-blog – I think he means his blog worth 1 million. So if you read it, you may get 1 million! lol. I look up for a lot stock information from this blog. Hope you will find it useful too.
    • Kampung Investor (link is removed due to website is down) by Kampung Boy – A very unique name and he likes to call people “Brother”. At least he is calling me that which makes me feel warm can comfortable. lol. Want to know the kampung way of achieve financial freedom? Visit his blog…. 

    Well, I don’t want to list down the whole bunch of personal finance and investment blogs here because it will be too overwhelming. That may defeat the purpose for readers to find this article useful or informative. In fact, I still do read some of the blogs that I don’t listed here. Again,it doesn't mean the other blogs are not useful or informative.



    P/S: I will continue to make this article up-do-date from time to time. For example, I may remove some of the links here if the bloggers are no longer active or I will add more links here if I found some noteworthy personal finance blogs especially those blogger who I interact a lot. :) Happy reading!

    Minggu, 01 Mei 2011

    What are foreigners doing in China?

    When I was in China, I was thinking what foreigners are up to in China. So, I search around and  found this survey from a Chinese blogger. Let’s check it out here:


    By the way, I wonder if I am considered myself as Foreigner in China. The reason is the Chinese usually calls “Foreigner” as “Laowai” which refers to white men or western guys. However, technically speaking I’m not really a “Laowai”. So, I’m not sure if this survey includes me.

    Now back to this survey, what do you think? Do you think that is the real survey or it is meant for joke or probably just a guess by the blogger’s owner?


    P/S: Happy Labour's Day! Enjoy your long weekend especially you're off on Monday too! :)

    Minggu, 10 April 2011

    Bursa Malaysia KL Stock Portfolio System

    This morning I was looking an alternative ways to track my MYR stocks than my conventional excel spreadsheet and I found the “MY PORTFOLIOS” in the finance.yahoo.com.  So, what you need to do is:
    1. Go to “finance.yahoo.com”.
    2. Login with your Yahoo account.
    3. Click “MY PORTFOLIOS” tab –> Select “Create Portfolio”.
    4. Choose “Track your transaction history”
    5. Follow the rest on the on-screen instructions to setup all you stock transactions.
    You will see something like below to track your current positions and all the transactions:


    Positions


    Transactions


    Well, there are few problems I don’t like about this Stock Portfolio feature from Finance Yahoo:
    1. The Symbol doesn’t display the counter name (e.g. displaying GENTING instead of 3182.KL).
    2. There is no currency for MYR. This is really suck.
    3. It doesn’t show how much your earning from you sell transaction. Huh?

    Let's Try KLStock.Com

    So, I searched around again and I found www.klstock.com. It seems so far the best to suit my needs to replace my conventional stock tracking and monitoring with my excel spreadsheet.

    [Update: Jan 17 2013] Apparently this KLStock.com website is no longer available and down. Thus, I"m removing the link.
    1. Register an account with “www.klstock.com”
    2. Go to “portfolio” tab and key-in all your stock transactions
    3. For selling, you need to key-in your purchase transactions first. After that, click on the “sell” in the action column to key-in your sell transaction.

    Portfolio View

     
    P&L History


    Well, this website seems like a new website and I hope they will continue to make improvements to this website especially on the stock portfolio feature. One immediate enhancement I would request is to add the "commission charges” for both sell & buy transactions. Currently there is no way you can track it…

    Overall, I have no complaints and you do a better job than “Finance Yahoo”. Please keep up the good work!

    P/S: Feel free to suggest if you have better way to monitor or track your stock portfolio specifically for Malaysian stocks.

    Sabtu, 26 Maret 2011

    Stock Market 101: Understand How Stocks Get Started

    You buy shares from a certain stock and when the stock price goes up, you sell and earn money out of it. That is probably the main reason for all of us to invest in stock.  But do you know why stocks exist at the first place? Is it for you to invest and earn money out of it? Yeah, that’s true. But then why the company want to issue a share for your benefits? Don’t forget that economy is always win-win


    Why stocks exist at the first place?

    Stocks exist at the first place because companies want to raise capital (i.e. get more cash) for their business. Why companies want to increase their capital? Because they want to make their business big and eventually make even more money! Assuming a company wants to increase its capital to $1000K, the company will issue shares that worth for $1000K for investors to buy. Let’s say 100K shares are issued, 1 share will cost $1000K/100K = $10. When investors buy all these 100K shares, the company will able raise it cash or capital to $1000K. 

    You may also wonder why don’t the companies raise their capital from bank by taking loan. That is because taking loan has its limitation and you usually can borrow up to certain limit. Also, when you’re in debt you need to pay for the interest too. In order to get more money than what you can borrow from bank and most importantly without debt, the most effective way is to make your company listed  in stock exchange by issuing shares to the public or in other words make your company a public company.

    When your company is listed or became public, everyone can own part of your company by just buying shares from your company. For instant let's use the example above, you buy 1000 shares, you basically own 1K/100k = 1% of the company. If you buy 10K shares, then you own 10% of the company. Cool isn’t it?


    How to determine the initial stock price?

    Of course, the owners of a company decide what should be the initial stock price and how many shares they want to issue. However to determine the stock price, they must look from investors perspective. Let’s assuming you own this company and the annual net earning (i.e. net income – expenses) of this company is $100K.  How much do you think your company worth? Let’s say you price your company worth for $1000K, this means that if I’m a investor and I invest $1000K. I will get back $100K annually as my return of investment – ROI which is $100/$1000K = 10% (assuming the earning is constant in the coming years). If you price your company for $500K, then the ROI from investors is 20%. The technical term for this ROI is called “Dividend”.

    So do you think investors will invest for 10% ROI or 20% ROI? Of course, 20% right? But keep in mind that you only get the capital of $500K from a company perspective. What if you offer 10% ROI, do you think investors will invest? If yes, then you will get the capital of $1000K which is 2 times more than $500K. You get more money by offering 10% ROI as compared to 20% ROI. So, should you price your company $500K or $1000K? Well, that depends how good your judgement on what are the investors' need and to get the optimum capital that you want. :D

    If you issue 1 share for $1000K (which is unlikely in reality because after you sell your share, your company no longer belongs to you!) , then 1 share will cost $1000K. If you issue 100K shares, then 1 share will cost $1000K/100K = $10. If you issue 1000K shares, 1 share will cost $1000K/1000K = $1.  Do you think the public or investors have enough money to buy 1 share? So the quantity of the share decide how cheap is unit price per share that affordable by majority of investors. This is up to you to make a call too, if you’re the owner of the company.

    Once you have decided to price your company for $1000K and issue 100K shares, your initial stock price will be $1000K/100K = $10 per share. So you make this offer to the public which is also called “Initial Public Offering (IPO)” with $10 per share.


    Summary

    Well, I summarized a lot of stuff here and in reality the process is a lot more complicated than what I have explained. I think it is always important to understand the basic fundamental especially from a company and investor perspective before we start investing in stock.

    This article explains how stocks gets started in the first place. Feel free to comments and provide feedback if anything is not clear and you would like to discuss further. Happy investing!

    Minggu, 06 Maret 2011

    How to Embed Stocks that I am Watching?

    If you're looking for a way to embed the stock charts in a website or a blog, you can now can do it through wikinvest. Here is my list of stocks that I"m watching and the chart shows 1 year history trend for that particular stock:

    INTEL CORPORATION


    ALTERA CORPORATION


    If you have a better way to embed stock chart into a website or a blog, feel free to share. So far, I find this wikinvest is the best.

    [02 April 2011]: There is a bug in the Malaysian stock chart which shows only until August 2010 and I have reported to wikinvest. This is the respond that I got from them:
    Hi Champdog,
    I filed a report of this issue when you wrote in a few days ago, and it's been added to our developer's work queue. I don't have a formal estimate at this time, but I'll keep you posted of our progress.
    Thanks for your patience!
    Wikinvest.com
    Investing, Simplified.

    [11 April 2011]: By the way, check it out  my latest post on Stock Portfolio System to monitor or track your stocks. I find it pretty useful! :)

    LOG
    [03 March 2011]: Added AIRASIA BHD

    [04 April 2014]: Removed CIMB Group Holdings Berhad, PBA Holdings BHD and Airasia BHD because it is no longer working. :(

    P/S: Now you can spy on me because I will continue keep this post updated for the stocks that I"m watching.

    [04 April 2014]: By the way, I no longer keep this post updated for my watched stock, will be remove this link from the right panel as well.

    Sabtu, 26 Februari 2011

    Latest FD, EPF, Inflation, BLR and Saving Interest Rates History Trend in Malaysia

    If you wonder where to get the latest FD (Fixed Deposit), saving interest, EPF (Employee Provident Fund) dividend, BLR (Base Lending Rate) and inflation rates history trend in Malaysia, this is the place for you. I wrote about a similar topic in my previous post (almost 3 years ago) and apparently it is out-dated. The latest data was only up to 2007.

    I will use this post to keep track of the latest interest rates. As you can see from the graph or chart below, I put the inflation rate as reference – green line. Any interest rates above the green line is good to go and this is where you want to put your money into. However for those who are buying house, you need to look at the BLR – brown line, any investment return that higher than BLR is where you want to put your money into especially if you don’t like Flexi loan package.


    [Updated: 26 April 2014] 



    What can we conclude from this trend?
    • Saving rates is getting lower and lower. Thus, you shouldn’t put your money in saving at all. For instance, if your monthly expenses is RM3K, you just need to make sure that you have RM4K in your saving account every month. RM1K extra is for backup.
    • FD is as useless as saving but it is still better because it is higher than inflation rate in most of the years. But keep in mind that personal inflation rate is the thing that you want to look at (not the inflation rate reported by the government!)  
      • As expected, EPF is the best investment vehicle (of course only compared to FD and saving) and it is catching up the BLR rate (but still below BLR). This tells you that withdrawing your EPF money to pay your house loan is the right choice. How about withdrawing your EPF for Mutual Fund? Yes, but do this only when you believe the mutual fund return could be higher than 6%.
      • 6% is a important value (based on EPF dividend return and also BLR). You will use your extra money to invest (after you have enough emergency fund) and your investment return should at least more than 6%. If not, you’re making a bad investment. 
      [Updated: 28 Jan 2012]: Check it out the graph in 2011, inflation rate is now catching up with FD! :)

      [Updated: 26 April 2014]: Update data up to 2013, inflation has moved down (lower than FD) and EPF is till performing good!

      P/S: Well, to summarize: don’t put your money in saving and use FD as emergency fund. EPF dividend rate and BLR are very important because that is the investment goal that you want to set (i.e. Any of your investment return from stock, mutual fund, and bonds should be more than 6%).

      Sabtu, 19 Februari 2011

      How to read buying & selling price in money changer counter?

      Have you ever confused with currency exchange especially when you want to buy certain country’s currency in the money changer counter before you travel? Should you aim for lower or higher price?

      There are only 4 things you should able to see from money changer counter: Date, Unit, Currency, Buying and Selling prices.  Here is the example:

      Date: 20/02/2011
      Unit Currency We Buy We Sell
      1 US Dollar 3.015 3.035
      1 Great Britain Pound 4.880 4.935
      100 Chinese RMB 46.000 46.650
      1000 Japanese Yen 36.250 36.700

      Before you go into this, the first thing you need to know is the base currency. The base currency should be the currency based on the country where you exchange your money. For example, if you go to the money changer in Malaysia, the base currency will be in MYR – Malaysia Ringgit. If you exchange your money in China, then the base currency will be based on the Chinese RMB then.

      The table above is an example that you can see from the money changer in Malaysia (the base currency is MYR). The table tells you that you need RM3.035 to exchange with 1 US dollar and RM46.650 to exchange with 100 Chinese RMB. Look at the “We Sell” column whenever you want to buy and look at the “We Buy” column whenever you want to sell.  The formula is very easy:

      You want to buy foreign currency with MYR, this is how much you should get:
      Money that you want to exchange in base currency(MYR) / We Sell (Buying Price) X Unit
      You want to sell foreign currency and get back the MYR, this is how much you should get:
      Money that you want to exchange in target currency(Foreign $) X We Buy (Selling Price) / Unit

      Example 1: You want to exchange RM10K to USD. You should able to get:

      RM10K/3.035 X 1 = USD 3,294.89

      Example 2: You want to exchange RM10K to RMB. You should able to get:

      RM10K/46.65 X 100 = RMB 21,436.23

      Example 3: You want to exchange USD10K to MYR. You should able to get:

      USD10K X 3.015 / 1 = RM 30,150

      Example 4: You want to exchange RMB10K to MYR. You should able to get:

      RMB10K X 46.00 / 100 = RM 4,600

      Key Notes: The lower of the buying price (we sell) or the higher of the selling price (we buy), the more money that you will be getting back after the conversion. Thus, if you want to compare with different money changers, look at the lowest buying price (we sell) and highest selling price (we buy) that they can offer. It is a similar concept with buy low and sell high. If you want buy, look for the lowest price. If you want to sell, look for the highest price.

      Happy traveling! :)

      p/S: The different between the selling & buying price is where the money changer makes their money!

      Jumat, 14 Januari 2011

      Latest Live Gold Price History Trend in MYR & USD

      This the gold price trend in 1 year, 5 years and 10 years in Malaysia Ringgit (MYR) and US dollar (USD) currency. The following graphs will be automatically refreshed to show the latest live and most updated history trend.

      The data is sourced from goldprice.org. Have fun! :)


      1-Year Gold Price in MYR & USD

      Per ounce

      Per ounce

      Per gram

      Per gram



      5-Year Gold Price in MYR & USD

      Per ounce

      Per ounce

      Per gram

      Per gram



      10-Year Gold Price in USD

      Per ounce

      Per ounce

      Per gram

      Per gram



      Notes: The Y-axis is in unit ounce and 1 tray ounce = 31.1034768 grams. If you want to covert to grams, you need to divide the number with 31.1034768 to convert the Y-axis to grams.

      [29 March 2014]: Update graph to include per gram so you don't need to convert it to ounce. 

      P/S: For real time daily live gold price in Malaysia, visit here.

      Gold Related Articles:
       

      Sabtu, 08 Januari 2011

      Lifespan vs. Income in the Past & Future

      This is an interesting video and yet easy to be understood by Hans Rosling (a Swedish medical doctor and satistician) explaining the world progress in the past 200 years ago. Here you go and enjoy! :)



      In case you don't get it yet, how big is the bubble represents population size of a countries. Brown or light orange bubbles refer to Europe. Yellow bubbles refer to USA. Red bubbles refer to Asia and Blue bubbles refer to Africa,

      There are few interesting things that I get from this video:
      • I don't know we die so early in 200 years ago which is below age of 40? Please note that the 40 years old is the top and average it should be (40 + 25) / 2 = 32 years old. Huh? Averagely we can live until 32 years only in 200 years ago? Interesting...
      • You may notice very big swing in some of the countries and I guess it is probably due to the War or tragedy (e.g. diseases) that happened to those countries. That's why you see such big swing on the income or the lifespan. You can look at the action replay at the end of this video. OR is it mainly for animation purpose? I could be wrong...
      • As what is expected, rich & poor gap in China is demonstrated. Shanghai wealth is like Italy and Guizhou wealth is like Pakistan and etc. I like the way how he splits the bubble... 
      • Everyone is moving towards the "Rich & Healthy" direction. So let's extrapolate the graph, everyone will be "Rich & Healthy" in 100 years later? Hmm... how true is this? So, no bell curve? 
      • Moving forward, my best guess is probably everyone will be healthy but NOT everyone will be rich. The lifespan will be increased to a certain limit (e.g. 80 years old) but the gap for the income should still be there or maybe even serious in 100 years later. The rich will become richer, the poor will become poorer and the middle class stays where they are and trying to survive. It is probably just shifting the graph (e.g. 40K income become a middle class income). What do you say?
      P/S: I love the way how he presented his idea using graphs with animation. Cool isn't it? Apparently he has many other interesting videos too. Have fun to browse around them!