31 May 2011

Another way of doing charity - Through Investment

Do you ever think of doing something good to the public but you do not know how? Do you also think of how to do a charity while investing? Let me tell you a good news well known to the public.

Listed companies in Singapore and Malaysia do have their CSR (Corporate Social Responsibility) department to show their responsibility on social. For example, Mah Sing recently donated RM200K to Japan funds to support the victims there. It is a sign that by investing in a good reputation company, you are playing part of the role for the donation as well. It will give you a strong believe in long term investment. CSR not only can build up public image to the company, but it also shows that a society should have more good and strong company to support it.

By investing in the listed companies, we also in the hope that the company will further expand its operations and hire more people. TNB, Maxis, CIMB, DBS, SingTel are

30 May 2011

My Equity Portfolio Construction Process

Construct a portfolio is similar a way of creating a recipe for your own food. You may have your own taste which does not suit to others. Today I would like to share with you how I construct my investment portfolio which consists of various asset classes since I learn portfolio management from my finance course long time ago. It is easy to just buy and sell your investment product but it is not easy to construct your portfolio
to suit to your needs. Here, I show you how I do my own portfolio construction:

Steps by Steps:


1. Set an investment policy statement
  • Know your risk and return.
  • Know your investment horizon.
  • Know your restriction on anything. 

2. Stock screening
3. Stock purchase
  • Without opening a stock account, you cannot trade in stocks. Here shows you a list of stock brokers in Malaysia and in Singapore.What you need to do is to contact the brokers below. Of course, you may go to some roadshows and approach the people there.

29 May 2011

What makes you still stick to your investment strategy when market condition changes?

To those newbies in stock market, you may still try to figure out the best investment strategy even during Bull Market and Bear Market. For some one who is risk taker, they will still continue their 100% strategy in bull market. It is similar to some equity fund that benchmark against the Equity Index. For risk adverse guys, they will avoid to enter bear market as there is uncertainty in the market. However, from my observation, there are numbers of successful investment happened at the bottom of the market. If we look from portfolio management perspective, asset allocation plays a very big part in it. During Bull Market, while everyone is very bullish on the market, most of the investors will allocate most of their funds in the riskier investment products such as Stocks, Equity Funds, CFD, Forex, Futures etc. They will try to leverage on the bull market to earn more income. However, most investors do not have the exit strategy or so called portfolio re-balancing when market changes.

For me, I would construct an asset allocation plan during bull market and bear market:

  • Emergency Funds - 10% or 6 months living expenses (including loan payments)
  • Shares / Unit Trusts -40% - 60%
  • Real Estate (Could be REITs / House) - 40%-60%
The reasons why I allocate at least 10% of my money in emergency fund during

28 May 2011

Where are you leading to in your life?


Sometimes, when we look back on the things we had done previously, we will ask ourselves, whether it is worth to do so. There are too many things need to be done in our lives and how should we do?

At the age of 29 years old, I realize that I have spent majority of my time in studying and working. While my hobby is traveling and investing, I recognized that I have long time never touch on piano, table tennis, religion studies, as well as Chinese chess. Those were the activities I often did when I was in my school lives. Now, I have reached another step, where I am going to be a husband. What are the steps I should do? Where am I leading to? 

My gf gave me a gift - a cup with the title 'You Never Too Old to Dream'. Until recently, I just realized that the person who can give you most encouragement is nobody but yourself. You must think out of box to achieve what you want in your life.

As my goal, I want to achieve financial freedom, setup a charity trusts and travel around the world. Of course, I already set a dateline to myself. I must be a millionaire before 35 years old.

27 May 2011

The difference between speculation and investment

While we are trying to differentiate speculation and investment, we cannot deny that there are many people are in 'hybrid' mode. Based on my observation, speculation are a behavior that make you 'feel' that your choice of investment is correct at that point of time. You may change your 'feeling' as and when the market turns. You may think that investment is an easy job as all your investment choice is based on the 'gut feel' you made just now.


For many investors, I believe all of us would go through this process as we often made the investment decision after we think that our decision is correct. But how correct is correct? Results will tell us. One example of speculation: I knew that a company's annual report was 'fake', however I noticed that there are several shareholders in this listed company and I realized that one of the shareholders are a well known businessman with high integrity and capability. I just bet on his capability to send one helper to 'turnover' this co. However, my decision made based on my 'feeling' resulted a very bad loss. This taught me that 'DO NOT BUY INTO A COMPANY IN A BAD INDUSTRY OR BALANCE SHEET, EVEN THOUGH THERE IS CAPABLE MANAGEMENT IN THIS CO'. 

To me, investment is a combination of soft skills and hard skills. It can be easy, and it can be complicated. Based on the one's needs. I have some friends who like to use

26 May 2011

Mah Sing Q1 2011 Result Quick Review

Mah Sing's Q1 2011 result was released yesterday afternoon. I have a quick view on it. The summary is displayed as below: 

Q1Y2011
Q1Y2010
Comparison
Net Profit Margin
13.44%*
13.27%#
+1.28%
Asset Turnover
14.34%*
15.41%#
-6.94%
Equity Multiplier
2.327*
1.829#
+27.23%
ROE
4.485%
3.74%
+19.92%

* Balance Sheet items are used from Y2010 statement, while Income Statement items are used from Q1Y2011 statement
# Balance Sheet items are used from Y2009 statement, while Income Statement items are used from Q1Y2010 statement

24 May 2011

Why I do not like to invest more in bull (a.k.a bubble) market?

There are several reasons why I do not like to invest more during bull market:

  1. As a long term investor, I stay investing during low and peak season. During the peak season, too many rumors 'flying' around you and you are more tempted to buy in a stock which you are not familiar with. In my previous post, <margin of safety> is the key element to keep you calm in your investment journey. I have too many friends who are more excited to share with me on the paper profits they earn at the moment. However, they will keep on pumping money after taking profit from the stock markets. I believe this is the human nature to treat their profits not as their hard earned money. To few of them, stock market is like a casino, where you can try your 'luck' over there. However, I cannot find a lucky person who can earn profits always through the 'rumors' or 'luck'. Please let me know if you can find any. I will try to find out the reason behind.
  2. Too little profit yet too high risk during the bull market. Based on my humble opinion, the value investor always enter the bear market earlier and exit the bull market earlier. They will take into account the risk and possible return before making an investment decision. They

22 May 2011

Learning to buy Singapore private property using CPF

It is always a dream for me to buy a property in Singapore. Weekly magazine 'The Edge Malaysia' just showed that the rental in Singapore private property is starting at SGD2,5000.00. It is not ridiculous as the rental in 3-room HDB is also starting from SGD2,000.00 as well.

As I am always keen on learning investment, I start to learn from various channels, such as the On-line Property Websites (e.g. The Edge Property, iProperty, PropertyGuru etc) as well as from magazines (e.g. The Edge) and newspapers (e.g. Business Times, Today, MyPaper etc). 

As a Singaporean PR, I also like to know how to fully utilize my CPF (a compulsory saving scheme imposed by Singapore government so that the Singaporean citizen/PR can take out the money after

19 May 2011

The POWER of Compound Interest!

Do you know the power of compound interest? Just 26% percent return a year, will make your fortune increases by 1 more '0' every ten year. The most unforgettable lesson which I learn from uncle KLSE.8k is that, the believe in 26% compound interest can change your life. He shared with us that with 26% return a year, you will double up your investment within 3 years. The more wonderful part is, your fortune will increases by one more '0' every ten year.

Let me give you an example. If you managed to get 26% return a year
, your invested capital starts from 1,000.00. After three years, your invested capital will be increased to around 2,000.00. After a ten year period, your invested capital will grow till 10,000.00. Quite amazing, ya?

But, how can we do that?

I will illustrate an example again by showing the different type of asset classes:

1. Shares

Shares is one of my favorites investment vehicles as I knew it since I was in secondary four in year 1998. So I am quite comfortable with putting my money into it. However, you must understand the underlying risk in it. First of all, it is not suitable for the investor aims for short term investment horizon, as it fluctuate very high. However,

16 May 2011

6 Questions Every Investor Should Ask Before Starting a New Investment

Beginning:


Many people think that investment is an easy job. Before starting a new investment that, you should ask 6 questions before you start an investment.

Questions:

1. What is your desired return?

To the newbie, they would like to achieve more than 100% return in a day. In reality, it is nearly impossible to achieve such a consistent result in long run. Although there is a theory to state that 'the higher risk you can take, the possible return you can get', you must first understand what is your desired return and why it makes so important to you? I always set 26% for my annual return as it is around 100% return for 3 years or 1,000% for 10 years. Although sometime I can achieve higher return in short run, however, I achieve worse result in the year where there is financial crisis. With a better asset allocation strategy, I believe now I am in the midst of waiting investment opportunity to come in next bear market to come. 

2. What is your investment time horizon?

Life is long. We will enter different stage of life. Some will require long term such as for children's education needs or retirement planning, some require short term plan such as property purchase / wedding planning / traveling planning. While we are hard to distinguish all the time horizon for all these needs, having a combination of short term asset and long term asset is a good strategy for your to overcome any obstacles in your life journey.

3. What is your financial commitment / liquidity needs?

Some aggressive investors will be 100% fully invested in risky investment products without having second thought of their financial commitment / liquidity needs. After calculated your financial

15 May 2011

Property Investment - ROI



ROI ( Return on Investment) is one of the indicators to charge how profitable of your property investment is. There are several type of property investments, today I would like to share with you on the residential property (rental income).

The formula of the ROI in this case could be:

ROE - An Indicator of Company's Organic Growth

In previous post, I mentioned that ROE is one of the key performance indicator for the company management. In dupont model, it shows that ROE comprised of three key parts - equity multiplier, net profit margin and asset turnover. In this post, I will show you why ROE is also an indicator of growth to the company.

An internal growth factor or we call it organic growth factor,
is derived from the formula ROE * RR(retention ratio). For example, if one company achieved 15% ROE, but it gives out all the earned profits to the investors, it will be left zero amount in its shareholders fund and the shareholder fund remains

14 May 2011

Chip Eng Seng 1Q2011 Financial Result Review


Based on the recent release from Chip Eng Seng (Source: http://www.chipengseng.com/administration/NewsReports/76fe7ac1-b60e-47e2-81b0-24ea78993b09_Chip_Eng_Seng_1Q2011_Announcement.pdf), Chip Eng Seng has achieved a better result as compared to last year.

Summary of the result is showed as below:

1Q2011
1Q2010
COMPARISON
EPS
4.25
3.76
+13.03%
NTA
56.88
42.83*
+32.80%
ROE
7.47%
8.78%
-14.92%

10 May 2011

Pros and Cons of manage fund yourself

After we set out investment policy statement, it is time for us to sit down and thinking the way of how we manage the funds. To a certain people, we advice them to engage financial professional to assist them to manage the funds by following the risk and returns set in the statement. What is the pros and cons of managing funds yourself instead of engaging financial professionals? Below are the things that I summarized: 

Pros:

  1. Freedom - By managing fund yourself, you can buy and sell the investment product anytime you like to do so. For those who wants more flexibility, they can simply go and open an investment account with stock brokering firm / financial institution and enjoy a lower rate if transact online.
  2. You know yourself best - Investors know themselves most. By having a good understanding of potential risk and return of the investment products after did some homework, they are in a good position to manage their own portfolio.
  3. Satisfaction - Great satisfaction comes after a good investment has been made by the investors themselves. It is similar to the happiness you can enjoy after you baked a delicious cake.
Cons:

  1. Have to control your emotion - Greed and Fear are the two factors which can affect your investment performance. You have to be more relunctant to the emotion when market crash/boom.
  2. Self discipline is needed - A small mistake can cause a big failure in your investment journey. Hence, a strong self discipline is needed to safeguard you through the storms and arrive destination safely.
  3. Time and energy is needed - Just like writing a blog, it seems to be very enjoying job but a lot of energy and time is needed in order to achieve a decent return. If you are not passionate on the investment, you will soon get bored on the routine job and give up easily.


After considering both pros and cons, what is your opinion on managing fund yourself?

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08 May 2011

Public Transport System Progress in Iskandar Malaysia

Since Ex Prime Minister of Malaysia announced the development plan for Southern Johor - Iskandar Malaysia, we have seen a numerous projects running in Iskandar Malaysia. One of the most exciting plan for the residents could be the MRT / BRT plan in Iskandar Malaysia region.

Below are the progress of the public transport system in Iskandar Malaysia region:


1. A plan to build a 500km mass rapid transit (MRT) system has been proposed to improve the connectivity within Iskandar Malaysia, according to Iskandar Regional Development Authority (IRDA).He said IRDA planned to build a bus rapid transit (BRT) first and expanded to MRT after that. However, it is still in the planning stage. “The proposed BRT is about 400km with various phases. The first phase will be about 40km. Connectivity must be established within Iskandar as well as how Iskandar is connected with the outline region, including our neighbour,” he said.

Source from The Star (http://biz.thestar.com.my/news/story.asp?file=/2011/4/13/business/8471341&sec=business)

2. Booklets can be downloaded from here.
http://www.iskandarmalaysia.com.my


Related Posts:

06 May 2011

Australia Property Market

Recently I went to Australia and visited few major cities such as Sydney, Melbourne and Brisbane. The property market there is quite stable or in peak market. I bought an Australia property magazine 'API' and find out the current property market trend there. One of the key findings is Australia is a immigrant country, with more Asian (Chinese & Indian) moving to this country. There are more people moving to this country for oversea studies or working holidays. The demand of the property there is quite stable, with supply is catching very fast.

In Melbourne, there are more high rise properties are being build to meet the demand of the market. Currently the weekly rental of a one bedroom units of high rise in Melbourne is around $A300 while two bedroom units is around $A450. The median price of Melbourne property is about $A400K. It comes to the average yield of 4% to 5%. While the mortgage interest rate stays at around 7%, it is unwise to borrow too much debts to invest in the property market.  However, we can invest in another way to achieve a positive cash flow.

Some of the techniques are described in brief below:

1. Renovate and Sell - Most of the savvy investors do some researches on the suburb market and buy the property at relatively low price and renovate it with little cost and rent it out at market price. It can create a better cash flow in long run.

2. Buy Land and Build - A lot of Australian in Suburb can actually buy the land or buy the house with land and build a new house. For example, we can buy a land and build the house with multiple units

04 May 2011

Long Term Investment Applies to 'Good' 'Business' 'Company'

Over a period of investment, I met with different types of friends. We are all searching for a Low Risk yet High Return investment which is in contrast with the classic 'Modern Portfolio Theory' written by Harry Markowitz.

Some are learning Technical Analysis. A number of theories have been developed in term of the searching of a good stock which has a upward movement or downward movement which they can predict and make use of. However, the cons of this analysis is you are hard to master it and there is still a risk involved which encourage you to 'Cut Lost' if the wind turns another way round.

Some are learning Fundamental Analysis. CFA is a good post graduation course allowing you to learn how to perform fundamental analysis from Global, Sector, and Industry to specific company by annual report. However, there is too many manipulation from the company which hinders you from making a great profit. Instead, some of the companies are trying to cheat the investors by creating a better outlook. So, which one is the best strategy to beat the overall market while enjoying lower risk?

In my previous post Margin of Safety, First thing in Investment, I always emphasize the margin of safety. One of the way we can find out the margin of safety is through searching a
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