Worth over a hundred millions, and get paid in tens of millions a year

1. Is it possible to be millionaires from employment?

2. How about getting paid in millions a year from employment?

3. How about getting paid in millions a year before 40 years old and worth at least 100 millions in Net Worth purely from employment, and that company doesn't belong to your parents (or relatives) ?

Take a look at Value Partners Group. In the year 2007, the executive directors of the company (with their age) is as below:

- Cheah Cheng Hye, aged 54

- Law Ka Kin, aged 47

- Ho Man Kei, aged 41

- Choi Nga Chung, aged 36

- Ngan Wai Wah, aged 34

- Renee Hung Yeuk Yan, aged 33

- Louis So Chun Ki, aged 32

Below is their total compensation for the year 2006 and 2007.

Compensation and Benefits of Executive Directors for the year ending 31st Dec 2006

Compensation and Benefits of Executive Directors for the year ending 31st Dec 2007

Their annual salary is slightly above HK$ 1 million (about RM 440k) , but look at their bonus (for year 2006 and year 2007)!

In 2007, 5 of the Directors were paid about HK$ 40 Million plus (about RM 18 Million), while Cheah Cheng Hye was paid HK$ 234 Million (about RM 103 Million) !

How are they paid so high? There's a quote that says, "The best way to get what you want, is to deserve it."

Do they deserve to get paid so high?
Value Partners manage Value Partners Classic Fund, which have gained 2,173.0% from 1st April 1993 up to 29th October 2010, an annualized return of 19.4% over 17+ years! They manage USD 4.5 Billion and USD 7.3 Billion for the year ending 2006 and 2007 while earning 41.8% and 41.1% for their Classic Fund investors (A Units) for the year 2006 and 2007.

Since they add value to their fund investors, i believe they deserve such high pay (they're paid 1.25% management fee + 15% performance fee).

And how much are they worth in Assets?



At the end of 2007, the each share is priced at HK$ 7.63 (about RM 3.3572), while as of this posting (12th Nov 2010), the share is priced at HK$ 7.27 (about RM 2.908). So, they're worth above RM 100 Million each (except for Mr. Law, who joins the company only in the December 2004).

Cheah Cheng Hye is a Billionaire in HK$ as well as in RM. And he's a Malaysian (Penangite, and an old frees, not to mention he's also one of the top chess player in Penang Free School back then.)

Source of the information: 2007 Annual Report of Value Partners Group
Value Partners Group's Website
Value Partners Classic Fund
Value Partners Investment Philosophies

Letter to a fund manager of a local Insurance Company

Here's a letter i wrote to a fund manager (investment-linked) of a local insurance company. Until today, there's no reply from them.

In the year ending Nov 30th, 2007, A** Equity Fund had 92.6% in Equities. That time, the index was 1,396.98. 1 year later, when KLCI is at 866.14, A**'s Equity Fund's equity exposure drop to 42.5% ! Isn't that "buy high, sell low"?

Put it another way, the summary is as below:
Date ------------------- KLCI ---------------A** Equity Fund's Equity Exposure
30th Nov 2007 --------1,396.98 ---------------------------92.6%
30th Nov 2008 ---------866.14 ----------------------------42.5% !!!

Shouldn't it be the other way round? And if the fund manager can't time the market (which i believe nobody can), shouldn't A** Equity Fund maintains as an "Equity" Fund with 70% to 90% in Equity? Having 42.5% in Equity is less than what a balanced fund is putting! And having 42.5% in Equity when prices are low is even more unexplainable!

Please explain this when i can't see any logical reasons for it (other than the fund manager having "buy high, sell low" syndrome, or join the herd mentality to be fearful when prices are low or trying to gamble the market's direction).

And in year 2009, KLCI earned 44.7% while A** equity fund earned less than 2/5 of KLCI's return! And the annual report don't even mention the reason for such poor performance! If the unit holders are truly the owners of that fund, don't they deserve an explaination for such poor performance?

And please don't say that A**'s equity fund return of 17.5% is better than FD! If you travel from Penang to Singapore by flight, and reach there after 7 hours (when other air planes can reach within 1 hour), do you accept excuse as "At least our flight is faster than going by car" ?

As a result, A** under perform KLCI during these times. Am i right to say that? If that is so, then what's the point of hiring A** as the fund manager for their equity funds? Might as well they just buy the Index or ETF and save the 1.5% management fees, and don't earn a return WORSE than KLCI (not to mention savings on the huge upfront service charge, or ended up being tied up to the terrible fund for 6 years to enjoy 0% service charge).

And also, please don't say A** equity fund beat benchmark since launch. The comparison is simply not fair because KLCI doesn't include dividends into their price. Had KLCI add between 3% to 4.5% yearly dividends to the price, A** Equity fund would under perform by a wide margin!

Waiting for an explaination for me to explain to my unhappy clients.

__________________________________________________________________

Lesson Learned:

Don't find mechanic regarding your health.

Don't find doctor regarding legal issues.

Don't find investment companies for insurance.

Don't find insurance company for investments. They Suck!

Company that offers ways to reduce your housing loan interest?

Before i tell you the TRUTH behind those "The Truth about Mortgage Reduction", i would like to share with you a story:

'Once upon a time, a Young Engineer with an income of $3,000 per month noticed he had extra time (after work). Thus, he decided to use the extra time to work in Mcdonalds as a cashier, earning RM 5.00 per hour. In a month, his part-time salary was around RM 500, since he worked 4 hours a day for 6 days a week.

Then one day, he went to his Mcdonalds boss to get higher pay. The conversation was as below:

Young Engineer: Boss, how can I earn more money from this job?

Boss: Simple, just work full time here, you'll double your pay! If that's not enough, u can work full-time and over-time! All in all, you'll triple your pay! (by tripling your working hours).

Young Engineer: But if I work full-time in Mcdonalds, don't I lose my income as an Engineer (which pays higher)?

Boss: We don't count your pay elsewhere. We ONLY count your pay from Mcdonalds!

Young Engineer: Thanks! If I were to take up your recommendation (to quit a higher paying job to earn in a lower paying job), how much should I pay you for "consultation" fees?

Boss: It's only 1.5% of your total pay you'll get over 30 years plus RM 1,500. (And boss show some confusing softwares calculating how much you'll earn by working in Mcdonalds over 30 years, to confuse you that it's really worth it to pay the boss 1.5% + RM 1,500 and quit his engineering job!).

Young Engineer: Wow, that's really worth it!'


There's a few lessons you can learn from this (which I'll link to so called "Mortgage Reduction Company")

1. There's opportunity cost for your time or your money.
   For every hour you spent earning money on one job, you've lost the opportunity to earn money on another job with that time you spent. The same applies to your money! For every dollar you spent on reducing your loan (and thereby reducing your interest charged), your money have lost the opportunity to increase your assets (and thereby lost the opportunity to earn return on those assets).
   
   
2. Earning more by working more isn't smart!
   Smart people earns more by working more productively (spending same time, earning higher pay per hour). Likewise, when you allocate your money, what's important is NOT how much money you get (or save). What's important is how much you get (or save) in relation to how much capital you put in!
   
   
3. Your resources (be it time or money) are limited.
   If you can earn RM 100 per hour doing a job you like, it's ok to hire person to do something you don't like for RM 10 per hour! Stop thinking about the "loss" of RM 10, but instead, compare it with the savings of your limited resources. With loan, instead of "worrying" about Debts and interest charges, compare it against the investment return that you can conservatively get elsewhere. Not all Debts/ Loans/ Liabilities are bad (then again, not all "Assets" are good). The key is not to be afraid of Debts, but to understand it, and at times, you can make use it to help you achieve an earlier financial freedom.

Now, let me get back to the main topic. Let me share with you some statements from a Mortgage Reduction website that seems to "mislead" people, and mislead them to focus on the wrong stuff.

1. "Since this sounds like a gift from the heaven to me, I then made up my mind that one day, I could also help others to become debt free."
   Notice he uses "debt free", and not "financially free". Do you need to be debt free to be financially free? CRAP! A beggar is debt free, but is he financially free? Donald Trump might have debts more than what most people can earn in their lifetime, but he is financially free! So, STOP equating debt free with financially free!. Both are different, and a person who can't differentiate the two often find themselves stuck in rat race.
   
   
2. "If you have a $100,000 Mortgage amortized for 30 Years with an Interest Rate of 10.50%, Monthly Compounding and the Monthly Payments are $914.74."
   As of this writing, housing loans in Malaysia charges less than 4%, while that website quote 10.5%. Isn't that trying to "inflate the interest charged" so that it looks more than what it's suppose to be?
   
   
3. "Do you know that only $39.74 (4.24%) of the $914.74 payment is used to pay the balance? This means that a whopping of $875.00 (95.66%) of that FIRST payment goes toward interest."
   While that statement based on the interest of 10.5% interest is true, BUT that statement mislead people to focus that interest payment in relation to monthly installment. Interest charged depends on the interest rate, NOT on monthly installment!
   

How does the $875.00 interest come about? Easy!

1. Your outstanding balance at the beginning of the Month is $100,000.
   
2. Multiply that by the interest rate (10.5%), and you'll get $10,500. This is the interest charged in a year (if your outstanding balance is $100,000 throughout the year).
   
3. Then, divide the interest charged ($10,500) by 12, and you'll get $875.00!

Notice the calculation of interest? It doesn't care what your monthly installment is! And, whatever in excess of the interest ($875), the balance goes to reducing the principal.

So, your outstanding balance reduces the following month, and thus, the interest charged reduces too (in $, but not in % of outstanding balance)!

What happens if your monthly installment is $ 5,000 per month? The interest charged on the 1st month would still be the same, which is $875 (and more than 80% of your installment goes to principal reduction!). Notice it?

If not: Here's the answer. Stop relating interest charged to monthly installment!! Instead, relate interest charged to outstanding balance (in fact, this has already been calculated for us, which is the rate told by the bank, (duh...))

And at current housing loan rate at less than 4%, the interest charged is less than half what is shown on that so called "mortgage reduction website"!

___________________________________________________________________

So, the question is NOT to "save" or "reduce" your housing loan, but rather to Optimize it! No point saving/ reducing your housing loan if your investment return earns better than housing loan. If you still don't understand, read the story of the Young Engineer above again.

The only way to save interest is getting lower rate from the bank! Like the Young Engineer above, the only way (that makes sense) for him to get higher pay is to increase his pay per hour, not working more hours (and lose the time to do something else!).

Personally, I'm happy to borrow maximum loan, maximum tenure, since at current housing loan rate (BLR-2.25%) , I believe my investments can conservatively earn at least twice that rate over the loan tenure (which is 40 years).

Instead of prepaying more of my housing loan to save less than 4% interest yearly, I rather invest the excess to earn at least 8% yearly, conservatively estimated. And that surplus will earn more surpluses over time, and compound the effect over time.

But if you don't know how to earn a return higher than your housing loan, then there's nothing wrong to use the surplus to reduce housing loan. Either way, comparison between housing loan's interest rate vs. your investment returns, conservatively estimated, and NOT blindly pay just to save housing loan interest!

How to Become Wealthy - by Joshua Kennon

How to Become Wealthy
Nine Truths That Can Set You on the Path to Financial Freedom



#1: Change the Way You Think About Money

The general population has a love / hate relationship with wealth. They resent those who have it, but spend their entire lives attempting to get it for themselves. The reason a vast majority of people never accumulate a substantial nest egg is because they don't understand the nature of money or how it works.


Cash, like a person, is a living thing. When you wake up in the morning and go to work, you are selling a product - yourself (or more specifically, your labor). When you realize that every morning your assets wake up and have the same potential to work as you do, you unlock a powerful key in your life. Each dollar you save is like an employee. Over the course of time, the goal is to make your employees work hard, and eventually, they will make enough money to hire more workers (cash). When you have become truly successful, you no longer have to sell your own labor, but can live off of the labor of your assets.


#2: Develop an Understanding of the Power of Small Amounts

The biggest mistake most people make is that they think they have to start with an entire Napoleon-like army. They suffer from the "not enough" mentality; namely that if they aren't making $1,000 or $5,000 investments at a time, they will never become rich. What these people don't realize is that entire armies are built one soldier at a time; so too is their financial arsenal.


A friend of mine once knew a woman who worked as a dishwasher and made her purses out of used liquid detergent bottles. This woman invested and saved everything she had despite it never being more than a few dollars at a time. Now, her portfolio is worth millions upon millions of dollars, all of which was built upon small investments. I am not suggesting you become this frugal, but the lesson is still a valuable one. Do not despise the day of small beginnings!


#3: With Each Dollar You Save, You Are Buying Yourself Freedom

When you put it in these terms, you see how spending $20 here and $40 there can make a huge difference in the long run. Since money has the ability to work in your place, the more of it you employ, the faster and larger it will grow. Along with more money comes more freedom - the freedom to stay home with your kids, the freedom to retire and travel around the world, or the freedom to quit your job. If you have any source of income, it is possible for you to start building wealth today. It may only be $5 or $10 at a time, but each of those investments is a stone in the foundation of your financial freedom.


#4: You Are Responsible for Where You Are in Your Life

Years ago, a friend told me she didn't want to invest in stocks because she "didn't want to wait ten years to be rich..." she would rather enjoy her money now. The folly with this school of thinking is that the odds are, you are going to be alive in ten years. The question is whether or not you will be better off when you arrive there. Where you are right now is the sum total of the decisions you have made in the past. Why not set the stage for your life in the future right now?


#5: Instead of Buying the Product... Buy the Stock!

Someone once asked me why they weren't wealthy. They always felt like they were putting money aside, yet never seemed to get any further ahead. The answer is simple. I told them to stop buying the products companies sell and start buying the company itself! A survey of America's affluent (those who make over $225,000 a year or own $3,000,000 in assets) revealed that 27-30% of all the income the wealthy earned went into investments and savings. That isn't a result of being rich, that is why they are rich. When the pain of getting out of the bondage of financial slavery is greater than the pain of changing your spending habits, you will become rich. Either change, or be content to live as you are.



#6: Study and Admire Success and Those Who Have Achieved It... Then Emulate It
A very wise investor once said to pick the traits you admire and dislike the most about your heroes, then do everything in your power to develop the traits you like and reject the ones you don't. Mold yourself into who you want to become. You'll find that by investing in yourself first, money will begin to flow into your life. Success and wealth beget success and wealth. You have to purchase your way into that cycle, and you do so by building your army one soldier at a time and putting your money to work for you.

#7: Realize that More Money is Not the Answer
More money is not going to solve your problem. Money is a magnifying glass; it will accelerate and bring to light your true habits. If you are not capable of handling a job paying $18,000 a year, the worst possible thing that could happen to you is for you to earn six figures. It would destroy you. I have met too many people earning $100,000 a year who are living from paycheck to paycheck and don't understand why it is happening. The problem isn't the size of their checkbook, it is the way in which they were taught to use money.

#8: Unless Your Parents Were Wealthy, Don't Do What They Did
The definition of insanity is doing the same thing over and over again and expecting a different result. If your parents were not living the life you want to live then don't do what they did! You must break away from the mentality of past generations if you want to have a different lifestyle than they had.

To achieve the financial freedom and success that your family may or may not have had, you have to do two things. First, make a firm commitment to get out of debt. To find out which debts should be paid off before you invest and those that are acceptable, read Pay Off Your Debt or Invest?. Second, make saving and investing the highest financial priority in your life; one technique is to pay yourself first.
Purchasing equity is vital to your financial success as an individual whether you are in need of cash income or desire long-term appreciation in stock value. Nowhere else can your money do as much for you as when you use it to invest in a business that has wonderful long-term prospects.

#9: Don't Worry
The miracle of life is that it doesn't matter so much where you are, it matters where you are going. Once you have made the choice to take control back of your life by building up your net worth, don't give a second thought to the "what ifs". Every moment that goes by, you are growing closer and closer to your ultimate goal - control and freedom.

Every dollar that passes through your hands is a seed to your financial future. Rest assured, if you are diligent and responsible, financial prosperity is an inevitability. The day will come when you make your last payment on your car, your house, or whatever else it is you owe. Until then, enjoy the process.

Copyright © 2001 Joshua Kennon
(from http://beginnersinvest.about.com/cs/personalfinance1/a/blwealthy.htm )

Is a low price fund means higher potential gains?

To answer this question, we need to understand how a unit trust fund’s price is derived daily. For example, why a particular fund’s unit price is is RM 0.2858 in a particular day, and not RM 0.2832 or even RM 0.2953. Who determines this price, and how is this price derived?

A fund’s price is determined by the underlying asset’s closing market price divide by total number of units of that fund on that particular day. This is the equation:

Fund’s Unit Price = Underlying Asset’s Closing Market Price / Total Units in the fund.

From the above equation, the fluctuation in a Fund’s Unit Price depends on the Underlying Assets, and it doesn’t depend on the fund’s Unit Price. After all, a fund’s unit price depends on “how many slices the fund is sliced”. The more units sliced, the fund’s unit price will be lower.

In fact, if both funds have the same Assets in the same proportion, both funds will fluctuate in the exact percentage, irrespective of the number of units in the fund. Putting it in a laymen way, if Fund A with unit price of RM 0.20 per unit increased by RM 0.10, then fund B with unit price of RM 1.00 per unit will increase by RM 0.50 (and NOT RM 0.10)!, if both funds have the same underlying assets at the same proportion. Both funds will increase by the same percentage, and not by the same amount!.

How about in reality (as oppose to the above “theory”)? Let’s take a look at 2 funds from one of the unit trust companies in Malaysia.

Fund A’s unit price is RM 0.4042 on 2nd Oct 2006, while Fund B’s unit price is only RM 0.2156. If a person wants an “aggressive” fund (fund which fluctuates in prices a lot), does it mean that Fund B is better? Or does it mean that fund B have more potential for higher return simply because the fund price is lower? Let’s take a look at their month by month’s prices from 2nd Oct 2006 until 1st Oct 2009 below:

*NAV is adjusted for unit splits/ bonus issue or distributions.

Simple Analysis

Fund A (the fund that have a unit price almost double of Fund B) have (in terms of percentage):
a) Higher Return
b) Higher advancement from the lowest price to the highest.
c) Higher changes in a month

In conclusion, a fund’s unit price does not tell whether the fund is a volatile fund, better potential for higher returns or it’s an undervalued fund.

A much better way to measure a fund’s volatility (fluctuation in unit prices) is looking at:

1. Fund’s Asset Allocation (percent in Equities, Bonds, and Money Market).
   - Funds that invest mainly in Equities will fluctuate more than funds that invest mainly in Bonds.
   - Funds that invest mainly in Bonds will fluctuate more than funds that invest mainly in Money Market.
   - In fact, more than 90% of the long term return can be attributed by Asset Allocation.
2. Fund’s objective/ restrictions or sub-category of the Assets Class.
   - Funds that invest in overseas will fluctuate more than funds that invest locally (due to currency exchange fluctuation)
   - Funds that invest in high dividend paying stocks will fluctuate less than funds that invest in low dividend paying stocks (like growth stocks).
   - Funds that invest in a specific sector/ group will fluctuate more than funds that are well diversified (no particular concentration on any sector/ group).
   - Though these factors do determine the fund’s fluctuation, but it doesn’t play a big role like (1) above.

Luckily for laymen, FMUTM did a good job to make it compulsory for all unit trust funds that have 3 years track record to publish their fund’s volatily. Read their full article here: http://fmutm.com.my/doc/BrochureinvestorMay09.pdf .

Anyone still thinks Berkshire Hathaway class A at USD 100,000 per share is “expensive” when compared to a “cheap” share of USD 1 per share?

More often than not, it’s the other way round!.

National Savings Bond by the Malaysian Government

Referring to the newspaper article by TheStar on RM5bil National Savings Bond on sale from April 14 , i was asked whether this investment is good or not, and whether should they invest in it.

The main features of the National Savings Bond is as below:

• Investment amount - ranges from RM 1,000 to maximum of RM 50,000, and in multiples of RM 100.
• Tenure - 3 years
• Frequency of interest payment - Quarterly
• Interest - 5% Guaranteed by the Government. So, it's "safer" than keeping money in the Bank.

Details of the Bond is available in BMN's website:

• News
• FAQ
• Key Features

So, back to the question, "Is it good?". The answer to this, depends on what you're comparing with.
"Is running fast?" That depends on whether you're comparing with walking, or driving.

Since Malaysian FD rates is going at 2.5% per year, then obviously this Bond is better.

However, is that the only choice we have for our money?

At 5% return, it'll take 14.4 years for our money to double (using the simple "Rule 72"). As our money earns interest (or returns), our money is also "eaten" up by inflation. Does it take 14.4 years for our expenses to doubled? I believe it'll take less than 14.4 years for goods to double in price due to inflation. I would estimate, between 8 to 12 years for goods to double in price.

Saying this, goods would double in price (due to inflation) BEFORE our money would double at the rate of 5% per year. I don't see anything safe about this. Infact, i don't see anything fun with getting poor slowly, but SURELY.

Most people would compare which product is better without understanding and knowing their needs. Truth is, which product, tools or medicine is better depends on your needs, and not on the product itself!

If you're having a headache, it doesn't matter whether Viagra is better, or Cialis is better. Both won't help much in your headache condition. What you need is a Panadol, and not choosing between Viagra or Cialis!

So, in what situation is this National Savings Bond good for you? I believe it's good if:

1. You need the money within these 3 to 4 years, or
2. You want to find a place to make your "Emergency Fund" earns higher return.
3. You have No Dependant, have set aside emergency and medical funding, knowing that your personal inflation rate is lower than 5% yearly, and have a Net Worth that is more than your remaining lifespan multipled by your current yearly expenses.
4. You know that you don't know how to invest, and don't trust anyone with your money. (Same analogy goes to driving a car: You know that you don't know how to drive, and don't trust any "driver" to drive you to Singapore, so.... you WALK from Penang to Singapore!")
5. Can't think of any other reasons why this is good.

However, i don't and won't invest in it because:

1. My needs within the next 3 to 5 years is in Bond Fund, which i will be using almost entirely within the next 3 months. So, the difference (if any), would be insignificant.
2. I'm happy with my current emergency fund, putting it in Bond Fund. And since my income is "safe", i feel comfortable with 2 month's expenses being set aside for emergency fund.
3. I don't have enough to retire on. I don't have RM 3.5 Million currently if my annual expenses is RM 50,000 and my remaining lifespan is 70 years.
4. I believe i know what i'm doing with my investments, and i choose something something which fits my long term needs. Just as Michael Schumacher believes he knows how to drive fast and safe, it doesn't mean that driving fast is not safe!
5. I trust Warren Buffett (thru Berkshire Hathaway) with more than 30% of my Net Worth, I trust Public Mutual with 90% of my Net Worth, and I also trust some of the CEO's of Public Listed Companies with my fractional ownership these companies.
6. I don't enjoy getting poor slowly but surely. I enjoy getting rich slowly but surely!.

Most important of all, I won't choose between Walking or Running if i want to travel from Penang to Singapore. I would rather choose between Firefly, AirAsia, MAS or Singapore Airlines (though i believe it doesn't make much difference in the speed and safety between them).

I don't foresee a need for more than 90% of my assets for the next 5 years or longer, so i rather choose other financial "vehicles" to reach my financial "destination".

What financial "vehicles" is the best for a person who won't be needing the money for the next 5 years? Definitely in Ownership (of Business, or Real Estate) ! I'll write more about it next time. :-)

Introducing my Father-in-law & my Wife. They're "models" in Personal Money magazine October 2005 Issue

Yes, my father-in-law and my wife were in the front cover of Personal Money magazine. That time, she was my girl friend, and her father, well.... let's just say that I used to live in their house most of the time.

Isn't she pretty? She's getting prettier day by day. Take a look at her blog here.

Why are they in the front cover of Personal Money magazine holding money?. Well, they joined the Investment Game organised by the magazine (sponsored by Hwang DBS) together with me.

The contest lasted for 1 year, and the winner was decided based on the investor's return after deduction of all charges and transaction fees. My father-in-law was the Champion, and my wife was 4th. How about me? I got 6th position.



The top 25 is as below:

Special mention: The No. 14 winner, Tan Seok Luan is my good friend, and my 1st agent who joined me in Public Mutual. I informed her about the contest, and suggested her to join as soon as possible, and invest in a low cost Bond Fund with good past performance.
She took my advice, and she kept the winnings. :-)

A few things the 3 portfolios (my Father-in-law, my wife and mine) had in common:
1) We all lived in the same house at that time.
2) We used the same computer.
3) We ate dinner together most of the time... hehehe..
4) All the 3 portfolios were being "advised" by the same person. :-)

The position, total return, and the prize winnings of the 3 portfolios are as below:
1st - 15.26%, winning RM 80,000
4th - 10.40%, winning RM 20,000
6th - 9.23%, winning RM 3,000

Total Prize money won = RM 103,000.
Average return from the 3 portfolios : 11.63%

They interviewed the top 5 winners, and each has their own page story. I missed the Top 5 mark by 0.09%.

My Father-in-law's full page interview

My Wife's full page interview

The Winner's Circle. My name was mentioned, though i wasn't "promoted" as husband, yet.

What's interesting, is this small side article:

There were 2,326 unique participants, with 3,153 portfolios (some joined 2 or more entries). Since each person had an initial RM 100,000 virtual fund to start with, they as a group, managed RM 315 Million.

Average Losses for the 3,153 portfolio is -1.41% !!

Meaning, these 3,153 participants ended up with less than RM 315 Million after the contest ended. Mind you, that period, the KLCI went from 827.49 points on August 2nd 2004 (dropping to a low 804.89 points on August 24th 2004) to close at 937.39 on July 29th 2005, one of the highest KLCI points of the contest!

The results show:

1. These contestants will better off just by putting their money in FD. At least they won't get a -ve return.
2. In fact, they will be better off by not doing anything with the money (rather than simply buying unit trust funds). This way, the overall portfolio would be 0%, which is better than -1.41%!
3. Or it could simply mean that they took this contest for "fun", and thought that they could not possibly be among the top 25 (6th position to 25th will get RM 3,000 worth of Unit Trust by Hwang-DBS).

I know i did not take this contest for fun as there is real money at stake! Infact, all my money (then, now, and future) are serious money. I think carefully before I put my money anywhere. I always compare what I pay with what I get.

Being frugal is totally a different meaning compared to being a miser.

In one my future entries, maybe I would explain more about the 4th position portfolio 'Dynamic Asset Allocation' which I believe is supposed to shine out among the 3 portfolios.

The Crisis of Credit Visualized

The best, simplest explaination of current Financial Crisis. Must Watch !


The Crisis of Credit Visualized from Jonathan Jarvis on Vimeo.

Is BNM doing the right thing to reduce interest rates?

Seeing The Star newspaper today, i couldn't help but to blog on the "Your Opinions" column by one of the reader through sms. His title is "Have a heart". Below is his sms:

BANKS should not lower FD interest from 3% to 2.5%!. How do you expect retirees to survive? Heave a heart! BNM, please look into the matter. [adjusted for short form]

I do have a few comments regarding his comment:

1. Who "forced" that person to put his money in FD? Obviously, the answer is nobody, and yet, why is he blaming the Government for getting that kind of return? If he's not happy with that return, then why is he still putting it there?

2. If money is important, why didn't that person learn how to let his money work hard for him? If money is not important, then why does he send that sms in the first place?

3. When he wrote that sms, he's looking from his point of view (only, which i find it selfish), while BNM looks from the overall point of view for the benefit of the overall country! When a country is in recession/depression/ financial mess, BNM's main objective is to bring the economy back to stability, which means, to :

1. Encourage spending - so that businesses continue, which gives employment to people.
2. Encourage business growth - so that businesses will hire people, which ultimately reduces unemployment rate of the country.

Which situation would encourage spending (or discourage savings) more than the other ?
A) When interest rate is high (say, at 10% per year), or
B) When interest rate is low (say, at 2% per year)

So, to encourage spending, should the government increase interest rate, or reduce interest rate? I hope the answer is obvious to everyone.

Now, when interest rate drops, lenders (or called depositors, who lends money to the Bank) earns lower interest. On the other hand, borrowers pays lower interest! This again would encourage consumer spending, which helps businesses, who provides employment to the general public.

I believe businesses is one of the main borrowers of money. When interest rates drops, their cost of borrowing is therefore reduced. This would encourage business expansion as their risk of losing money is reduced because of lower cost (which would mean lower break-even, and higher profit). When businesses expand, they create employment to the public.

In conclusion, do not depend on the Government (or anybody to take care of you). Take responsibility, learn about Economics, Finance, Business and Investing. Then, you would know that :

1. Owning the Casino is better than gambling in the Casino.
2. Owning Tobacco companies is better than smoking Tobacco, and lastly,
3. Owning the Bank is better than keeping money in the Bank!
   (assuming you're buying a RM 1 business for RM 0.80 or lesser)
   

Why do we compare when we're in school, but not when we're adults?

I was wondering, why do we compare grades/ points/ position when we're in school, but not our Financial Statements when we're adults?

Imagine going through our school days without knowing how we stand against everyone. I believe it'll greatly reduce our chance to get good grades/ to get scholarship or get to University.

If that is so, then shouldn't comparing Financial statements be encouraged so that it'll improve our chance for Retirement? Afterall, more than 85% of the people don't have enough to retire by the time they reach retirement age.

Just some food for thought. Comments/ Reply appreciated.

Whole Life or Buy Term Life and Invest the Difference?

Recently, i came across many of my clients asking me this question. So, instead of explaining one by one, i've decided to write this entry.

Look at what Suze Orman have to say in the video below. (Learn more about Suze Orman at: http://www.suzeorman.com/ )

Also, look at what Dave Ramsey have to say in his website here: http://www.daveramsey.com/the_truth_about/life_insurance_3481.html.cfm
(Learn more about Dave Ramsey at http://www.daveramsey.com/ )

He says:
Myth: Cash value life insurance, like whole life, will help me retire wealthy.
Truth: Cash value life insurance is one of the worst financial products available.

Another good explaination is at http://finance1o1.blogspot.com/2007/04/myths-about-cash-value-life-insurance.html .

A former insurance agent wrote a very good article here: http://www.epinions.com/finc-review-1C75-CFAC2FD-3926096C-prod3 .

She list 8 questions to ask the insurance agent, which is as below:
1. If I buy your whole life policy, when will it start building cash values?
2. If I want the money, do I have to borrow it?
3. If I borrow it, what happens if I don't pay it back?
4. If I pay it back, do I pay interest?
5. How much interest will I earn on this cash value?
6. If I die with an outstanding loan on the cash value, what happens to the face value?
7. When I die, do my beneficiaries get the face value and the cash value?
8. You say my premiums will be $25.00 per month. How much term insurance could I buy from you for the same amount of money?

By this time he will probably be packing his bag and getting ready to leave. My advice. Let him leave!

Is it the same in Malaysia? I might write more about it later, with some quotations and detailed explainations.