Announcement: (my comments  in italic)

1. Rakyat Goodies:
   • i)  A generous additional 1 month bonus to 1.4m civil servants
   • ii)  BRIM 2.0: one-off RM500 cash to households with incomes not exceeding RM3,000/ month; and RM250 cash to single residents with age <21 and incomes not exceeding RM2,000/ month.
   • iii)  additional RM100 per month of pensions for government pensioners
   • iv)  special incentive of RM200 per month for all military personnel
   • v)  one-off RM1,000 for former members of the armed forces who did not receive any pension
   • vi)  Another schooling assistance of RM100 to all primary and secondary students and book voucher increased from RM200 to RM250 to all Form 6 and tertiary students.
   • vii)  individual income tax rate cut of 1 percentage point for each group which has annual chargeable income exceeding RM2,500 to RM50,000
   • viii)  RM200 rebate to 1.5m people under the age group of 21-30 year old for purchase of 3G smartphone.
2. 15% Real Property Gains Tax (RPGT) is now payable for properties disposed within two years and 10% within the 3rd to 5th year. Properties held and disposed after 5 years are not subject to RPGT. My first home scheme: income limit for individual loan increased from RM3,000 to RM5,000. – I think the increment of RPGT can hardly curb the property price hike and speculation. From an investor‘s point of view, as long as you make money, you don’t mind paying a little bit more taxes. 
3. Sugar subsidies reduced by 20 sen to 34 sen/ kg w.e.f 29 Sept 2012. But no mention of proposed subsidy cuts on other items. – The government believe that higher sugar price will reduce the sugar intake of our citizens. What do you think? I don’t add sugar to my Starbucks coffee not because the sugar is expensive. I don’t take much sugar because I’m health conscious. 
4. No Goods and Service Tax (GST) explicitly spelled out – In fact, I would prefer the introduction of GST, but personal income tax and company tax reduced. Then the government would somehow maintain the tax revenue, while those who love to spend money pay more taxes.
5. Investment Tax Allowance of 100% for the period of 10 years for investment in the refinery activities on petroleum products including project like RAPID, oil and gas storage Terminal in Johor, Regasification Plant in Melaka as well as oil and gas terminal in Sipitang, Sabah. GIFT programme will be enhanced with a 100% income tax exemption on statutory income for the first 3 years of operations for LNG trading companies from tax incentive at the rate of 3%.  - Since more foreign direct investment is expected, those companies directly or indirectly involved in oil and gas industry will benefit the most. So Shan Saeed is right that investing in energy sector has a bright future. If you missed the live webinar, watch the replay here where Shan Saeed, the renowned financial market economist shared about the prospect of investing in energy especially natural gas.
6. No hike in excise duty for tobacco and malt liquor and also gaming duty. – If you smoke, you not only affect your own health, but the health of the people surrounding you. If you gamble heavily, you risk the financial stability of your family. Personally, I love to see more duty imposed on these sinful activities. You might not agree if you own related company stocks.
7. No announcement made on the National Automotive Policy (NAP). – Well, Malaysia government continue to invest heavily on road safety campaigns to bring down the fatality rate to below two for every 10,000 registered vehicles by 2020, on par with developed countries. But one of the main reasons there are dead motorist is that not every one can afford a safe ride. I believe you want to be able to easily afford a decent car, with enough air bags. Let us buy a decent car for a fair price, build roads  that is safe to drive on and provide well-connected public transport will eventually bring down the road accident death rate.
   

Last but not least, I would like to share my wish list for future national budget:

Let everyone has a very affordable high speed Internet connection

The reasons are quite straight forward:

1. Internet access is the key to economic growth. Every government should treat it the same way they treat water, electricity and roads. Internet is a necessary utility.
2. Look at the countries that has the highest Internet speed. No.1  - South Korea. No.2 – Japan. No.3 – Hong Kong. Now, take a look at your household items. My wife use Samsung SIII smart phone. She drives a Hyundai Starex. She watches Korean movies and dramas. My mom uses Samsung fridge and washing machine. There is an LG LED TV in my bedroom. Now everyone in the whole wide world is dancing Gangnam Style!
3. Internet is an essential connection. The easier we can connect and communicate, the better we can collaborate. Collaboration is the key to more innovation and creation. It will be easier for businesses to connect to their customers. This allows users to consume goods, services and information anytime, anywhere. E-commerce will flourish.
4. If you can do something online, you would so that you don’t get stuck in the traffic, you don’t need to show up at work on time, you don’t need to find a parking place just to pay a bill, file a police report, or purchase an item. You got the idea!

Government can expedite this by

1. Invest in information infrastructure
2. Let more players into telecommunication sector. Competition drives the price down and gives way to better service.
3. Encourage broadband subscription by giving high tax relief, or even subsidy.
4. Encourage more Internet or ICT startups by giving more grants, low interest loan and reduce taxes for these business.

Reference:  MALAYSIA BUDGET 2013 – An earnest & all-around Budget?   1st October 2012 report by Philip Capital Management Sdn. Bhd.

This article is posted at: KCLau's Money Tips

Malaysia Budget 2013 Highlights

This article is posted at: KCLau's Money Tips

ABC of Malaysia Home Loan

In Part 1 of IGB REIT IPO Analysis, we summarized the quantitative aspects of the REIT – that is, the key financial figures from the prospectus.  In this second part, we extract the qualitative aspects of IGB REIT from its prospectus – both the good, and the bad, otherwise known as SWOT (Strength-Weakness-Opportunities-Threats) analysis.

For Youtube version of this article and demonstration of the easiest way to apply for IPO, click here

Strengths

Strategic location within a self-contained mixed-use development which comprises of hotels, offices and residential units. Crowd traffic to the malls is consistent.

High accessibility by Superior transportation infrastructure . In addition to public buses and taxi services, Mid Valley Megamall is directly connected to the Mid Valley KTM Komuter train station and is within close proximity to Abdullah Hukum KL LRT station. The Gardens Mall is in turn directly connected to Mid Valley Megamall via a roofed bridge and an underground tunnel. According to the Independent Market Research Consultant, there is a proposed linkage from Mid Valley City to the Abdullah Hukum KL LRT station via the upcoming KL Eco City.

Experienced Management team

Management team lead by Antony Patrick Barragry, Chief Executive Officer of the Manager.  His credentials:

He is a qualified architect with 35 years of international experience in the design, development and operations of major mixed-use developments. His prior work experience includes the Putra World Trade Centre and the Renaissance Kuala Lumpur Hotel, the Ciragan Palace Hotel in Istanbul, and Jebel Ali Hotel development in Dubai. He was previously Project Director in the construction of Mid Valley City Phase 1, including Mid Valley Megamall. Appointed as Executive Director of MVC in 2002, he spearheaded the development of more than six million sq ft of commercial space in Mid Valley City’s Phases 2, 3 and 4. He was also Project Director for the design and construction of the St Giles Hotel, Heathrow, London and the upgrading of IGB’s Pangkor Island Beach Resort, a 100-acre beach-front property on Pangkor Island. In January 2008, he was appointed Chief Executive Officer of MVCG. He holds a Diploma in Architecture from the University of Sheffield and is a member of the International Council of Shopping Centers and FIABCI.

Large and diverse catchment area

Mid Valley City are located in proximity to the upmarket Bangsar commercial and residential areas and the established Damansara Heights, Seputeh and Petaling Jaya residential areas, providing for an immediate catchment area which comprises some of the more affluent suburbs in the Klang Valley.

Both malls capture multiple target customer segments due to their size and diversified tenant mix

. • Mid Valley Megamall caters to families and tourists

• The Gardens Mall is positioned as a premium fashion mall focused on affluent, domestic, expatriate and international tourist customer segments.

How to Invest in REIT in Malaysia

Weaknesses

• Traffic congestion: Lingkaran Syed Putra is often congested during weekend/peak hours, which discourages traffic to the mall.

• High dependency on vehicular traffic: Footfall is heavily correlated to the availability of car park bays – in which footfall growth may be limited in the future if the number of car park bays remains stagnant. Going forward, there does not seem to be any room for additional car park, therefore, any growth in the future can only come from alternative means of transportation such as the LRT and MRT.

Opportunities

Improving transportation infrastructure: The proposed linkage to the Abdullah Hukum Putra LRT Station, MRT 2 Circle Line and KL Monorail Extension will contribute to greater crowd traffic to the mall.

Population growth in the suburbs: Klang Valley is expected to house a population of 10 million by 2020, as such population growth in the suburbs will expand the catchment and bring more shoppers to Mid Valley Megamall.

Increasing commercialization of the immediate surroundings. Ongoing developments such as Bangsar South, KL Eco City and KL Sentral to bring more commercial content and business can be created into the area.

Threats

Upcoming malls: Several malls exceeding 1.0 million sq ft in size are in the works, including Boustead Retail at Jalan Cochrane, Empire City Mall in Damansara Perdana, IOI City Mall in Putrajaya and i-City Mall in Shah Alam which may potentially dilute the market share of Mid Valley Megamall.

Urban sprawl: Escalating property prices has resulted in the expansion of geographical boundaries to the south and west of Klang Valley for residential developments. This may lessen the concentration of catchment population of the malls.

On top of that, here is a summary of what we have discussed on Part 1 of IGB REIT IPO Analysis.

Note: All information are quoted from the first draft of the IGB REIT Prospectus. This is not an invitation to buy or sell. The content on this site is provided as general information only and should not be taken as investment advice. Any action that you take as a result of information, analysis, or commentary on this site is ultimately your responsibility. Consult your investment adviser before making any investment decisions.**********LCF of HowToFinanceMoney.com, also co-founded REITMethod.com with KC Lau, the first REIT investment online educational course for Malaysians.

This article is posted at: KCLau's Money Tips

IGB REIT IPO Analysis Part 2

Every Business Owners or Company Secretary should know about this. It’s Business Buy-Sell Agreement. Most of the Business Owners are very busy, so, this is the place to start. Just take~ 3 mins to digest the video.

A complete Business Buy-Sell requires few documents below

1. Buy-Sell Agreement
2. Funding: Cash or Life Insurance
3. Power of Attorney
4. Trust Deed

About the Guest Author:

Evanna Phoon is the “Most Sought After Rockwills Will & Trust Specialist”. Her website is www.malaysiawills.com, where anyone can register for FREE SEMINARS on Will Writing & Trust and watch FREE Video Education Series to help increase awareness of Will, Trust and Estate Planning services in English, Mandarin and Cantonese.

She had done over 200+ video blogs on the topic of Will, Trust, Funeral & Bereavement care and Estate Planning. She was invited as a speaker at International World Bloggers Summit 2011@PWTC, Rockwills CEO achiever´s congress, Negeri Sembilan Chinese Chamber of Commerce & Malaysia SME Business Networking Seminar.

Evanna writes regularly for Malaysia SME newspaper and two Chinese medium magazines “mystudy.my” and QiJi.

Prior to joining the financial planning industry, she worked for a few years as an electronics engineer with Intel, Freescale, Motorola and Western Digital. While still studying in the university, she appeared in billboards and did catwalk modeling. She was Miss Astro Chinese International Finalist 1998/99 and had won Miss Sunway Beauty Pageant title in Year 1999. She is currently married with two children and love to spend her time mountain biking and outdoor sports with her family.

This article is posted at: KCLau's Money Tips

BIZ Trust explanation

The Star organised the round table conference recently and the attendees were four top leaders of the industry. The whole conference is very well reported on page 20-22 The Starbiz on 25th Aug 2012.
As an investor, among all the things they discussed, I am most concerned or interested is the 6 million tons of additional oil required annually due to the world population increase and the growing affluent population ie more rich people and less people on starvation.

One hectare can produce half ton of soya oil while one hectare can produce 4 ton of palm oil. Assuming that soya oil can increase 3 million ton and palm oil can increase the other 3 million ton. They will need 6 million hectare of land to produce 3 million ton of soya oil and 750,000 ha to produce 3 million ton of palm oil. Looking at these figures, it is most unlikely they can find so much of additional land for soya every year. As a result, they will have to rely more on palm oil to cater for the annual additional 6 million ton of oil.

Record shows that Malaysia only produced 18.9 million ton in 2011 and 7.82 million tons of palm oil in the first half of 2012. Indonesia’s palm oil production is about 10% more than Malaysia.
Due to the severe drought in USA, Argentina and Brazil the price of soya is currently selling at historical high. I can foresee palm oil price will soon rise in tandem with soya. The last time when CPO price went above Rm 4000 per ton, all plantation shares shot through the roof.

Conclusion:
Reasonably well managed plantation companies will enjoy sustainable profit growth in the next few years.

Koon Yew Yin
27th Aug 2012

This article is posted at: KCLau's Money Tips

The future of Palm Oil

In a study called “Measuring Financial Literacy: Results of the Organization for Economic Co-operation & Development (OECD) International Network on Financial Education (INFE) Pilot Study,” it was noted that 97 percent of the Malaysian participants were actively saving in the past 12 months. Malaysia and 13 other countries participated in this study. Some of the other countries were the United Kingdom, Albania, South Africa, Germany, Poland, Norway and the British Virgin Islands.

In this study, around 1046 people, 18 years old and above participated in a face-to-face interview in Malaysia. The study which ended in early 2011, started in the second-half of 2010. A questionnaire, “OECD INFE Core Questionnaire” was used to determine a person’s financial literacy that covered three elements namely financial knowledge, financial behavior and financial attitude. The same questionnaire was used by the other 13 countries in this study. All the respondents were tested on their knowledge of financial concepts and in applying their numeracy skills.

One of the core question was “In the past 12 months, have you been saving money in any of the following ways?” These include putting aside money at home, in saving accounts, in investment accounts or through saving clubs. The highest result was reported by three countries namely Malaysia, Germany and the British Virgin Islands where more than 80 percent of the respondents were active in saving money.

When it came to managing money responsibly and having a budget, Malaysia had the highest percentage at 74 percent. This relates to the handling of household finances and budgeting. It was also observed that there is a positive relationship between financial knowledge and financial behavior. Examples of good or positive financial behaviors are giving some thoughts before buying something, having a budget, saving money and paying the bills consistently. The following countries showed higher financial behavior results compared to the rest

Education plays an important role as analysis of every country showed that

• High financial literacy scores came with increased levels of education
• Individuals with higher education are more likely to practice good or positive financial behaviors and attitudes. In addition, they also tend to possess more advanced knowledge in the area.

Another conclusion from the study showed that financial literacy varies with age and income. Middle age people tend to have a higher level of financial literacy as reflected in most of the 14 countries. The youngest and oldest respondents gave lower scores. What about income level? If you guessed that a higher income correlates to higher financial know-how, then you are right. Participants with higher incomes tend to score higher in financial knowledge compared to those earning lower incomes.

Jacquelyn is the co-author of the books “Teaching Your Kids About Money” and “Top 93 Personal Finance FAQs in Malaysia” with KC Lau. Jacquelyn is the pseudonym used by Amy Sipagal.

This article is posted at: KCLau's Money Tips

Malaysians Have Good Savings Attitude

MAS has just reported a loss of Rm 349 million in the 2nd quarter 2012 which is smaller than the loss of Rm 526 million in the same corresponding period last year. This is still twice as much as the first quarter loss of Rm 171 million. The total loss for the first half of 2012 is now Rm 520 million. The company has suffered losses in every quarter of the last 6 quarters.

As usual, there are the incorrigibly optimistic cheerleaders for the airline who are unable to see the writing on the wall. These ‘experts’ are still touting that the company is in recovery mode and will soon be returning to profitability.

photo: Kentaro Iemoto@Tokyo

The market however sees the prospects for the airline differently. During the past few days the airline share has been scrapping the one ringgit level. This is the lowest share price that the airline share has recorded during the past five years. Without the support of government-linked funds and left to market forces alone, it is possible that the share price of MAS will drop even more.
Many investors still holding on to the share must surely be hoping that MAS will not try to ‘break the record’ loss of Rm 1,262 million set in 2005 or that achieved in 2011 when the loss was Rm 2,521 million.

For non-investors, the recurring losses of MAS are a great mystery especially when they are compared with the performance of SIA. I972 Malaysia-Singapore Airlines (MSA) became MAS and SIA. In the last 10 years from 2002- 2011 SIA reported a total pre-tax profit of Singapore $13,992 million, averaging S$ 1.4 billion per year.

Should the government continue to bail out MAS?

The most recent losses bring the total losses of MAS to at least over $3 billion. In any normal business, any company incurring large and sustained losses would have closed down or gone into bankruptcy. This has not happened to MAS yet but I think the time is right – many observers will say, long overdue – for the government to withdraw the open cheque book extended to MAS.

When planning the future of MAS, it is important that the government avoids not only the past mistakes but also takes a rational approach based on economic fundamentals. One line of simplistic thinking is that there is a bright and profitable future for MAS since the number of air travellers continues to increase by about 5-7 percent per year.

But if you look at the history of airline industry profitability, this is not the case for airlines worldwide. The fact is the airline industry requires huge capital and produces poor returns on capital employed. Hence, year after year, many airlines produce poor profit margins or outright losses.

Why you might ask is it that an industry with year-on-year rises in sales cannot generate good returns to shareholders?

It all comes down to the economic structure of the industry. One of the forces that limit profitability is the intensity of the rivalry between the leading airlines. There is over-supply leading to pressure on prices. This is exacerbated by a high degree of freedom for new competitors to enter the industries.

If, say, an airline route between two destinations is found to be reasonably profitable it is not long before new entrants move in or current airlines simply move their planes to this profitable route.

It is truly an industry governed by the principle of “survival of the fittest”.

The ego and elections factor

It would seem that every developing nation wanting to show off to the world its progress MUST have its own airline, regardless of the impact on an industry already grossly over-supplied, and regardless of whether they have the ability to manage efficiently. So there is a regular stream of announcements of new airline ventures.

Now that Malaysia has also done it and failed dismally, the next logical question to ask is why doesn’t the Malaysian government allow MAS to fold up or go under.

There are two main reasons: Firstly, the perennial optimism of managers and shareholders. “Just one more chunk of money will see us break through into profitability as we rout the opposition!” seems to be the credo of these parties based on their self and not national interest.

Secondly, there is government interference. This factor however is less found now as many governments have learnt not to come to the rescue of their airlines.

Malaysia has not learnt these lessons – initially for reasons of national pride tied to the ego of leaders but now increasingly apparently to save jobs and to prevent the retrenched employees from voting for the opposition. This may make sense politically but it is poor economics.

Let MAS fly or crash without further interference or delay is the only way forward in the national interest.

This article is posted by Koon Yew Yin, the philanthropist tycoon.

This article is posted at: KCLau's Money Tips

Why is MAS still flying?

IGB REIT, a pure play retail REIT is to be listed at the Main Market of KLSE on 19th September 2012. It would be the largest REIT in Malaysia by market capitalization so far, surpassing Sunway REIT and Pavilion REIT.

IGB REIT first registrable IPO has just been submitted to the Securities Commision recently, and this gives the public a sneak peak into the business & fundamentals of Midvalley Megamall and the Gardens Mall. The prospectus for the IPO can be downloaded here.

The prospectus is of 442 pages, and if you are not too financially inclined, you would probably fall asleep before page 50. The fact is, you don’t need to read every single detail in the prospectus – just need to look at the important ones. Many information are repeated in a few sections and the languages used in certain parts are too long-winded. But here’s the summary of the key metrics when conducting fundamental analysis for IGB REIT, per the previous article – How to Invest in REIT in Malaysia.

**This is not invitation to buy/sell. All public information taken from IPO which can be obtained from Securities Commission website.**

Click here for video and audio version of IGB REIT IPO Analysis Part 1

IGB REIT comprises of…

…only the mall components of Midvalley City, namely, Midvalley Megamall and the Gardens. Midvalley City is a mixed-used  development which also comprises of offices and hotels, but they are NOT part of this REIT.

IGB REIT Trustee is…

Am Trustee Berhad, a reputable trustee which also provides trusteeship service to a few other REITs in Malaysia.

IGB REIT Sponsor is…

IGB Corporation, a public listed company and one of Malaysia’s largest owners cum managers of investment properties, with diversified interests worldwide. The Sponsor currently manages the 2 malls through its subsidiaries, Kris Assets, which is 75.13% wholly owned by the Sponsor.

Retail Offering (IPO) Price is…

RM 1.25 per share.

Income distribution (dividend)

100 percent taxable income distribution to investors until 31 Dec 2013.

Forecasted DPU

6.38 cents (annualized) and 6.71 cents for 2012 and 2013 respectively.

Gross Yield

5.10 percent (annualized) and 5.37 percent for 2012 and 2013 respectively.

Important Dates below

Occupancy Rate

> 99 percent as of March 2012 (splendid!)

Tenant business breakdown

Diversified, with fashion/apparel outlets and department stores taking lion’s share of the pie in terms of NLA and gross rental income.

Gearing ratio (indebtedness)

Medium-low at 25.8 percent (lower, better)

Net Asset Value/share

RM 0.996. Hence, IPO price is trading at a premium due to the “premium perception” of the assets.

**********

Stay tuned for Part 2 of IGB REIT IPO Analysis, where we further dissect the strength, weakness, potential opportunities and threats of IGB REIT.

LCF (or Ching Foo, founder of HowToFinanceMoney.com,  is an avid REIT investor. LCF also co-founded REITMethod.com with KC Lau, the first REIT investment online educational course for Malaysians.

This article is posted at: KCLau's Money Tips

IGB REIT IPO Analysis Part 1

A friend asked why I am still in the stock market when there are so much of uncertainties. Both the United States and Europe have so much of financial difficulties and unemployment, India’s Rupee is at historical low and China has lower GDP growth. Under such conditions, how can you still expect to make money from the stock market?

In fact, this is the best buying opportunity to pick up undervalued growth stocks when most fund managers and investors would reduce their holdings -be a contrarian investor.

Sustainable profit growth prospect

As you know, there are many criteria for stock selection, such as P/E ratio, NTA, intrinsic value, cash flow etc. In my opinion, I consider the most important criterion in stock selection is sustainable profit growth prospect. I will never buy any stock, however cheap it is, if I am not sure it can make more profit in this year than last year because when the company announces its annual report with reduced profit, most investors will dump the share and the share price will be depressed.

Picking winning stocks means that we pick the companies that can meet the constant challenges of competition, supply and demand, change of fashion and style design, obsolete stocks write off, etc. There are also unforeseen factors such as variation in interest rates, import and export restriction, foreign exchange variation, change in Government regulations, etc. Unpredictable inclement weather like the recent flooding in Bangkok which affected production, that even the most well run of companies such as Toyota and Honda could not escape.

Best form of investment

In my view, investment in the stock market is the best form of investment. They are tax free, have no management problem, and you can reduce or liquidate all your holdings at any time. There is a classical saying in the market – “You can buy the winning horse after the race”. This means that you can still buy a good share after the company has announced its profit.

Reasons for share price to go up are:

a. Exceptionally good profit growth prospect

b. Fund managers must be interested, liquidity, publicity etc.

c. Dividends are an important catalyst for moving share prices up

d. Unexpected good news of profit, bonus issues etc.

What is the best Buy?

After having seen so many unexpected surprises in the stock market, I consider the safest shares to invest are undervalued oil palm shares. Almost all the leading Plantation Companies have a compound growth rate of more than 20% per annum. That means you can double your capital in about 3 years. If you have bought KLK, IOI, United Plantation or Genting Plantation, you would have been able to double your capital in about every three years in the last 10 years. All these Companies are famous and are no longer cheap. But there are many other less known and undervalued plantation companies for you to buy.

The reasons for this exceptional growth rate are:-

a. The production cost for Crude Palm Oil (CPO) is about Rm 1,300 per ton and the average selling price has been more than double the production cost in the last 10 years or more. The average CPO price for 2012 is about Rm 3,000 per ton. Due to the current drought in the U. S. which is affecting the production of soya and corn, many analysts believe palm oil price will go up. Which business can offer such big profit margins?

b. The demand and profit are sustainable due to population increase. Moreover, both China and India who are our largest buyers have been improving their populations and economy. The financial problem in Eurozone and US has little or no effect on our palm oil market.

c. A palm tree will start fruiting after 3 years. It will continue to bear more fruits until it is about 16 years old after that age it will begin to bear less fruits. Only after about 22 years a palm tree needs replanting.

d. The land always appreciates in value.

e. There is good profit growth prospect and sustainable profit

I am obliged to tell you that plantation shares form the major part of my investment portfolio. If you decide to buy, I am not responsible for your profit or your loss.

How to become a super investor?

I started serious investing in public listed shares when I retired from executive work at 50 years old. I was not an accountant nor have I a MBA degree. I was just a civil engineer and I hardly knew how to read a balance sheet at that time.

I started by reading to understand the basic fundamental principles of share selection as practiced by Warren Buffet, Peter Lynch and other great investment gurus. These are the key traits to being a super investor that I picked up.

Trait 1: Be a contrarian investor, that is, the ability to buy stocks while others are panicking and sell stocks while others are euphoric. In 1983 when China declared that they wanted to take back Hong Kong, the people were selling as if there was no tomorrow because the Communists were coming. The Hang Seng Index plunged to about 700. Currently it is around 18,500.

In such a situation at that time, would you buy Hong Kong shares? I did.

Trait 2: Obsession in playing the game and wanting to win. Winning investors don’t just enjoy investing; they live it. They are obsessed in enhancing the value of their holdings.

Trait 3: The willingness to learn from past mistakes. Most people would much rather just move on and ignore the dumb things they’ve done in the past. I believe the term for this is repression.? But if you ignore mistakes without fully analysing them, you will undoubtedly make a similar mistake later in your career.

Trait 4: An inherent sense of risk based on common sense. Most people believe analysts’ reports which are often ‘a buy’ recommendation. It is very seldom they recommend ‘a sell’ because they would lose the business from the company he has recommended ‘a sell’. You must always take any analyst report with a pinch of salt. I believe the greatest risk control is common sense.

Trait 5: Confidence: Great investors must have confidence in their own convictions and stick with them, even when facing criticism. Buffett never got into the dot-com mania though he was being criticized publicly for ignoring technology stocks. He stuck to his guns when everyone else was abandoning the value investing ship. He was proven right when the dot com bubble bust.

Trait 6: Clear thinking. When considering a share, you must try to understand the nature of the company’s business and its inherent difficulties so that you can evaluate your risk exposure. There are a lot of people who have genius IQs who cannot think clearly, though they can figure out bond or option pricing in their heads.

Trait 7: And finally the most important, and rarest, trait of all is the ability to live through volatility without changing your investment thought process. This is almost impossible for most people to do. When the market makes a severe correction, most people dare not buy more shares to average down or to put any money into stocks at all when the market is plunging. They would begin to doubt their own judgement.

How to take advantage of margin financing?

After you are sure that you can pick good stocks, you should take advantage of margin financing to maximize your profit. Currently most Banks have too much cash and they are offering loan at base lending rate or lower. At this cheap rate, any investor with reasonable skill should be able to make more money than the interest rate.

When you borrow money to buy a house, the house as collateral will most likely appreciate in value. But when you borrow money using shares as collateral to buy more shares, the share price can often come down in value and you will have a margin call if you borrow to its limit.

To avoid being forced to sell, you must not borrow to its limit. You must always have spare facility so that you can buy some more when the share price plunges. Most ordinary investors would be afraid to buy some more shares when the share price is cheaper than what they paid earlier. You must be smart to buy when it is cheaper than the price you paid before.

To be able to maximise your profit, you must take full advantage of margin financing. Most good business mangers borrow money to be able to do more business. If they trade within their own capital they are considered inefficient.

You must have confidence in your own share selection skill and buy while others are panicking and sell stocks while others are euphoric in buying.

This article is posted by Koon Yew Yin, the philanthropist tycoon.

This article is posted at: KCLau's Money Tips

Value Growth Investing

Money has been pin-pointed to be the No. 1 cause for many couples getting a divorce. Money’s notorious reputation should be a signal to other couples hoping to tie the knot in the not so distant future to pay more attention on this issue. Being deeply in love should not cloud a person’s eyes to another person’s flaws.

Wrong attitude

It is wrong to adopt an ‘I don’t care’ or ‘life will eventually take care of itself’ attitude. While ignorance is bliss especially where money problems are concern, it may become a couple’s nightmare later on. Therefore, a couple should tackle the following issues before tying the knot with each other.

• What debts or loans does each person have?
• What assets does each person have?
• Will both contribute equally to the union i.e. all expenses are shared equally? Or the highest earner is expected to contribute more?
• What about spending habits? Is one person more of a spendthrift compared to the other?
• Who will be in-charge of paying off the monthly bills after marriage?
• Will there be joint accounts after marriage or maintain separate accounts?
• What are the plans for the future? For example, after marriage will there be a need to rent a place to live, buy a home or staying with the in-laws?
• Do both hold the same views or values about money?
• What about personal spending money? Does each person get equal personal spending money?

Today, men and women hold equal responsibilities when it comes to money. Gone are the days where women stay home while the men go out to work. Whether out of choice or necessity, women also seek employment and consequently have to deal with financial issues such as paying taxes, saving for retirement, claiming maternity benefits, investing for the future, etc.

In a marriage, a couple enters into a partnership, sharing a life together. Any good or bad consequences that come out of the union will affect both partners. Good money management will benefit the couple while bad money management will cause a rife between the couple. Couples who want to avoid cataclysmic money arguments after marriage should hash out and settle all money issues before getting married.

At the end of the day, each person will have a clear picture of the actual money situation and what to expect later on. The couple can then decide on the following

• How to improve their financial situation
• What changes to initiate
• Which areas need compromises
• Each person’s ideal money situation
• What sacrifices have to be made
Etc.

Before we got married, my husband and I did cover some money issues to find out where we both stand financially. We discussed about the up-coming wedding, our personal debts, money or assets we each have, our financial goals, our personal values about money, etc.

Did this help to prevent money arguments after we got married? Not exactly. We still have arguments about money but it seldom happens and the arguments are more constructive rather than destructive in nature. We both know what to expect from each other which prevents any shocking or unpleasant surprises. Most of the time, discussions about money are amicable as we have similar goals and values about money.

What about you? Is money a prickly issue in your marriage?

Jacquelyn is the co-author of the books “Teaching Your Kids About Money” and “Top 93 Personal Finance FAQs in Malaysia” with KC Lau. Jacquelyn is the pseudonym used by Amy Sipagal.

This article is posted at: KCLau's Money Tips

Couples Fight about Money

Pessimism and Money Management – bad choice of words to put into a sentence.

But let me tell you why it makes sense to inject a healthy dose of pessimism when it comes to managing your personal finance. This is most applicable for Gen-Y, generally referring to those born between 1977 to 1994.

Here are two distinct Gen-Y traits that will be detrimental to their personal financial standing in the long run.

Instant gratification and optimism.

Allow me to explain.

If you are a Gen-X-er (born between 1966-1976), then you would actually shake your head in disbelief as the young executive who just joined the company for a year had changed his smartphone model 3 times for the past one year while you still find your good old trusted Nokia (insert model number here) serves your daily purpose.

If you are a Gen-Y yourself, you will definitely feel the temptation to buy what your peers are buying. Peer pressure, anyone?

Here’s my ‘dumbphone’ since 4 years ago.

You can call me a dinosaur (if you know me in person) or you would probably thought I am still broke after working for 7 years (if you don’t know me in person).

One thing for sure – I am surely an outcast when colleagues discuss about the hottest Android/iPhone Apps during lunch.

Anyway, I digress.

The fact is, Gen-Y-ers feel the urge to get everything accomplished instantly.

Like doubling your stock market investment return in a year. Or tweeting & Instagram-ing  to their 2000 followers (and subsequently went viral on Facebook in 3 hours) about the-staff-that-got angry-and-wanted-to-beat-up-a-customer incident in a fast food joint.

Gen-Y-er live in the moment, so try telling them to plan for retirement three decades ahead. That idea will be instantly brushed aside.

Which leads to another point, optimism.

Most Gen-Y-er are living beyond their means. Read – expenses exceed net income.

“But that’s okay, I will earn more in the future as I am young, and there’s so much time ahead. I am convinced things will work out eventually”, so they think.

Keeping up with the Joneses is much more fun for Gen-Y-er, right here, right now.

But believe me, shit will happen. You will get retrenched, even if you are in a multinational company. In our father’s time, retrenchment is virtually unheard of for young people but not in this era.  My peers in their twenties – they were retrenched in the 2008 recession when companies closed down or sold certain departments in order to cut cost.

Living on borrowed money means you are wide open when the shit hits the fan.

Now here’s some statistics

1. A survey by Consumer Research and Resource Centre, released in July 2012 found that 47 percent of Malaysia’s young workforce between the age of 24 and 29 are crippled by consumer debt, whereby their monthly debt payments comprise 30 percent or more of their gross income.
2. 15 percent of the 1002 respondents had no savings.
3. 37 percent had never thought about retirement planning.
4. 54 percent were degree holders, showing that conventional education failed to provide any awareness on good financial sense.

An investment in knowledge pays the best interest – Benjamin Franklin, Founding Father of the United States

In Personal Money Aug 2012 issue, a fresh graduate, Tan from Penang sent in a question to the Consult the Expert column – asking on how to invest with his basic income of RM 2,800. He said he tries his best to save around RM 1,300.

Now, I absolutely salute him/her because:

1. He/She makes an effort to save 50 percent of his income

2. He/She is so financially aware at that age

Truth to be told, I was not that financially aware when I first joined the workforce. I saved only in Fixed Deposit during the early years.

I think someone like Tan is going to go far, and this is exactly what Gen-Y-er should emulate.

You spend like you want to grow rich, not as if you are rich. But most people just feel compelled to spend in acquiring material things to look rich.

If you want to look rich while you are not yet rich, how can you be truly rich? Click here to tweet this

It just won’t compute.

To quote a profound paragraph from The Millionaire Teacher: The Nine Rules of Wealth you should have learned in School:

Responsible spending habits are often overlooked by people who want to be rich (LCF: Actually, I think the better term is to be financially free). It’s one of the reasons many people nearing retirement age have to work when the would rather be travelling the world or spending time with their grandchildren. Naturally, not everyone has the same philosophy about work. But how many people on their deathbeds ever lament: “Gosh, I wish I had spent more time at the office,” or “Geez, I really wish they had given me that promotion back in 2012″.

Most people prefer their hobbies to their workplace, their children to their iPhones, and their quiet reflective moments to their office meetings. I am certainly among them – which is the reason I learned to control my spending and invest my money.

If you are a young person starting out and you see someone with the latest expensive toys, think about how they might have acquired them. Too many of these items were probably bought on credit – with sleepless nights as a complementary accessory. Many of those people will never truly be rich. Instead, they will be stressed. 

By learning how to spend like a rich person, you can eventually build wealth and material possessions without the added anxiety. 

**********

LCF (or Ching Foo) is a frugal and unconventional “early” Gen-Y who think differently from most of his peers, and had to battle his way everyday from succumbing to the many temptations to part with his money.

LCF blogs about personal finance matters at HowToFinanceMoney.com

KC Lau is borderline Gen-X and Gen-Y.

The above is adapted from the following columns in Personal Money Aug 2012 issue:

•  Simply CJ column by Ong Shi Jie, head of wealth management at OCBC Bank Malaysia 
• Mind Your Money column by Tho Li Ming

This article is posted at: KCLau's Money Tips

More Pessimism Needed in your Money Management Now

Evanna Phoon chats with Mr. Brian McMillan. Director-General of Society of Will Writers & Estate Planning Practitioners about Will Writing if you own properties in multiple countries

Q3: There are many Expats in Malaysia; some of them own assets in Malaysia. Or currently, many Malaysians own asset outside of Malaysia. Do they need to write multiple Wills to cover assets in overseas or they only need to write one that covers all?
A3: It’s appropriate to Write different Wills, one to cover the asset in Malaysia & one to cover the assets in the domicile country. It’s very common in UK & Europe. Example: British own property in Spain will have a WILL written in UK to cover assets in UK and a separate Will to cover those in Spain. You do not want your British Will to handle the Spain property because the succession rules, the tax laws are different in these two countries.
It’s quicker; it’s cheaper to gain probate if you have different Wills covering assets in different countries

About the Guest Author:

Evanna Phoon is the “Most Sought After Rockwills Will & Trust Specialist”. Her website is www.malaysiawills.com, where anyone can register for FREE SEMINARS on Will Writing & Trust and watch FREE Video Education Series to help increase awareness of Will, Trust and Estate Planning services in English, Mandarin and Cantonese.

She had done over 200+ video blogs on the topic of Will, Trust, Funeral & Bereavement care and Estate Planning. She was invited as a speaker at International World Bloggers Summit 2011@PWTC, Rockwills CEO achiever´s congress, Negeri Sembilan Chinese Chamber of Commerce & Malaysia SME Business Networking Seminar.

Evanna writes regularly for Malaysia SME newspaper and two Chinese medium magazines “mystudy.my” and QiJi.

Prior to joining the financial planning industry, she worked for a few years as an electronics engineer with Intel, Freescale, Motorola and Western Digital. While still studying in the university, she appeared in billboards and did catwalk modeling. She was Miss Astro Chinese International Finalist 1998/99 and had won Miss Sunway Beauty Pageant title in Year 1999. She is currently married with two children and love to spend her time mountain biking and outdoor sports with her family.

This article is posted at: KCLau's Money Tips

How to Write Your Will, If you own properties in multiple countries

Koon Yew Yin

The official and Government friendly printed media has been carrying column after column on the “water crisis” in Selangor during the past few weeks.  Readers will have noticed that the finger of blame for this so-called “crisis” has been pointed towards the Selangor state government and the larger Pakatan Rakyat coalition.  The prime minister and his Barisan colleagues have made repeated charges that Mentri Besar Khalid Ibrahim has failed to take care of the interests of the people of Selangor and accused him of allowing a water shortage situation to develop.

In his latest salvo, Najib has said that Selangor’s water crisis can be resolved.  According to him,

“It cannot be that the Federal Government is unable to resolve the water problem in Selangor. We can do it”

He also added that “we have to wait until the time comes when the people of Selangor make a choice and choose a government that can do it.”

This statement by the Prime Minister shows how dirty and unscrupulous the BN government is prepared to be in its attempt to stay in power.

photo: Carnie Lewis

With the elections due soon, it is evident now that no sector or area of life in the country is exempt from being made a political football by Barisan.

The public though is not fooled one bit by this cheap election tactic engineered by the political and economic interests associated with previous state government to win back the state of Selangor by playing on the fears of the public and by spinning a fairy tale on the lack of water in the dams.

This latest piece of political spin also suffers from the disadvantage that most people in the country are fully aware of the back ground and root causes of Selangor’s water predicament.

Selangor Water Problem Created by BN

When Najib argued that it cannot be that the Federal Government cannot resolve the water problem in Selangor, he conveniently forgot to add that in fact the water problem was created entirely and solely by the Federal Government.

It is a fact that the concession agreement for Syabas was approved by the Federal Government in 2005. Earlier, the Barisan Nasional government privatised the water industry to four different companies from 1996 onwards resulting in wastage and mismanagement, with the Selangor case the worst of the cases.

It is important to note too that in December 2009, the federal government provided a RM320.8 million back-loaded, interest-free unsecured soft loan to Puncak Niaga, the holding company of Syabas to settle their debts.  In other words, an expensive bail out at public expense.

What Others Have Written

Members of the public have also written to express their concern though none of this ever appears in the print media.  In December 2010, at the height of the Selangor state government’s attempt to submit a memorandum to the Agong over Selangor’s water issue approaches, the salary of Syarikat Bekalan Air Selangor’s chief executive officer was hotly debated over micro-blogging site Twitter.

In particular the readers were posting comments about the salary of SYABAS’s Rozali Ismail, who earns some RM425,000 a month, 19 times more than the salary of the prime minister, at RM22,826.65 a month.

“If UMNO’s brand of Ketuanan means paying its GLC CEOs RM425,000 per month, then I also want!” shouts one named ‘anthraxxx’.

A twitterati calling himself ‘fickryyaacob’, suggested that Rozali may have helped fund UMNO’s election campaigns in the past.

“Is every payment for a litre of water flow(ing) to UMNO? Are you funding UMNO’s election funds?” he asked (http://en.harakahdaily.net/index.php/berita-utama/1877-twitter-fun-as-syabas-ceos-fat-salary-becomes-focus.html)

More recently, Nat Tan has written an excellent post in Malaysiakini analyzing the crisis. I cannot agree more with his conclusion that the water issue is in reality a crisis of corruption (see http://www.malaysiakini.com/news/204258)

Water Gods Angry With Barisan

A few weeks ago when water rationing appeared a distinct possibility in Selangor due to the long drought, the Barisan leadership must have been congratulating itself that they had victory in Selangor state in the bag.

This is because Barisan would have been able to use their formidable spin machinery with assistance from Syabas to turn the people’s water shortage frustrations on Pakatan.  We can be sure that the hundreds of pictures and hours of television programming would have appeared focusing on the lines of people queuing for water in Selangor. The negative impact of the issue on the Pakatan and its propaganda value to Barisan would have been priceless.

Unfortunately for the Barisan and Syabas, the water gods have not cooperated with them.  Although there was a possibility of water shortage about a month ago in view of the prolonged drought, the heavens have opened up in Selangor during the past few weeks and the rivers and dams are full.

Repent Now

Now that the water gods have turned against them, my advice to the Barisan is simple: repent your crooked and corrupt ways.  Again, I like to repeat what I wrote last year on the issue

If this is an example of the New Economic Model (NEM), then God help our country.  All Malaysians, whether from Selangor or from other states, must demand full transparency and accountability on this issue.

It is the height of economic foolishness to award concessions or contracts without open competitive tenders. This warning is for all the 131 projects that are being envisaged under the Economic Transformation Programme (ETP) including the MRT project which is supposed to transform Malaysia into a high-income nation.( http://english.cpiasia.net/index.php?option=com_content&view=article&id=2088:empty-promise-of-reform-in-sgor-water-service&catid=211:koon-yew-yin&Itemid=169)

Post script

Now that the rivers and dams are full again, I predict that our Barisan chameleons will sing a different tune.  We can expect them to declare victory over Khalid and claim credit for the ending of the water crisis in the state.          

by Koon Yew Yin, the philanthropist tycoon.

This article is posted at: KCLau's Money Tips

No Water Crisis; Just Barisan Business as Usual

Recently, the Selangor state assembly passed a new regulation barring any state representatives and local council members from applying for state-owned lands. This is a really brave and unprecedented move which deserves more public attention than it has drawn so far. One question is whether the new rule also applies to the members of the royal family. There are probably many examples of members of royalty applying for state land. Should they be given special consideration or be treated the same as the public? I am sure there are pros and cons when it comes to applying the rule to royalty. The important thing is for the issue to be brought out into the open and for rational public opinion to prevail.

Amongst the physical assets belonging to the state, land is undoubtedly the most valuable. According to the Federal constitution, land is a state matter. Even if land is not owned by the state, the state still has control over the development and use of land through administrative and executive council rulings.

photo: thienzieyung

In addition the Town and Country Planning Act (1976) provided powers to the local planning authority in relation to planning applications for the purpose of land development. Section 19 of the Act stipulates, ‘no person shall commence, undertake, or carry out any development unless planning permission in respect of the development has been granted’.

Land is Big Business

What does all of this administrative verbiage mean in real life? Basically, the bottom line is that land alienation and land dealings are big business running to the tune of hundreds of billions of dollars, and the gate keepers are the civil servants and politicians.
Despite the importance of land to the state and citizenry – not only in monetary terms but also in terms of the overall quality of development (including environmental sustainability) the whole subject is covered in secrecy.

Who are the recipients of state land? How much do they pay for the land? What is the process of ensuring that the state receives the top market price for the land? Are land parcels alienated by the state transacted openly and transparently? These comprise one important set of matters which need reform.

The move by the Selangor state assembly to prevent politicians (especially elected ones) from making use of their position to gain privileged access to state land is only the tip of the iceberg in terms of the reforms necessary to make dealings in state land honest, transparent and accountable.

photo: Ezry A Rahman

A second set of issues relates to administrative controls over land which has already been alienated to private individuals. For example planning permission for development may delay or accelerate the implementation of project, resulting in lowered or higher costs for the individual or developer. This provides tremendous scope for corruption at many levels of the local government. I do not think I am exaggerating when I say that the majority of land and housing developers in the country have to pay “coffee money” to formal and informal “toll collectors” to ensure that the land issues are quickly resolved. This raises house prices for house buyers who are at the end of this production chain.

My estimate based from my own experience with the construction industry is that the price of the average house in Malaysia is higher by as much as 20 per cent or more as a result of the administrative and political toll booths found in the land and housing market.

The public also needs to pay special attention to the planning system. Since planning rules are flexible, any developer is at the mercy of the town planner and the approving authorities. There is no fixed rule regarding the area for parks, schools, secondary roads, the percentage of the total land area for commercial use and plot ratio for building.

Just imagine how the profit can multiply if a developer can get permission to build more units of offices or condominiums. This administrative discretion has only encouraged corruption. Admittedly it is difficult to fix planning rules or guidelines in perpetuity as conditions change. However, if the process of approval is open and transparent then land owners will not be completely at the mercy of the approving authorities.

I would like to suggest the setting up a board of appeal so that dissatisfied applicants can appeal for reconsideration. If there is an appeal board to turn to, dissatisfied applicants would not be so desperate to increase their bribes.

photo: chee.hong

Other controversial land issues are also surfacing. For example, it has been disclosed in an internet news portal that the Selangor state assembly has been buzzing with the revelation that Agriculture and Agro-based minister Noh Omar has been involved in a prawn project at his Tanjong Karang parliamentary constituency. According to the report, Sekinchan state assemblyman Ng Suee Lim claimed that Noh bought 30 acres of land at a heavily discounted price in 1995, the year he won the Tanjong Karang seat.
Noh reputedly had inked a deal to rent the land to Pristine Agrofood Sdn Bhd for its prawn farming project for 10 years. “Noh’s involvement raises the issue of conflict of interest as he is also the minister responsible for the industry…. people are having a hard time getting lands but a key leader is given land easily”. Ng added.

Start reform now

It is timely for all state governments to follow the example set by the Selangor State Assembly and to begin the process of cleaning out corrupt and unethical practices in the land and housing industry in the state wherever they may be found. As this process will be extremely complicated and sensitive it is likely to take many years. The sooner we begin, the better for the country.

I salute Mentri Besar Tan Sri Khalid Ibrahim and the state assembly for making the first move. Critics will say that this measure does not go far enough. For example, there is nothing to prevent relatives of politicians from getting privileged access to land.

This can be prevented by making public the details of every single case of new alienation by the state and for the establishment of a tender system in which state land is sold to the higher bidder in the open market. In this way, the state can generate a great deal more revenue that can be spent on developing the poorer areas. Many Malaysians, including I, look forward to hearing of the next land reform move by the state or federal government.

Finally, we must emulate how the Hong Kong and Singapore authorities sell their state properties and concessions by public auctions. It is truly incredible why after hundreds of study trips by our political and civil service leaders to the two cities that they have not got round to implementing this best practice of land sales by the state.

This is a guest post from philanthropist tycoon Koon Yew Yin.

This article is posted at: KCLau's Money Tips

Kudos to Khalid and Selangor State Assembly for State Land Reform Measure

This is the transcript of the webinar I conducted live with Jean Soong from Fundsupermart.

Jean:

Thank you, and Good Afternoon. First let me thank everyone who is tuning in for today’s topic on What is unit trust and How Important is it as a Saving and Investment Tool? On the next slide, I will be bringing you to six key pointers, starting with how everyone is an investor whether you realize it or not, the types of unit trusts available, how the right unit trust can be chosen, the methods of investments, and investing in both good and bad times.

Basic Forms of Investment

On the table we can see the basic forms of investments which most people have, starting with the savings account which is barely an investment and is more for liquidity – cash on hand whenever you need it. Naturally, it then progresses to FD, which is the fixed deposit where there is a 3.15% per annum. Credit investors are ready to lock in your money. EPF is provided to working employees as a form of retirement planning. From EPF you can earn 4-6% per annum in recent years. Unit trusts, meanwhile, could actually yield you with potentially higher returns, and they have no lock-in periods. Unit trusts range from low to high risk. Other investment options include a wide variety of money markets, bonds, stocks, property, and REITs, to name a few. Let’s go through them one by one.

A money market is actually a short-term debt by the government or financial institutions and corporations. Money markets mature in less than a year. This is how it works: RM1,000, for example, can mature in ninety days. In the future you can buy this for RM900, for example, and then you redeem the RM1,000 and pocket the RM100 when it matures after ninety days. Most of this money market instrument is not available to the public or to the individual.

Next we go on to bonds. Bonds are actually loans to governments or companies and they will pay you back the amount with additional interest. You are actually lending them money to fulfill the company interest or for the governments to carry out any projects. These interests pay back on a regular basis, for example, yearly, and it can also be quarterly. For this the interest rates decrease but if you can hold this bond until maturity you will be getting the fixed coupon rate.

Stocks. I am sure that some of you are already stock investors. Stocks are “shares” of a company, ownership of every piece of desk, filing cabinets, or sales of this company which you own a share for. Companies sell their shares to obtain additional financing for their business. Investors buy shares when they project good future earnings. Shares are affected by ‘macro’ and ‘micro’ factors and are very volatile as you may already know.

After that we have property and REITs. Properties that are commonly owned used to be residential or business, but now we have another group of people buying properties for the sake of investment. Property can be a good or bad investment depending on a lot of factors. The profit usually comes through rental or capital appreciation of properties. To buy a property, as we all know, you need high capital, and it is also low liquidity. For example, when you need money you may need to wait until there is a suitable buyer. There are a lot of different factors affecting the selling of a property. Lastly, you have REITs, which are real estate investment trusts. Equity REITS invest in own corporate properties, and revenues come from rentals or capital appreciation of their real estate assets. These are all examples of investments.

What are unit trusts?

What are unit trusts? Where do they stand among all these instruments? A unit trust is a portfolio that invests into all the investment instruments I mentioned. Basically, it is a basket of stocks or equity funds, bond funds that invest in corporate bonds, money market funds which invest into the money instruments, REIT funds, and property funds. It is well diversified locally and globally. You may a piece of U.S., Europe, or China by investing into unit trusts. It is managed by professional fund managers from top fund houses in Malaysia or foreign fund managers. What I mean by foreign fund managers is that this manager is managing from abroad in foreign markets which are being sold in Malaysia and carried by the local fund house.

Types of Unit Trust

Going on to the types of unit trusts on the market, there are five categories, and you can also find this information in your fund selecter tool at fundsupermart.com. There is the equity market, the balanced market, the fixed income market, the money market, and alternative investments. What do we mean by all these different types of categories? You can see that this money market fund has a risk rating from 0-1. So it is not very risky to put your money into the money market funds. The reason being, it is very low on volatility, the money will just be put in there to grow. You have the domestic fixed income funds, meaning this money is being invested domestically. The risk rating is from 1-4.

Global and regional fixed income funds have a currency exposure, and there is a slightly higher risk rating of about 4-5. After that, you have the global equity funds and the regional or sector equity funds. This risk rating is the highest, from 7-10. You have your investments in countries which are outside of Malaysia, and they are invested into either blue chip stocks or a fund that invests into small cap companies. The balanced fund has a risk rating from 4-9. From 4-6 I think would be pretty balanced and not too risky, and from seven onwards it is a high-risk market.

All the funds can invest into different geographical locations. Just because you are in Malaysia doesn’t mean that you should be constrained to invest in the home market. You can, of course, but you can also open up your options to investing into Asean, Asia (including/excluding Japan), and Australia, to name a few.

How to Choose the Right Unit Trust Fund

Now comes the most important question. With so many concentrations, how can I invest and choose the right fund? Firstly, understand how much risk you can stomach. Secondly, you should create and maintain an investment portfolio. What we mean by investment portfolio is you can have more than one fund from the same geographical location or fund category. This means if you have a unit trust where you invest in China, for example, you can buy 5000 units in China and you can also be allocating another 5000 to maybe Indonesia, and another 5000 into a fixed income fund which is not very risky. This is what we mean by a portfolio. Thirdly, you should set the comfortable investment horizon for yourself. Unit trusts usually invest in wall street for five years. I would be lying to you if I told you that you should by unit trusts and then sell them off without keeping it for very long or that you could get a very big profit within a short period of time. Unit trusts are a long term inv estment and is for investors who believe in keeping their money inside and letting it grow, let it ride through the normal economic cycle. There are good times and bad times, of course, and when you have hit your target return you can sell you funds. This brings us to my last point, that you have to set your expectations to match the portfolio performance. I’ll be giving you a few examples of a portfolio.

Conservative Unit Trust Portfolio

There is a portfolio for everyone. We start with a conservative portfolio. What is a conservative portfolio? You have 90% of your money in fixed income and only 10% in equity. If you invest RM10000, for example, you should have RM9000 in fixed income and only RM1000 in equity. It gives a very slow but steady return. What we mean by a steady return is that it’s stable, it’s low risk, and you do not need to manage it actively. You will be keeping this portfolio for at least three years or more.

Moderately Conservative Unit Trust Portfolio

Next we have the moderately conservative portfolio. For the moderately conservative portfolio we invest 70% in fixed income and 30% into equity. For the 70% into fixed income, again with the example of RM10,000 is RM7,000 and another RM3000 into the equity fund. This shouldn’t be a problem because for most of the unit trusts in Malaysia the investment amount starts with RM1000. This portfolio can give you reasonably good returns and is for investors who are able to bear a little bit of risk. This is a medium to long-term portfolio and you should be able to stay here for three years or more.

Balanced Unit Trust Portfolio

Next we have a balanced portfolio, which is actually rather popular because it’s neither too risky, nor is it too safe. It’s 50% into fixed income funds and another 50% into equity funds. This will help you achieve moderate returns with medium risk. The investment horizon you are looking at is at least five years or more.

Moderately Aggressive Unit Trust Portfolio

After that we have the moderately aggressive portfolio. It’s 70% into equity and 30% into fixed income. This gives you higher returns in a moderately higher risk, and the investment horizon should be between 5-10 years.

Aggressive Unit Trust Portfolio

Lastly we have the aggressive portfolio. It is not for the faint hearted, but if you are able to stomach the volatility that goes on in the market with all the ups and downs, you should be able to have an aggressive portfolio. You invest into global, regional, or single country equity. It has high risk and with high risk you are able to generate higher return. The investment horizon you are looking at is maybe 10 years or more. Most of the listeners out there are thinking, “10 years!? I mean, I’m putting my money in there for 10 years? How much return do I expect to have? First and foremost, of course, you will be wanting to beat inflation. Secondly, the purpose of the portfolio is to plan for your retirement, or you could be planning for your children’s education, planning for your new house, or anything like that. 5 years should be a very good time for you to keep your portfolio.

How can you Invest in Unit Trusts?

How can one invest into unit trusts? Say you are interested in having this portfolio, you can invest in a lump sum investment by cash or check. You can also invest using your EPF or you can invest periodically using the regular saving plan. Most investors are reluctant to reconsider their EPF for investment purposes and are content with the dividend yield. The dividend yield which is given for this past year’s annualized return was a 6% dividend, but if you had taken that money and invested it in unit trusts you could have made 18.33%. This unit trust we are using as an example was taken from a Malaysian unit trust. The EPF does not allow its members to take out their money; the unit trust is invested in to foreign markets, so you have to be investing into malaysian unit trusts. Even Malaysian unit trusts can give you 18.33% for the year of 2011. Meanwhile, for a three year annualized return, from 2008 to 2011, the unit trust can give 28.48% return. This is annualized, so every year you are getting 28.48%. That is compared to the EPF’s interest of 4.75% on this graph.

Should you Withdraw your EPF money to Invest in Unit Trust funds?

A lot of investors are reluctant to give up their EPF for investment purposes. They are content with the dividend yield, but if you take away the erosion of inflation you may be left with little of the dividend. The EPF body has allowed its investors to withdraw some savings from account one for unit trust investments. Is it worth it? If you judge from this slide, I think you can see that since the money is in there for the long run, perhaps you can pick it up and make your money work harder for you.

How much of your EPF account 1 money can you take out for your investment? This goes by age. You are not allowed to take out 100% of your EPF account one. I will give an example for a thirty year old. We just need to fill in your account one amount, your age, and then subtract the basic savings. For a thirty year old with 50,000, if you refer to the table, is 50,000 – 18,000, and then 20% of that money is 6,400. You can use this for investment. So, actually, its not the entire 50,000 that you can pick up and invest. It is the 6,400 which you can invest and it will generate 28% return for you over a year. Why not take a little bit out? Ask for it and take out your money to invest. When you settle this investment it eventually goes back to your EPF as well.

Why you should invest regularly, both in good and bad time with unit trust?

Investing in both good and bad times: To invest in regular timing means to avoid market timing. You should be disciplined to invest consistantly regardless of market conditions. As we look at this chart, how many of you have experienced this before or have already seen this chart? The point of euphoria is at the top of market. Usually investors feel great and it is usually the time that they buy more. When it goes down to a point of maximum financial opportunity at the bottom you have depression. Investors will usually think, “Maybe the market is not for me. You can see this is a cycle that repeats itself. When it is going up you want to ride on the optimism and you want to invest more. But during that time it is not a very good time to invest.

Jean – I just wanted to ask how many of the listeners actually have seen this chart before.

KC – I don’t think any of the viewers have seen this.

Jean – Oh, Ok. So it is a good reminder to watch these. Each time we show this in one of our seminars, most of our investors feel very connected to this because they are bad. As much as we try to be like Warren Buffet or any of the great investors we just don’t know when the market is going to be at its top or if it is already at the top. So your journey is during the best market times anyone can give you the best advice or you can throw it down and then you lose your investment.

Avoid Timing the Market

If you want to be an investor in both good and bad times, you have to avoid timing the market, talking about unit trusts. For stocks you have to try to time the market but to know if your time is correct or not, it depends. You need discipline to invest consistently and to not be overcome by your emotions. You need to choose the undervalued market. I’ll quickly explained what an undervalued market is, and you can also refer to our reccomended funds for fund ideas.

When I talk about being consistent and not timing the market, I just want to say that the unit trust is designed to ease the investment slide. The regular savings plan will help investors to achieve their first few coins. This is a monthly subscription plan which instills discipline to the investor and it is a based on automatic deduction. There are no additional fees for this. With this the investor can also avoid the market timing and not be overcome by the emotion of investing. Every month there is a dedicated amount to be put into the specific fund that you like; it can be any fund. It gets rid of the hastle for you because you don’t need to manually put in an order and make the payment. This is about investing discipline.

Make profit by investing in the under-valued market

I mentioned to choose the undervalued markets. Over here we have the greater China market, and also the emerging markets. Why is it so? If you look at this chart, it is actually for greater China. Greater China consists of China, Hong Kong, and Tiawan. For year 2012 we have PE, which is the price ending ratio of any investment or primary you look at. Estimated PE is what is being calculated now, what is happening now, and the fair PE is what it should be at. There is a lot of potential for these countries that they are not reaching yet. You can see for the year 2012, China. for example, had an estimated PE of 9x, but in fact we think a fair PE should be at least 14x. Any difference between the 9x PE and the 14x PE is a discount. What we mean by discount is that you are investing into this cheap market, which has more potential than where it has come. Upset potential ranges from 43.6% for Tiawan and 32.3% for Hong Kong to 45.2 for China by the end of 2013. China’s economy is e xpected to grow by an estimated 8.25% to 8.5% in 2012 and 2013. So their growth is expected to be faster than any developed market. There are probably already a lto of people out there saying that China is good for investment, but some of our listeners who may have China funds may feel not so because maybe their China fund is now showing negetive returns. Given the current market condition, I would like to ask, there are a lot of other countries giving a negative return but when we revisit the chart that I showed just now, does this mean that there is no room for investment? We don’t know if it has hit the bottom yet, but at least according to our PE calculations these are actually cheap markets with good value that you can consider investing into.

The next slide is for global emerging markets. The U.S. and the Euro are currently looking gloomy or glum, so a lot of the tension has been switched over to the asian side, and especially for the global and emerging mar kets it has a lot of potential. So notice all the estimated PEs are also very low, and the fair PE is estimated at 14x. We are seeing a lot of discount in the global emerging market. It is currently trading at 9.7% and 8.6% PE ratio based on 2012 and 2013. There is an upside potential of about 35% per annum by the end of 2013. This is our research analysts’ estimations.

Always refer to Fundsupermart.com’s recommended funds for fund ideas. We have almost 200 funds on our platform to help investors choose. We have a list of 23 funds which we picked out and it is for investors who already know or have anidea where to invest what they like or they can read the investment ideas on our platform. After that you can choose from our 23 funds whether you want to buy or not. How is this methodology picked? It is picked by our researcher analysts. We have the analysts from Malaysia, Hong Kong, India and Singapore. It is based on 60% performance, 20% expence ratio and 20% risk.

That is my introduction to unit trusts. I hope it has been able to help you and if I’m too fast you can let KC know.

Jean – KC?

KC – I think you are doing a good job.

Jean – Aw, thanks.

KC – The most important issue is what to do during the market cycle. The most common question I have gotten from my subscribers is they ask, “I bought this certain fund and then it is giving negative return nearly 30%, what should I do?” What do you reccomend normally if an investor is making a loss of this kind?

Jean – We get a lot of this. Trust me, you are not alone when you ask this sort of question. In fact, being an investor myself, I have my doubts when I see negative returns as well. You must always think about what the investment underlying your fund is. If it is China markets right now, we would tell the investor to look at the evaluations. Do not look at the price because the price does not indicate whether the market is expanding or changing. If we look back at the evaluations for China and Hong Kong we can see that the price is way below the fair PE now. There is a formula which can be used by the analysts and stock pickers. They use PE as the guidepost to investment. When we say that the market is changing and there is a lot of upside in potential, you just have to be patient and if you can use the regular savings plan to put in a little bit of money on a monthly basis, which will help you to average out your price. When you average out your price you will encounter situations when the market moves up here you will be telling yourself, “Oh, I wish I knew this would happen, and I should have bought when the market was down.” This helps you to skip a little emotion, and when the market is down, great, you’ll be giving more units and they will help you to average your price. But when the market goes up at least you know you won’t be buying everything at the most expensive price. We will usually suggest using the regular savings plan. When a client comes to us and says that this fund is not performing well, we will see which market this fund is investing into or which sector, and we can propose something better. We will normally tell the customer you can consider, maybe, this one, and switch into this one now, but if you realize it, meaning if you sell it, then your loss is not only a paper loss, but is really come out. You lost your investment here.

KC – Ok, good, thanks for the great answer. Fundsupermart is the only way I invest in any unit trust, I dont invest in any other fundhouse, true agent or anything. Why don’t you tell us about fundsupermart?

Jean – Thanks for the support KC.

Who is Fundsupermart?

Who is Fundsupermart.com? Fundsupermart.com is a platform for you to buy, sell, and switch unit trusts. This is the simplest way that we can explain it. We have 20 fund houses on our platform, which are: ASM investment, Alliance, CIMB, Eastspring (formerly known as prudential), Hwang, OSK, to name a few. 20 of these fundhouses are on our platform for you to find. We don’t have Fundsupermart.com unit trusts. We are generally a distributer which distributes close to 200 funds.

Fundsupermart is the online unit trust platform for iFast Capital, which is a subsidiary of iFast-OSK, which is a joint venture between Malaysia’s OSK Investment Bank Bhd and iFast Corporation. We have the necessary license. We have a lot of investors who worry what will happen if we cease as a business and whether we have the necessary license. We are licensed by the securities comission to deal in unit trusts and also to provide investment advise. We are with the federation of Investment Managers Malaysia (FiMM) and are registered as an Institutional unit trust Adviser (IUTA). We are the online distribution for iFAST Capital and were launched in malaysia in August 2008. We are entering our fourth year in Malaysia now.

We are in Singapore, India, Malaysia and Hong Kong. In Singapore we are already on our 12th year, we started in 2000, and we are the largest online unit trust ditributer in Singapore. In Singapore we are partnered with SPH Asia One and we have more than 300 funds in Singapore. We were in Hong Kong one year before Malaysia, so that’s 2007. And in india we started one year after Malaysia. How safe is iFast Capital or Fundsupermart? I already shared with you that we are liscenced with the security commision and FiMM. We have a nomineees account and also a trust account. This means that even though you are buying unit trusts from us, the asset is actually registered under your name. We give out the physical and PDF versions of your unit trust holdings, so if we cease as a business you just have to print out this statement or bring it to any other distributer, bring it straight to the OSK or Prudential which you have bought your unit trust from, and they will ask you if you wnat to transfer to another distributer or if you want to sell it out. No problems with that. Why Fundsupermart? You can traditionally buy unit trusts from the agents or from the bank, they wait for the bankers to tell them why it is better than the FD. Fundsupermart it the obvious choice because our sales charge is 2% or lower. We help the investors to minimize investing cost. Generally outside of that the assistance that you’re paying for is 5-6% so with 2% or lower you cut out more than half of your cost, which helps you to break even faster. For products and services, we have a wide array of products and you can manage everything under one account. These online transactions we try to make as hastle free and as user-friendly as possible to all our investors. We also have seminars. This is our first web seminar but we also have lots of live seminars being organized in our office, for example, altogether with the fundhouse, or even recently with the star alliance. As for fund information we have the latest information and data and we also have strong online tools. Being a distributer with 20 fund houses means that we can have a neutrality on all the funds. We stand on a neutral ground and we are not biased for any fund h ouses. This is very important for investors because when they ask us for any advice or they want to know which fund is better compared to the other we are able to give them an independent view and it’s not just for the sake of selling the fund. This is a comparison of all the investment channels in Malaysia. Sale charges, as I mentioned, by banks or agents is 5-6%. Fundsupermart is a maximum 2% for equity funds or lower. Some money market funds are selling at 0%, so there is no cost for investment at all. For the range of products, banks and agents may be restricted to be under the asset house or under the particular fund house only. In Fundsupermart we have 20 top fund houses with more than 106 funds. For transaction efficiency you have to submit forms or hard copies that you earn from banks or agents, but with Fundsupermart you can forget about that! You will be getting online transactions or statements. For fund information and tools, we have a comprehensive on our form, and we also have a chart center which will give you up to 10 years of historical performances. The fund selector which is what I showed in the beginning is compared to a fund search engine. So if you want to buy sharia funds for example, you can just click sharia and we will show you all the sharia funds on our platform. As for Research Reports, we know that for unit trusts it’s a bit difficult for investors in Malaysia to get their hands on the information because they cant get ahold of their fund manager or they can only ask the agent which in turn has to go to their manager or go to the necessary people to get the answer that you need. But with Fundsupermart we have our independent research reports which are written by our regional research team, and we also have regular meetings with the fund managers to ask them how they feel about the current market and how they will position their funds to make them more resilient for the future. You can get a lot of investment ideas from our platform. The main priority for us at fundsupermart is not to sell the funds, but to provide investors with lots of investment ideas. If their agent is able to provide you with so many ideas of places to go for your holidays and make it so easy for you to plan where to go and what to do, it’s the same goal for fundsupermart. We want people to have a lot of investment ideas on how to grow, and all this is achieved through our investment articles. We also have idea of the week which is written for our fundsupermart mobile which you can download to your iphone or to your android. So it is a free application you can check it out and we also have a lot of latest promotion. The promotion goes in line with our market call so if we like a certain market, like the emerging market, we will lower our sales charge and it is not generate more sales but rather is an incentive for investors to invest. We have seminars and events and of course we have the reccomended funds.

This table I am showing as example of investing in unit trusts over a period of time. For the past three month you can see some negative, and one year you can see some negative, and especially Asia and Japan. That’s a negative 15.8 and the emerging market is negative 18.78. These are the undervalued markets we are talking about. If you are buying it, you are buying it at a discount now. Also, earlier on I mentioned the healthy investment horizon. If you looked at three years, if you are able to go for three years investing in fund supermart unit trusts you can see the majority of positive return. I’m not saying this is definitely what you will be getting, but this is based on the historical return. So you have some information after five years and even after ten years, because some funds have more than ten years to relieve. There is a general misconception about buying new funds that are newly launched which will generate better returns for the investor because with the fund that has a historical fund of at least three years you can know how the fund manager managed the fund in bad times, its not only about the good times. When it’s good, it’s good. But during the bad times usually it is the fund house fund manager who can make the fund resilient and also respond timely to you. That’s Fundsupermart.

What about Switching Funds? Is there a fee involved?

KC – Thank you Jean, you have provided very good information about fundsupermart and I will say that the first thing I like is the low cost of investing with you guys. You save more than 50% of the cost, which is the entry cost. How about switching funds? Like switching from fundhouse A to fundhouse B?

Jean – If it is within the same fundhouse, for example, OSK. OSK to OSK there would be no switching fee, if it is within the same tier. What I mean from same tier, is from equity to equity, so if it is from 2% to 2%, there’s no charges there. But from 0% to 2%, there would be the sales charge. Because you are buying at no charges, and you want to switch it to a higher sales charge fund of course the 2% charge is there. The good news for fundsupermart is that we designed something called a credit system. If you switched RM10,000 from 0-2% before we will give you 10,000 credits so that the next time you switch again where there are any costs incurred you will minus off using the credit. So if you invest next time at 5% and you have some switching costs we will use your credit

to minus off 5,000, so you don’t have to pay the cost.

KC – Oh, I see. So this is no cost.

Jean – It can be considered no cost, yes. This is the first of its kind in Malaysia for a credit system.

KC – Yeah, It’s great!

Jean – For the different fundhouses, for example, I will have to highlight Alliance to Canana it is a normal sell and buy. We have to sell your Alliance to buy Canana. This is no cost for selling and for buying there is the normal 2% to buy. What is the difference with doing this elsewhere or doing it at fundsupermart. As I have already mentioned in Malaysia there is no such thing as switching from different fund houses. What this means is that you do not need to wait for your money to come back after you have sold your fund. Once you sell it today, we will buy you your other fund within two business days. In contrast of waiting for your money to come back in maybe four to five business days, while you get a check, you have to bank it in and then you get to write another check for a different fund house, we can help you get this done withing six days. In six days you will see it in your holdings online. So it is completed for you.

KC – Yeah, that’s really convenien t. Like you were talking about waiting for a physical check to come and then you go banking and then you go ahead and buy another fund, that’s a lot of trouble. We have many questions for Why FS, let’s see if we can answer them. The first question is: Are we able to purchase funds offered at fundsupermart Singapore and Hong Kong.

Jean – No, You need to open a fundsupermart singapore or fundsupermart Hong Kong account. For fundsupermart Singapore it’s very easy to open, you just need to go to our website at fundsupermart.com.sg fill in the account of the name form and post it together with a utilities bill or a phone bill or anything like that. The regulation in Malaysia states that our foreign investments inside a particular fund cannot exceed a certain percentage. That’s why in singapore you have a variety of funds that are single country investments, meaning if you buy a malaysia fund, it’s 100% in Malaysia. We are not allowed to have that in Malaysia unfortunately. If you are interested in buying Singapore funds, please open a fundsupermart Singapore account, it’s free as well. Now as I know, for Hong Kong it’s a bit more of a problem. You can still open an account but you will have to bank in a certain amount of money into the account first. So this is in compliance with the Hong Kong financial gu idelines.

KC – So you needs to have money inside the funds before the account is interactive.

Jean – That’s right.

KC – Not like in Malaysia where if you open funds in an account, you don’t have to pay anybody at first. After set up is done, you can transfer money inside.

Jean – Yes.

KC – Ok, Good, so we have another question. This person asks: “I want to know, when you talk about the conservative portfolio, what is the annualized average return we are looking at?”

Jean – Let me just look back at the conservative portfolio. This is 90% in fixed income and 10% in equity. Fixed income is usually able to yield you about 5-6% a year and equity can maybe give you 20 or more percent a year, if it’s a good year. When you take the 20% in turn with the 5%, you have to average it out so it will be about 10%. This conservative portfolio does not contain a lot of risk. Like I said earlier risk is usually equal to perrformance. If you are not taking a lot of risk chances are that the return will not be that great but it is a very steady return. At least you wont be seeing peaks or lack of dividends just compared to the very aggressive portfolio.

KC – I hope that answered their question. We have another question: “Why are common mutual funds not available?”

Jean – This is a question that we get all the time and I am very happy that I get the opportunity to make it clear here. For common mutual funds they are selective funds, meaning they are only selling it to their banks or to their agents. They are not open for any other distributer to carry their funds. In order to sell common mutual funds, you can buy from your bank or from your agent. For the moment they are not joining fundsupermart.com’s online platform, and I do believe they have their own online platform as well. So on the online platform, the surcharge is still fixed at 5-6%.

KC – Oh, I see. So if they buy using the online platform, do they still need to go through an agent service?

Jean – As I know you do go online and buy for yourself, you do not need an agent service.

KC – If the charge is the same, is it better to go through the agent at least to have someone check it?

Jean – Yes, I think so too. You are paying the same cost, so maybe you should have an agent to help you out with that.

KC – Here’s another question. He wants to know whether the investment app will allow for mobile transaction.

Jean – No, because that app is more for generating investment ideas. There is a lot of tracking for investors, and there is also a very helpful function for you to check funds’ price and performance. For some investors they do have a wishlist. They want to buy a fund but they haven’t bought it yet. They can track that fund on a daily basis and when it hits the price that they want they can go ahead and purchase it. So, for now, the app is not for any transactions, but we are looking to enhance it in the future.

KC – Ok, good. So that means that in the future we may be able to see our statement from the app?

Jean – Yes.

Question: Can you invest with Fundsupermart Hong Kong and Singapore?

KC – Ok, Jason wants to know how to open an account in Malaysia with fundsupermart. It is very to open an account with fundsupermart, you’ll get through it in about five minutes’ time. Let’s get to another question. Before that, if anyone listening out there wants to know anything, you want to ask Jean about unit trusts or about fundsupermart, you can simply type your question in the chat box. We only have about five minutes to answer your question, so let’s hear from you. Now we get to another question. He wants to know if he wants to invest in Singapore or Hong Kong, does he need to open a bank account over there?

Jean – I think it is most convenient if you do have an account over there. For Singapore, you should have either a EDS account or a OCDC standard charter and there is another one that I am not sure of. Those are the Singapore accounts that you can use online banking for to ease your transaction. If you do not have a singapore bank account, you may need to do a telegraphic transfer each time you make a payment, and the same goes when you liquidate your investment, they will also need to issue you a check which you can’t bank in Malaysia, so they will need to do it by telegraphic transfer and there will be some cost involved there. So I would strongly suggest that you have one of the four accounts to make payments and also for a bank for fundsupermart to send its proceeds to you. As for Hong Kong, I’m not sure, because I’ve served Singapore before and Malaysia currently, but I’m not sure about the Hong Kong site. As I know it’s only for the account opening that you would need t o have a certain amount before you can start. I would think that it makes sense for you to do telegraphic transfers as well if you do not have an account over there.

KC – Ok, thank you for your answer. I think we will get to two more questions, one is from Rosilla. She wants to know who will observe investor portfolio and sell while investor was gaining from investment when everything is through online. Do the agents still decide on the buy and sell?

Jean – For funsupermart with the lower sales charge we have investors who ask, “What’s the catch.” There is no catch, but we need the invester to be more alert and DIY. So this is a platform for investors who are keen to do their own investment, or they have had not very good experiences with agents who are not able to help them. So you have to be very hands on with your investment. For unit trusts it’s not very big changes on a daily basis in the prices. What you need to do is merely set an investment horizon and expected return. When it hits it’s expected return you can sell it off. There will be no individual to help you oversee your account individually, but what we do have is a client investment specialist. This is a new position which we just created recently. If you have any problem you can email our client invest ment specialist and they will come up with a suggestion for you on what fund to add on or whether it is a good time to sell off now, or what else is recommen ded for your account. So they will give you suggestions but at the end day you will be the one who wants to buy more or sell more. This is one thing as far as human interaction. Secondly we have a ceiling price and a floor price indicator. This means that, for example, if you buy a fund RM1, and you want 50% return. You can set a ceiling price so that when it hits RM1.50, an email notification will be sent to you and you will know that it hit your projection, so from there you can decide what you want to do. The floor price is also, let’s say, again, for RM1 you want to buy more of this fund, so you set RM.80, and when it hits the price that you set there there will be an email nbotification sent to you. You can also decide whether you want to buy more or not. We need investors to be more savvy to be able to be in fundsupermart. The processes are very easy, it’s just a three to four step for buy, sell, or switch, but more is on the investment ideas, where to get it from. So we are trying very hard to give out lots of ideas on our website and also through our investment specialists and client service.

KC – Just now, I think I missed something. Did you say we can get advice from an expert?

Jean – Yes.

KC – How do we do that?

Jean – We call this our client investment specialist. If you go to the website there is actually one chat page dedicated to them, so there is a column where you can chat your question, or you can also email them at investhelp.my@fundsupermart.com.

KC – Ok, thank you. We’ll take two more questions. Ok, a simple one, Rice wants to know if you can give him a copy of your presentation, is it possible?

Jean – Can’t say, we don’t usually give out those. I don’t think it is a problem but I will probably just have to remove some of the slides which I can’t give out. Mainly it is a very general slide, so it is fine for me to have it.

KC – Maybe he will email you, or something?

Jean – Yes, he can email me that, no problem.

KC – Ok, some other question. Among all the unit trust investments, which one provides constantly good returns, like 20%? This question was asked by Evelyn.

Jean – If you would like to have at least 20% return per annum, I would say you should go with the equity funds. So it would be a more aggressive fund, and the risk rating is from 7-10%. For the aggressive fund we see this table here. All these funds are equity funds, and you can see that over a period of three years or even two years, you have funds that can generate up to 20%, and even see one that goes up to 50% returns. So, if you are looking for 20%, I would say go for equity funds. It can be any fund that invests into stocks, let it be from Malaysia, China, or emerging market, or the RIC which is the Russia, India, China, Brazil.

KC – Currently on the platform you have a list of 23 recommended funds and some of them are definitely in the good deal category.

Jean – Yes.

How fast is the effect of stock markets on equity funds?

KC – Okay, this is a question from Peter: “How fast is the effect of stock markets on equity funds? Is it one day or two days, or immediately?”

Jean – The prices of unit trusts are computed daily, so there is only one price a day for a unit price, different than stocks. When you buy stocks it’s real time, and you can only buy if you have a seller. But for unit trusts you can by any time, and you can also sell at any time, the fundhouse is obligated to buy them from you. What it means by computed daily is that the stock needs to close on that particular day, and then they are computer priced and come out at the end of the day. So you only know at the end of of the day or two days later. There is a lag effect there. Since they are stocks that invest into thestock market of the particular country, I will say that if the stocks are not performing very well that day, than the unit price will go down as well. It will not be as great as the impact of a particular single stock, for example, because it is a basket of ten or more funds that are being picked by the fund manager from the stock. So it can either be the small cap stocks, or the blue chip stocks, or it can even be just technology stocks, so it would definitely be reflected in the unit trust, but at a much slower pace.

KC – So it is affected daily, but it’s not affected every hour or so, because it is based on the closing price of the stocks, right?

Jean – Yes, that’s right.

KC – Ok, this is the last question by Dr. Edmund, he wants to know, Why can I not grow a fund past the lowest profit recently?

Jean – Is Dr. Edmund holder for Kenanga growth fund?

KC – Yes.

Jean – Ok, Dr.Edmund, you don’t have to worry because recently Kenanga growth fund had stocks split, so for each one unit you get an additional two units. Also, the price fell about RM.03 to about RM.70, so they did a stock split, it wasn’t that the fund performed badly.

KC – In unit trusts, is it called distribution?

Jean – It is also called stock split, but it is a form of dividing.

KC – Ok, we have come to the end of the webinar, so can you tell us how we can contact you? Or if you want to open an account you can go to the link. This is the link where you can fill out the form at KCLau.com/webinar/fsm. There you can use a simple form, you can fill out your name, mobile number, and email address, and a representative from fundsupermart will contact you, then they will help guide you through what kind of account you need to open, there are two types.

Jean – Account opening is free and there is also no cost at activating your account. Your only cost is when you buy a fund at 2%. Pretty much we are an independent platform for investors that feel free to invest. We also do not puch anybody or a product to our investors out there.

KC – Ok, good. Can you show me your email again?

Jean – Yes. If you have any enquiries, you can contact me or Alvin. Alvin is from our marketing team as well. My email is jeansoong@fundsupermart.com, and Alvin is alvinwong@fundsupermart.com.

KC – Just a question I suddenly thought of, I wanted to ask you this: Do you have any sort of special deal for my subscriber?

Jean – In fact, you’re right KC. We have a very good deal right now. Not only for KC Lau subscribers because the deal is so low we don’t know how to beat it any more. If you open an account at fundsupermart for the first month the sale charge is kept at only 1%. There is a further discount.

KC – So if you would be paying 2%, you’re paying 1% for the first month?

Jean – Yes. And if you are keen to start the regular savings program, which is monthly, from as low as RM100, you can get 1% for the first six months.

KC – Wow, that’s good!

Jean – Yes, because if we go any lower than this, I think it’s gonna have to be zero already.

KC – I wanted to ask, what about existing customers?

Jean – For existing customers, we do have our gold and silver program. This is for investors who have a certain amount of investment. And also I would like to let our listeners know that our latest recommended fund, for year 2012 and 2013 will be out next month. It is very exciting for us, because we have added an CIMB, Hwang, and another fund house is going to be up soon, so we will have 21 fund houses, and the list is going to come out. We will be having a lot of highlights, so probably you will see the reccomended funds in the financial magazines and newspapers. This is in july.

This article is posted at: KCLau's Money Tips

What’s Unit Trust and How is it Important as a Saving and Investment Tool?

Speaker : Mr. Mike Grover
Profile : Tax Specialist, Senior Partner of Ernst & Young in Malaysia, Brunei, Singapore, China, Hong Kong & Australia
Topics : Labuan Tax Efficiency and Wealth Planning for Malaysians

Q1: For Expats and their underlying tax issues
A1: it’s common for expats coming to Malaysia marrying the locals, when they decide to return to their home country. When the expats pass away, his transfer of estate to his Malaysian wife is not exempted from tax. The Malaysian spouse will suffer from huge losses paying inheritance tax. In UK, it’s 40%!!!
To avoid heavy taxes, the recommendation is to place the assets into trust, so that the wife can then enjoy the inheritance tax free.

Q2: We all thought Malaysians are not subjected to inheritance tax, but why you say Malaysians fall into paying inheritance tax if we own property overseas?
A2: Malaysians do not need to pay inheritance tax but if their property is located in countries that has inheritance tax, they are subjected to PAY the TAX. WOW !!! THIS IS SOOO DISTURBING TO ME NOW.”
However, the inheritance tax does not apply to movable assets (shares, cash, unit trust etc)

It’s so simple to side step and avoids the tax – plan ahead and structures your assets

Key point: there’s a time to make money, there’s a time to protect your money. Plan ahead to protect your money from the claws of the IRB.

About the Guest Author:

Evanna Phoon is the “Most Sought After Rockwills Will & Trust Specialist”. Her website is www.malaysiawills.com, where anyone can register for FREE SEMINARS on Will Writing & Trust and watch FREE Video Education Series to help increase awareness of Will, Trust and Estate Planning services in English, Mandarin and Cantonese.

She had done over 200+ video blogs on the topic of Will, Trust, Funeral & Bereavement care and Estate Planning. She was invited as a speaker at International World Bloggers Summit 2011@PWTC, Rockwills CEO achiever´s congress, Negeri Sembilan Chinese Chamber of Commerce & Malaysia SME Business Networking Seminar.

Evanna writes regularly for Malaysia SME newspaper and two Chinese medium magazines “mystudy.my” and QiJi.

Prior to joining the financial planning industry, she worked for a few years as an electronics engineer with Intel, Freescale, Motorola and Western Digital. While still studying in the university, she appeared in billboards and did catwalk modeling. She was Miss Astro Chinese International Finalist 1998/99 and had won Miss Sunway Beauty Pageant title in Year 1999. She is currently married with two children and love to spend her time mountain biking and outdoor sports with her family.

This article is posted at: KCLau's Money Tips

Labuan Tax Efficiency and Wealth Planning for Malaysians

Do you have a proper money management system set up for yourself? Why is it important to have one? Have you ever forgotten to pay any of your bills on time? Have your ever misplaced any of your financial records? Are you often clueless as to how much you have in your various bank or investment accounts? If you answered ‘yes’ to any of these questions, then you probably need a proper money management system to prevent any of these incidents from reoccurring again.

Having a proper money management system simply means establishing a set of tasks that can assist you in reaching your financial goals. Below are some examples of money management tasks.

• Prepare a spending plan / budget plan (monthly)
• Pay utility bills (monthly)
• Pay credit card bills (monthly)
• Pay house mortgage and car loan (monthly)
• File finance related documents / financial records (monthly)
• Analyze net worth (yearly)
• Complete income tax return (yearly)
• Review financial portfolio (yearly)
• Review insurance needs (yearly)
• Review retirement plan (yearly)

Looking at the tasks above does not look so intimidating after all as you are probably doing some of the tasks consistently already. It is your responsibility to ensure each one of the tasks is completed according to schedule.

If you are thinking that it is still a lot of work to do, then use the computer and internet to simplify your life. For example, you can use online banking to pay your bills, monitor your account balance, create a spending plan, etc. If you are computer savvy and like the idea of using financial software, below are some tasks you can do to manage your finances even more efficiently.

• Create financial graphs and reports
• Put all your accounts in one place
• Do a daily or weekly tracking of your expenses
• Analyze your spending history
• Keep track of your assets, liabilities and net worth
• Set up reminders for bill repayments

Do a search for ‘free financial software’, ‘financial software’ or ‘financial tools’ and you get a lot of choices to try on. Examples of often-heard financial software are Quicken, Mint, Mvelopes and Myspendingplan.

OK, you have reached the bottom of the page. If someone asks you about money management, you are not in the dark about it anymore. Hopefully, reading this article has given you some ideas on what you can do or should do to manage your money and put a money management system in place.

Do you have a system already? Is it helpful?

Jacquelyn is the co-author of the books “Teaching Your Kids About Money” and “Top 93 Personal Finance FAQs in Malaysia” with KC Lau. Jacquelyn is the pseudonym used by Amy Sipagal.

This article is posted at: KCLau's Money Tips

What is Money Management?

The debate on the pros and cons of Penang hill development above 260 feet has been dragging on for a long time. Both the BN and the PR governments appear to be afraid or hesitant to allow development above 250 feet so that the issue has taken on a policy ban dimension.

Is this policy decision restricting hill development to below the 250 feet level the appropriate one to benefit the state and the people? In my view this policy needs to be reconsidered.

Little Logic in Banning Hill Development Above 250 Feet

I cannot see the logic of banning development above the 250 feet level. Even the ordinary citizen I am sure cannot see the logic of this ruling. If the ruling is meant to show that the state government is engaged and proactive on the issue of hill development, then it is the wrong message to send out. In my view, the hill above 250 feet is just as capable of supporting environmentally and socially sustainable development as the land below 250 feet. To argue otherwise makes little sense.

How to make use of the billions ringgit worth of Penang Hill assets?

The correct strategy is to remind the people that they will be the beneficiaries of development of the Penang hill. To restrict the development to below 250 feet is simply to waste an asset which is worth tens if not hundreds of billions of dollars.

This restriction may have been necessary in the past when the know-how and technology available was less advanced or reassuring. However new knowledge and recent engineering and technological innovations (see the many examples of hill development in Hong Kong) show that hill development above 250 feet can be carried out responsibly and sustainably.

Instead of saying “no” or be seen to be procrastinating on the issue of hill development, the Chief Minister needs to show that he is made of sterner stuff and he must take the bull by the horn. He must speak out and act decisively on the hill issue. This means that he must explain that his Government has the best interests of the people and that the rational and planned development of Penang hill under an open, clean and efficient government will benefit the state and the ordinary Penangite.

Of course it is always easier not to make any controversial decision to pre-empt losing some votes on what is perceived to be a hot potato issue. However, the Government must not be afraid to make any decision that will benefit the majority of the people, provided the decision making process is done openly and transparently and after a careful analysis of the pros and cons of the issue.

Recruit a World Class Consultant

For a start, I propose that the Penang Government engages a reputable engineering consultant to find out how to develop the land above 250 feet. The consultancy for the engineering consultant should be set out in a rigorous and transparent manner to ensure that it attracts bids from the best firms available.

The Government must also assure the public that the Government intends to share with key stakeholders and other interested parties the outcome of the study as well as to engage with them in any further actions relating to hill development that may arise.

How to generate more revenue?

Any sensible government, Barisan or Pakatan, must change their “cannot do or won’t do” policy if they are confident and backed by rigorous data that the change will benefit the people and due diligence is done. Land is different from other natural depleting commodities like gold, tin or other minerals. Land can be used for real estate development which in time can produce continuous taxes and other direct and indirect ancillary revenue to benefit the people. Just look at all the tall buildings in any city. They are built by entrepreneurs who pay taxes and other dues to help the Government to help the people. Any good government must always be on the lookout for ways to benefit the people.

Benefits to Existing Land Owners and State

Since the PR government took control of Penang about 4 years ago, their track record shows that they have performed very well and the people know that. Just explain to the people how the decision to develop the Penang hill will benefit them and I am sure that the people of Penang will support the development.

Existing land owners must appreciate the fact that if the hill development takes place and when the government changes its policy from “cannot build” to “can build”, their property value will gain tremendously. They must be prepared to share their windfall profits with the government because the state will have to pay for the construction of additional infrastructures such as roads, drains, slope protection, soil stabilisation, supply of water, electricity and other environmental protection measures to ensure the safety of developing the hill. It would be unfair to the ordinary tax payers if the government does not share in some of the windfall profits accruing to existing land owners. Properly negotiated, this can be a win-win situation for the existing land owners and the state, the latter representing the interests of ordinary citizens.

The biggest beneficiary will be the government since most of the land still belongs to the government. Once the hill is open for development, the government can sell the land in small parcels by open tender to the highest bidders, just like how it is being done in Hong Kong and Singapore. In the tender process, the government can specify the usage of the land and add other conditions to ensure that the development goes according to plan and meets world class standards.

I am confident that if my proposals are accepted the ‘Pearl of the Orient’ will acquire as much lustre from its hills as it is getting from its beaches.

This is a guest post from philanthropist tycoon Koon Yew Yin.

This article is posted at: KCLau's Money Tips

Penang hill development above 250 feet

This guest post was written by Ching, the founder of iMoney.my, a price comparison website for Malaysians. Ching is a CFA charterholder, and was formerly an investment consultant and wealth advisor.

Investment professionals love complicating things.

Trust me on that. I was once like that.

You don’t believe me?

The next time you meet people from the investment industry, try asking them to give you a definition of the word “risk”.

Investopedia defines “risk” as “the chance that an investment’s actual return will be different than expected…risk is usually measured by the standard deviation of the historical/average return of a specific investment.”

Don’t get me wrong. This is actually a pretty good definition of “risk”…that is if you speak finance.

But most people don’t, and if you are like most people, you probably struggled to understand even the first sentence (actual return vs expected return…huh?). Good luck attempting to measure risk!

Complicated definitions aside, many investment professionals define “risks” consistent with the above definition i.e. in terms of “uncertainty” (or “volatility”, a fancy word for uncertainty). Professionals refer to a risky investment as one with a “high standard deviation” or “high volatility” (or in our language, high “uncertainty”). 

photo: loop_oh

The problem is, people don’t normally think of risk that way. An investment that is “uncertain” or “volatile” may not necessarily be risky.

I’ll give you an example.

Suppose there is no chance of losing money on this particular investment, but depending on a certain factor (e.g. how the weather turns out to be in a year’s time), you could either make a small profit or quadruple your money, or anywhere in between.

We both know that if such an investment exists, it is a no brainer – this investment has no risk (you either win small or win BIG)!

But by definition, this investment is highly risky!  Why?  The outcome is highly uncertain: you could make a small profit (say +1%) or any amount up to quadrupling your money (+300%)!

Isn’t it absurd that professionals define this as a highly risky investment?

This is how I think “risk” should be defined:  The potential for losses.

That’s it!

Therefore, a risky investment has a high potential for losses.  An example: a share of a single, unproven company in a politically and economically unstable country. A not risky investment has a low potential for losses – like a bank account.

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This article is posted at: KCLau's Money Tips

How Can A Profit-Guaranteed Investment Be Risky? Investment Risk Explained

Every few months or so, the subject of selling sand to Singapore flares up in the media.  When this happens in the websites, the discussion takes on a polemical turn – with ‘patriots’ proclaiming how disloyal it is to sell sand to our neighbor; how we are selling out our national interests; etc.  The latest report out in the media states that a private company employed by the operator of the Tanjung Agas Gas and Oil Logistic Park in Pahang is being investigated for smuggling sand into Singapore (see http://thestar.com.my/news/story.asp?file=/2012/5/31/nation/20120531065041&sec=nation).

Dr. Mahathir’s Double Speak

For the life of me, I cannot fathom why there is such an irrational reaction, especially when this comes from the like of the former Prime Minister of the country.  Readers will remember that when Dr. Mahathir became the Prime Minister, he stopped sand exports.  More recently in 2010, following reports that 34 Malaysian civil servants were arrested for facilitating sand smuggling to Singapore, Dr. Mahathir condemned corrupt officials in the following way:.

“What these people are doing is selling a little bit of Malaysia, dig, keep digging Malaysia and give her to other people,” he said.

This is an irresponsible statement aimed at provoking Malaysians into treating Singapore as an enemy and instigating us to hate our closest neighbor.

The fact is that during Dr. Mahathir’s time, our economy grew as a consequence of our exploitation of natural resources such as minerals, timber, forest products etc. which we sold to the highest bidder in the market.  In turn Malaysia imported natural resource products from other countries.  This trade and international exchange is not only normal. It is also desirable and in the interests of all nations.

When Thailand sold us minerals or quartz products, would Dr. Mahathir want the former Prime Minister of Thailand to publicly denounce the sale and say

“What these people are doing is selling a bit of Thailand; keep digging Thailand and give her to other people.”

Safeguards Needed

Of course, we need to ensure that the exploitation of our sand and other resources is undertaken responsibly and transparently. This means a system of open tender with the federal and state governments opening their books to the public on the licenses given out to quarries, dredging companies, timber companies, etc.; the licence fees collected;  the duration of the licence; winning and unsuccessful  bidders; and other key information.

All of this is missing right now in the current system of sand licences and needs to be corrected.  I recommend that this be done by the Pakatan Rakyat states so that they leave behind a legacy of transparency and accountability in this important sector.

But let us not forget that the corrupt system of negotiated and closed tender and lack of transparency and accountability emerged as standard operating procedures during Dr. Mahathir’s rule.  If anyone is to be blamed for the mismanagement and abuse in the exploitation of our natural resources, the finger of blame must be pointed at our country’s present leaders.

Environmental Considerations and Public Interest

We also need to ensure that environmental concerns are fully taken into consideration before exploitation of sand and other natural resources is permitted. I have sympathy with the environmentalists who are concerned with the adverse environmental impacts of uncontrolled sand mining on our picturesque beaches.

For this reason, proper studies need to be conducted and fears of adverse environmental consequences must be addressed in an open and transparent way before any licences are given out.  This is necessary for all projects including the Lynas one which has gathered so much controversy over the health and environmental concerns.

Sand Sales As Part of a Win Win Situation

About 30 years ago, Mudajaya Construction, the company I founded, was given the contract to fill up the Kelantan Medical University site with sand from Sungei Kelantan.  It is a well-known fact that Kota Bahru and other towns upstream are flooded because Sungei Kelantan is clogged up with sand. Hence the contract was akin to killing two birds with one stone.

Mudajaya was also given the contract to dredge sand from Sungei Tiram in Johore for export to Singapore.  The sand from the river was used to create the beach at Sentosa Resort in Singapore. In the process we not only cleared our Malaysian river and solved its flooding problem but we also generated jobs and income from the revenue received from Singapore.  This is a win-win situation for our two nations.

I am now no longer associated with Mudajaya nor have I any business interest in the construction industry. However I will support exploitation of our sand resources subject to the caveats I have set out earlier. If our country can sell 50 million cu m. of sand to Singapore at Rm 50 per cu m. Singapore will pay us Rm 2,500 million which can help fill the shortfall in Government coffers. At the same time, if properly planned, the dredging can eliminate the flooding for us.

What is wrong with this business transaction if it is carried out properly and with full transparency and accountability?

For us to be jealous of Singapore’s beaches created out of Malaysian sand is plain stupidity just as it is stupid for Singaporeans to want to see the Iskandar Development fail.  The fact is that economic exchange is in the interest of both countries.

A more prosperous and appreciative neighbor is always better than a poorer or disgruntled one.  Let us not cut our nose to spite our face or pay heed to the ranting of politicians who are anxious to recruit others to fight their personal ends.

This is a guest post from philanthropist tycoon Koon Yew Yin.

This article is posted at: KCLau's Money Tips

Sand, Sensibility and Singapore Bashing