Tips on Investing in Bursa Malaysia
Most of the peoples I surveyed losing money in trading or investing in Bursa Stocks Exchange Market. Investing in Kuala Lumpur Bursa Stocks Exchange will never be rewarding if you do not follow the some basic investing rules. I would like to share my two cents view on how to make money from Bursa Stock Exchange: -
1. Invest only in companies which consistently make considerable
profit through out many years after listed.
You should only invest on those companies consistently make profit through out many years. For my own guide lines, it should be at least 5 years after listed. By observing this rule, you are able to make sure yourself that you only invest in the companies which the management are capable to manage the companies well and consistently making profit for the companies and the shareholder like you. More importantly, you will prevent yourself to buy the companies who the management or big boss only interested to make money from Initial Public Offering and runaway after cheated investors money. Thus, new IPO stocks will never be in my portfolio so far. My golden rule to myself, although making profit is my high priority, prevent making loss is even higher. Thus, I will never consider new IPO stocks or any stocks without make considerable and remarkable profit over the past 5 years.
2. Invest in the people, not only the company.
Before I invest, I will ask this question, who own this company? Who manage the company is this person capable? Is this person trusted? Is this person managing the company well? What is his past record of managing the companies? For example, I have known that Tan Sri Teh Hong Piow is really a capable person by knowing his style, his management skill and more importantly, his integrity. I have studied the performance of his public bank for many years and concluded that he is really a genius to manage the bank. Thus, when his stock London Pacific Industries being listed, I will not give second thoughts before I invest in London Pacific Capital by trusting Tan Sri Teh. Ask yourself, if your got money and you want to invest in business, will you join venture with your friends who have cheated you before, or who have cheated many peoples before, you should know his character since he is your friend. However, if you know the person well, who is capable and honest, I believe you will feel more comfortable and secure by joint venture with him. Likewise to the stocks market, you should never invest in the stocks that you don’t know the management or the boss well, who may eventually collapse the companies and cheat all your money away. A good examples for capable and honest person like Tan Sri Dato' Lee Shin Cheng(IOI, IOI Property) and Robert Kuok Hock Nien ( PPB, PPB Oil, etc) . DiGi CEO Morten Lundal (DIGI) is really another genius I knew. For all the foreign owned companies like Nestle, Dutch lady, BAT, MOX, Shell, etc, they are manage by good management with good company culture, and you can be assured that your money invested are really go to the business and eventually will make money for you. For local companies, you shall be more selective and careful, and make sure you choose the right company with capable person, and more importantly, honest person who will not eat your money.
3. Invest in companies which the nature of business will never losing money or the chance of losing money is very slim.
Where got companies never losing money? Hur....to answer this question, I think I can name a few. For example, Bursa is one of them. Bursa earns money by earning commissions from you when you trade stocks. The more you trade the more Bursa earn. The less you trade the less Bursa earn. Their overhead and expanses are low and their business model is simple. It is a matter of low profit or high profit and the risk of losing money is minimal. If some play contra and suffer huge loss and runaway to Thailand, who bear the loss? Securities firm and the remisier, not Bursa. Thus, you should choose Bursa instead of any securities firm. Another good example is Nestle, you drink MILO, your children will drinks MILO, your children's children will drink MILO, and so what is your worry? If you think investing in those companies will never make significant profit, then I will prove you wrong. One of my favorite stocks Dutch Lady has gone up more than 200% after I bought it, and I still hold it, and I still believe it will consistently make profit and give high dividend! Thus, I have give you the principle here, you got to do your homework to find which companies business model is so simple that will sure make profit ! 3. Invest in companies really pay out the dividend. The principle is simple, what showed in the financial report may not be the real money, only those companies capable to pay it out is real money. I don want to discuss more on this too simple logic. You can find the high yield stocks easily in Bursa market.
4. Invest in big capital stocks or small capital who owned by the big capital stocks.
Based on the past records, most of the companies suffer huge loss are from small capital of main board, second board and mesdaq. Thus, you should avoid these stocks. If you really want to invest in these stocks which may give you quick profit with up down 20 or 30%, then you should only considered any of these stocks are owned by Good Big capital or my principle 2, owned by good and honest and capable person.
5. If the companies consistently doing well for many quarters and make remarkable and impressive profit, even though the share price is up, it is still cheap.
If the companies consistently doing badly and suffer loss, even the share price is go down a lot, it is still expensive. Thus, do not hesitate to invest in the companies which consistently doing well, even it is high price, but is it still worth it. Unless you are very sure what happen, do not buy any limit down stocks.
6. Do not invest in High Debt or High Gearing Stocks
Check the balance sheet, the debt of the company should not be more moderate for none establish business or any local companies. However, exception is given to the establish companies like BAT or Nestle, or any foreign owned company as their objectives of the high debt is mainly improve the Return On Equity. For local companies, you must be careful and selective. Be cautious of any off balance debt statements.
7. Do not invest in outdated business.
What do I mean by outdated business ? For example, nowadays people start using digital camera, because of thechnology change, how is the conventional camera maker going to survive ? It includes also the fim manufacturer and related supporting business. Another example, when the electronic storage device 's price getting cheaper and cheaper, the outlook of the VCD/DVD manufacturer is getting dull. Be very cautious to invest in any technology companies, if another competitor have better technology, the company will lost their market share because of its outdated technology. Thus, try to avoiod this kind of companies unless you fully understand their business and their outlook. One of my favourite stocks in this sector is Uchitech. I leave it to you all to figure out why I have choose this company.
8. PE is less than ROE
Do not invest in stocks just based on the PE alone, low PE is good but sometimes it may mean that you are investing in business with low prospect. Grow business usually come with high PE. For my personal guideline, the PE can be moderate high, but must be equal or less than ROE. Thus, if ROE is high, I can accept the stocks with moderate high PE, of course, not to the extend of PE 100 or 1000. I will leave it to the investors to decide what is the moderate PE is.
9. Do not sell your stocks as long as it perform well and consistent exceed expectation significantly. Sell only when the price is rediculous high.
You friend startup a chicken rice restaurant but he runs out of capital. Thus, he ask you to invest. You agree and invest 10000 ringgit. After 6 months, his chicken rice store business is fantastically doing well and he start paying you earning 500 this month. One month, he pay you 1000 earning, and two months later, he pay you 1500, do you want to sell this restaurant if someone willing want to buy your share of this restaurant for 15,000 ? You will immediately get profit 5000, together with your total earning 3000 he pay you, your profit is so impresive , 8000, or 80% of your initial investment. However, there are no sign that the business will do poorly, and everytime you visit the restaurant, the business is too good that it almost full house everydays. Even if the restaurant can maintain the earning 1500 monthy for another 9 months, you will get 13,500 more and your total profit for the year is will also be 16,500. The return of equity is impressive of 165% , mean you earn 165% from your invested capital yearly. More importantly, your monthly earning may continue to grow ........like wise for stocks, if your stocks are perform so well that it consistently deliver excellent result meet and exceed your expectation, hold it...........don't sell it.........unless someone is crazy want to buy your restaurant shares at rediculous price......if an idiot likes the restaurant so much that he want to buy your shares for 200,000 or 500,00 , yes, you can sell it to him immediately.
Saturday, December 22, 2007
Thursday, December 20, 2007
21 steps to a great retirement
21 steps to a great retirement
GROW YOUR MONEY
In this final article on retirement planning, the Financial Planning Association of Malaysia (FPAM) puts forward 21 recommendations to help Malaysians prepare for their future.
EDMOND Cheah, immediate past president of the FPAM says, “If we’re fortunate to live long enough, we all have to retire one day. So, make realistic decisions on the timing of your exit from the workforce.” Here are 21 steps to help you plan well for the golden years.
1. Face your future honestly
Extensive retirement studies show that those who exercise control over when they retire live happier lives than those who wait to be put out to pasture by others.
It is important to not make dangerous assumptions about the future. U Chen Hock, President of the FPAM observes, “Malaysians generally still harbour expectations of their children looking after them in retirement. However, I advise parents to be pragmatic in planning for their children’s education to the extent they can afford it without jeopardising their own retirement funding plan.” Of course, there is no harm in aiming to tilt the odds in your favour (see recommendation 18)!
2. Exercise delayed gratification
Financial planner Rajen Devadason says, “Those who adopt a delayed gratification mentality early in life often discover a decade down the road that this mindset is the most dependable key to future wealth.”
3. Start yesterday, failing which start today
The time value of money tells us money today is worth more than the same amount tomorrow. This is best understood by realising RM1,000 today will be worth RM1,030 one year from now if it is deposited in a 3% one-year fixed deposit (FD) account. This ability of money to snowball over time is termed compounding. Mike Lee, managing director of CTLA Financial Planners Sdn Bhd, says, “Compounding your savings and your returns early in life is always a better strategy than hoping to catch up later.”
4. Save your money
Two effective ways to save money are to first set aside savings before allowing any other outflows each time you receive your salary, and second, to manage your cash flow effectively.
Even those who have let time slip by can benefit from saving money. Wong Loke Lim, honorary secretary of the FPAM, explains: “While it’s obviously better to start saving early, it is never too late to start even if you’re already close to retirement. This is because every ringgit saved will help cover retirement expenses.”
5. Teach yourself about financial planning
Take personal responsibility for educating yourself about financial planning. The bookstores are filled with awesome resources. Cheah says, “It is vital that those who are serious about succeeding in retirement begin thinking and reading about it as early as possible.”
6. Write down your goals
Retirement specialist Devadason says, “Over many years of consulting, I’ve discovered that my most successful clients have goals that are clearly written in personal, positive and present tense terms.” It is therefore wise to write down your own retirement planning goals in the same way.
7.Fine-tune your preferred future on paper
The earlier you begin writing down your dreams for the perfect retirement, the more time you will have to tweak those aspirations into concrete written goals. It is important that personal control is exercised in this matter. FPAM honorary secretary Wong says: “Loneliness, loss of respect, expensive medical bills – these are just some possible negative aspects of retirement which must be taken care of.”
As for the financial dimension, Cheah elaborates, Be practical; know that you will have to compromise and adapt to possible changes to your lifestyle.”
8. Beef up your net worth
Your net worth is measured by your net worth statement. This lists all your assets and all your liabilities. If you total each column, the difference between assets
and liabilities is your net worth. In corporate terms this is equivalent to a company’s net book value. We should focus on boosting our store of productive assets that generate passive income for us in the form of dividends, rental and interest. At the same time, we should eliminate all forms of bad debt that suck up our financial resources.
9. Create your own pension
Some government servants can look forward to a lifetime public sector pension that’s equal to half of their final drawn salary. Others contribute to EPF, just as most private sector workers do. K.P Bose Dasan, Securities Commission-licensed financial planner with Standard Financial Planner Sdn Bhd, maintains, “Retirees must have a pension. No pension, no retirement!” So, those without a government pension must take personal responsibility for creating their own. Devadason says, “The goal for everyone should be to proactively create multiple sources of income from investments and, perhaps, privately-held businesses to channel through a future pipeline of passive income.”
10. Purchase appropriate life insurance
Ultimately, people should aim to be self-insured. But the road toward such a large level of wealth is not easy. Along the way, those who are gradually building their net worth (see recommendation 8) ought to ensure they’re managing disability and premature mortality risk appropriately. Michael Tan Lib Chau, CEO of RHB Unit Trust Management, says: “Besides setting aside some savings for investment, it is also crucial to protect the loss of earning capacity. In other words I would encourage them to seriously look at life insurance coverage.” Toward that end, many financial planners believe a “buy term and invest the difference” approach is the most cost-effective route.
However, the danger lies in a possible lack of discipline being exhibited by some adherents of D-I-Y financial planning: They might choose to buy relatively cheap term life policies but then squander the rest of the money. In many cases, then, it would be wise to work with a reputable financial planner
11. Prepare for future inflation
A major factor in retirement funding calculations is future inflation. Saving money in the bank, while a great initial step toward financial freedom, is unlikely to generate returns greater than inflation. Therefore, focus on educating yourself on the damaging effects of inflation and the need to accept some level of investment risk.
12. Manage your investment risk
It is unwise to take on so much investment risk that you lose sleep and begin to develop ulcers. On the other hand, accepting too little investment risk is likely to hurt your long-term portfolio returns. Educate yourself to gradually elevate your risk appetite to at least moderate levels. Tan Beng Wah, CEO of CIMB Wealth Advisors Bhd, explains why the quanta of accepted risk should change with age: “In funding for retirement, the investor may start with an aggressive portfolio, then switch to a moderate one half way toward retirement, and then to a conservative portfolio when he or she is a few years from retirement.”
Knowing how to do this wisely requires either active self-education or the help of a trusted advisor or, preferably, both.
13. Enslave your money
Don’t always work for your money. Make it work for you. Steve L. H. Teoh, deputy president of the FPAM, notes, “Failing to plan is planning to fail!” This piece of advice is relevant to those entering retirement. Teoh explains, “From that point on, the wealth a person has accumulated throughout his working life will now have to work for him instead.” The larger that pool of resources and the harder it works for the retiree, the better the quality of life in retirement.
14. Hone your career skills
Do what you can today to extend your employability through enhanced skills development.
15. Target greater tax efficiency
Bose, a tax specialist, notes, “To retire well, you have to accumulate a healthy sum in your retirement portfolio. It helps, therefore, to take advantage of all possible tax incentives available in Malaysia.” A tax specialist in retirement planning can be of great value in this endeavour.
16. Tame the credit beast
Unnecessary interest spent on consumer debt instruments, particularly credit cards, sucks money away from possible retirement plans. Manage your total liability situation well.
17. Aim to be debt-free
While there is such a thing as good debt that ends up enriching us, most people are wired in such a way as to benefit from living a debt-free life. Therefore, if the prospect of one day becoming free of all liabilities appeals to you, make it a written goal and then act in a manner consistent with that desire. Teoh says, “Work toward attaining zero gearing in as short a period as is practical. Certainly settle all credit card monthly dues promptly and in full! Remember, there is always a cost to borrowing.” He recommends settling all liabilities by age of 50, or earlier.
18. Train your children well
In the decades ahead, it will be difficult for even the most filial of children to fully fund their parents’ retirement needs. But if you are able to instil even a partial sense of responsibility in your children as they mature, you might be able to derive a steady, modest flow of income from them. This possibility should not in any way alleviate your own responsibility for funding your own retirement through intelligent saving and investing.
19. Clarify your legacy
Write a will. Consult a reputable will writer or a lawyer familiar with probate matters. Ong Eu Jin, chief operating officer and director of OSK Trustees, and author of Can Wealth Last Three Generations, says: “It is important to have a will. Also, parents with minor children should consider creating a testamentary trust under their will.” Such a trust may be used to set aside specified liquid assets like bank deposits, unit trust funds and life insurance proceeds to meet children’s maintenance and education requirements in the event of an untimely demise by one or both parents.”
20. Make a difference
Aim to retire from work, not from life! Always focus on continuing to live a life of significance. This requires careful long range planning.
21. Engage the right financial planner
Sue Yong, executive director of Equity Trust (Malaysia) Bhd, notes, “To enhance your chances of succeeding in retirement, focus on building a good working relationship with a financial planner for the long-term. Such a professional may also act as a coach when we have gone astray from the agreed plan.” Financial planner Ken Lo of Money Concepts Corporation adds, “Because most people have little time, discipline, knowledge or expertise to manage their own financial affairs, they need to work with professionals to reach their financial goals.”
The first step in becoming adept at financial planning is focusing on self-education. That commitment alone will help most people enormously. For those who might want to pursue things further, please visit FPAM’s website at www.fpam.org.my for a free downloadable copy of “Insights to Choosing A Financial Planner” as well as to search and access the directory listing for licensed and qualified financial planners.
GROW YOUR MONEY
In this final article on retirement planning, the Financial Planning Association of Malaysia (FPAM) puts forward 21 recommendations to help Malaysians prepare for their future.
EDMOND Cheah, immediate past president of the FPAM says, “If we’re fortunate to live long enough, we all have to retire one day. So, make realistic decisions on the timing of your exit from the workforce.” Here are 21 steps to help you plan well for the golden years.
1. Face your future honestly
Extensive retirement studies show that those who exercise control over when they retire live happier lives than those who wait to be put out to pasture by others.
It is important to not make dangerous assumptions about the future. U Chen Hock, President of the FPAM observes, “Malaysians generally still harbour expectations of their children looking after them in retirement. However, I advise parents to be pragmatic in planning for their children’s education to the extent they can afford it without jeopardising their own retirement funding plan.” Of course, there is no harm in aiming to tilt the odds in your favour (see recommendation 18)!
2. Exercise delayed gratification
Financial planner Rajen Devadason says, “Those who adopt a delayed gratification mentality early in life often discover a decade down the road that this mindset is the most dependable key to future wealth.”
3. Start yesterday, failing which start today
The time value of money tells us money today is worth more than the same amount tomorrow. This is best understood by realising RM1,000 today will be worth RM1,030 one year from now if it is deposited in a 3% one-year fixed deposit (FD) account. This ability of money to snowball over time is termed compounding. Mike Lee, managing director of CTLA Financial Planners Sdn Bhd, says, “Compounding your savings and your returns early in life is always a better strategy than hoping to catch up later.”
4. Save your money
Two effective ways to save money are to first set aside savings before allowing any other outflows each time you receive your salary, and second, to manage your cash flow effectively.
Even those who have let time slip by can benefit from saving money. Wong Loke Lim, honorary secretary of the FPAM, explains: “While it’s obviously better to start saving early, it is never too late to start even if you’re already close to retirement. This is because every ringgit saved will help cover retirement expenses.”
5. Teach yourself about financial planning
Take personal responsibility for educating yourself about financial planning. The bookstores are filled with awesome resources. Cheah says, “It is vital that those who are serious about succeeding in retirement begin thinking and reading about it as early as possible.”
6. Write down your goals
Retirement specialist Devadason says, “Over many years of consulting, I’ve discovered that my most successful clients have goals that are clearly written in personal, positive and present tense terms.” It is therefore wise to write down your own retirement planning goals in the same way.
7.Fine-tune your preferred future on paper
The earlier you begin writing down your dreams for the perfect retirement, the more time you will have to tweak those aspirations into concrete written goals. It is important that personal control is exercised in this matter. FPAM honorary secretary Wong says: “Loneliness, loss of respect, expensive medical bills – these are just some possible negative aspects of retirement which must be taken care of.”
As for the financial dimension, Cheah elaborates, Be practical; know that you will have to compromise and adapt to possible changes to your lifestyle.”
8. Beef up your net worth
Your net worth is measured by your net worth statement. This lists all your assets and all your liabilities. If you total each column, the difference between assets
and liabilities is your net worth. In corporate terms this is equivalent to a company’s net book value. We should focus on boosting our store of productive assets that generate passive income for us in the form of dividends, rental and interest. At the same time, we should eliminate all forms of bad debt that suck up our financial resources.
9. Create your own pension
Some government servants can look forward to a lifetime public sector pension that’s equal to half of their final drawn salary. Others contribute to EPF, just as most private sector workers do. K.P Bose Dasan, Securities Commission-licensed financial planner with Standard Financial Planner Sdn Bhd, maintains, “Retirees must have a pension. No pension, no retirement!” So, those without a government pension must take personal responsibility for creating their own. Devadason says, “The goal for everyone should be to proactively create multiple sources of income from investments and, perhaps, privately-held businesses to channel through a future pipeline of passive income.”
10. Purchase appropriate life insurance
Ultimately, people should aim to be self-insured. But the road toward such a large level of wealth is not easy. Along the way, those who are gradually building their net worth (see recommendation 8) ought to ensure they’re managing disability and premature mortality risk appropriately. Michael Tan Lib Chau, CEO of RHB Unit Trust Management, says: “Besides setting aside some savings for investment, it is also crucial to protect the loss of earning capacity. In other words I would encourage them to seriously look at life insurance coverage.” Toward that end, many financial planners believe a “buy term and invest the difference” approach is the most cost-effective route.
However, the danger lies in a possible lack of discipline being exhibited by some adherents of D-I-Y financial planning: They might choose to buy relatively cheap term life policies but then squander the rest of the money. In many cases, then, it would be wise to work with a reputable financial planner
11. Prepare for future inflation
A major factor in retirement funding calculations is future inflation. Saving money in the bank, while a great initial step toward financial freedom, is unlikely to generate returns greater than inflation. Therefore, focus on educating yourself on the damaging effects of inflation and the need to accept some level of investment risk.
12. Manage your investment risk
It is unwise to take on so much investment risk that you lose sleep and begin to develop ulcers. On the other hand, accepting too little investment risk is likely to hurt your long-term portfolio returns. Educate yourself to gradually elevate your risk appetite to at least moderate levels. Tan Beng Wah, CEO of CIMB Wealth Advisors Bhd, explains why the quanta of accepted risk should change with age: “In funding for retirement, the investor may start with an aggressive portfolio, then switch to a moderate one half way toward retirement, and then to a conservative portfolio when he or she is a few years from retirement.”
Knowing how to do this wisely requires either active self-education or the help of a trusted advisor or, preferably, both.
13. Enslave your money
Don’t always work for your money. Make it work for you. Steve L. H. Teoh, deputy president of the FPAM, notes, “Failing to plan is planning to fail!” This piece of advice is relevant to those entering retirement. Teoh explains, “From that point on, the wealth a person has accumulated throughout his working life will now have to work for him instead.” The larger that pool of resources and the harder it works for the retiree, the better the quality of life in retirement.
14. Hone your career skills
Do what you can today to extend your employability through enhanced skills development.
15. Target greater tax efficiency
Bose, a tax specialist, notes, “To retire well, you have to accumulate a healthy sum in your retirement portfolio. It helps, therefore, to take advantage of all possible tax incentives available in Malaysia.” A tax specialist in retirement planning can be of great value in this endeavour.
16. Tame the credit beast
Unnecessary interest spent on consumer debt instruments, particularly credit cards, sucks money away from possible retirement plans. Manage your total liability situation well.
17. Aim to be debt-free
While there is such a thing as good debt that ends up enriching us, most people are wired in such a way as to benefit from living a debt-free life. Therefore, if the prospect of one day becoming free of all liabilities appeals to you, make it a written goal and then act in a manner consistent with that desire. Teoh says, “Work toward attaining zero gearing in as short a period as is practical. Certainly settle all credit card monthly dues promptly and in full! Remember, there is always a cost to borrowing.” He recommends settling all liabilities by age of 50, or earlier.
18. Train your children well
In the decades ahead, it will be difficult for even the most filial of children to fully fund their parents’ retirement needs. But if you are able to instil even a partial sense of responsibility in your children as they mature, you might be able to derive a steady, modest flow of income from them. This possibility should not in any way alleviate your own responsibility for funding your own retirement through intelligent saving and investing.
19. Clarify your legacy
Write a will. Consult a reputable will writer or a lawyer familiar with probate matters. Ong Eu Jin, chief operating officer and director of OSK Trustees, and author of Can Wealth Last Three Generations, says: “It is important to have a will. Also, parents with minor children should consider creating a testamentary trust under their will.” Such a trust may be used to set aside specified liquid assets like bank deposits, unit trust funds and life insurance proceeds to meet children’s maintenance and education requirements in the event of an untimely demise by one or both parents.”
20. Make a difference
Aim to retire from work, not from life! Always focus on continuing to live a life of significance. This requires careful long range planning.
21. Engage the right financial planner
Sue Yong, executive director of Equity Trust (Malaysia) Bhd, notes, “To enhance your chances of succeeding in retirement, focus on building a good working relationship with a financial planner for the long-term. Such a professional may also act as a coach when we have gone astray from the agreed plan.” Financial planner Ken Lo of Money Concepts Corporation adds, “Because most people have little time, discipline, knowledge or expertise to manage their own financial affairs, they need to work with professionals to reach their financial goals.”
The first step in becoming adept at financial planning is focusing on self-education. That commitment alone will help most people enormously. For those who might want to pursue things further, please visit FPAM’s website at www.fpam.org.my for a free downloadable copy of “Insights to Choosing A Financial Planner” as well as to search and access the directory listing for licensed and qualified financial planners.
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