May Be This Is The Time

The stock market is on the down trend. But hei don't be disheartened. In every diversity there is always an opportunity. I am looking forward for the market to go down further. This may be the chance for us to make a killing.

Public Index Fund is trading at RM0.6358 as at 25th May 2010. Looking forward for the price to go down to RM0.45.

Patience and perseverance have a magical effect before which difficulties disappear and obstacles vanish.” John Quincy Adams

Persevere is to continue to do something in spite of difficulty. The best way to handle tough responsibilities is to persevere. All new assignments at the beginning are difficult but perseverance can make it a success.

“O’ the mass of arms, the brilliant leadership, the courage and the magnitude of the ancient armies of Greece, combined to conquer the city of Troy; all that, and ten years of perseverance.” Hipponax, The satirist.

Top job demand high responsibility. Unless we persevere, we cannot maintain the top job all the time.

“The ocean of possibilities is enormously inviting, yet terribly threatening. For most of us the problem is not a lack of potential, it’s a lack of perseverance; not a problem of “having the goods” but of “hearing the bad”. Jay Strack.

Louis Pasteur once said, “Let me tell you the secret that has led me to my goal. Mt strength lies solely in my tenacity.”

Understanding Human Needs

“Treat people as if they were what they ought to be and you help them to become what they are capable of being.” Johann W. Von Goethe.

Understanding human’s needs is the key to motivation. We have to combine common sense, understanding of human psychology and sensitivity to human’s feeling when dealing with motivating a person.

“If you make the obvious effort to be accommodating, sympathetic, and kind, business will transpire, and deals will be made; profits and goals will be realized.” Letitia Baldridge.

Money is a powerful motivating factor but job satisfaction, job enrichment, security, social esteem, trust and responsibility and opportunities for achieving excellence are equally important.

“There’s only one thing money won’t buy, and that’s poverty.” Joe E. Lewis.

Balance both these factors to achieve maximum motivation.

Opportunity In Adversity

Public Index Fund is trading at RM0.6537 as at 21st May 2010. For those of you who have a medium to long term investment horizon, it is about the right time to draw your EPF and buy unit trust.

I hope the price will goes down further so I can start buying again. Please read on my write up on the advantage of Ringgit Cost Averaging.

"A habit cannot be tossed out the window, it must be coaxed down the stairs a step at a time." Mark Twain.

Amount You Need To Maintain Your Present Lifestyle

Let say you are now having a take home pay of RM5,000 a month and with this amount you are financially confortable and happy. Not taking into consideration inflation and future value of money, all you need to have in your investment can be calculated as follows:

Let assume that you can invest in ASB or unit trust earning an average return of 10%. The amount of money you need a year is RM60,000 (RM5,000 x 12 months ). Therefore the amount of investment you need to invest is RM600,000 ( RM60,000 / 10% ). It is only after the first year you are allowed to draw RM5,000 a month. The caveat here is you have to wait for 1 year before you can pay yourself RM5,000 ( maximum ) a month. The principalhave to left intact all the time.

If you need RM10,000 a month, the amount invested is RM1,200,000. It is not impossible for a retired husbang and wife to come out with combined EPF of RM1.2 million.

Compound Interest Concept

Compound interest concept can be explained by looking at how much you can get from RM10,000 initial investment after 20 years.

Using the compound interest formula, the value of a compound interest investment after ‘n’ interest periods is calculated as:

FV = PV( 1 + i )n

where:
‘FV’ = Future value after ‘n’ interest periods.
‘PV’ = Present value of Principal,
‘i’ = the interest rate applying to each period.
‘n’ = the number of interest periods (number of years for per annum computation)

Thus the future value (FV) of RM10,000 in 20 years:

When Interest rate is 10%

FV= RM67,275

When Interest rate is 15%

FV = RM163,665

When Interest rate is 25%

FV = RM867,362

In fact, an equity fund can give you 100% return in a year or it makes a loss of 99% in extreme bear market. If your portfolio can produce 15% return per annum consistently, that’s already fantastic.

Advantage of Ringgit Cost Averaging

Say investor A

Invest in Fund A with the amount of RM 10,000, NAV RM0.2800, service charge is 5.5% (cash investment) or 3% (epf investment).
Amount goes into investment; 100/105.5 X RM 10,000. = RM 9478.67

Unit acquire; RM 9478.67 / 0.2800 = 33852.4 units.
Cost per unit; RM 10,000 / 33852.4 units = RM 0.2954

In the event of the market downturn; say NAV of Fund A is RM 0.1800.

Option 1,
(Without Averaging Down the Cost.)

Investor A has to wait for the NAV of Fund A to go up from RM 0.1800 back to RM 0.2954 to reach the break event point.

Option 2,
(Applying the Averaging Down Cost Approach)
Say investor B (invest same time as investor A)

Decided another cash investment of RM 10,000, at NAV RM 0.1800,
Amount goes into investment; 100/105.5 X RM 10,000 = RM 9478.67

Unit acquire; RM 9478.67 / 0.1800 = 52659.3 units.
Cost per unit; RM 10.000 / 52659.3units = RM 0.1899

Therefore, total amount invested; RM 20,000
Total units acquire; 33852.4 + 52659.3 = 86511.7 units.
Average cost per unit; RM 20,000 / 86511.7 units = RM 0.2312.


In the event the NAV of Fund A going up from RM 0.1800 to RM 0.2954,

1) Value of the investment of Investor A

33,852.4 units X RM 0.2954 = RM 10,000.00
Investor A only manage to get back his /her investment amount (provided if there is no dividend @ unit increase on the investment)

2) Value of the investment of Investor B

86,511.7 X RM 0.2954 = RM 25,555.56
Profit; RM 25,555.56 – RM 20,000 = RM 5,555.56
Therefore : % Net Profit = RM 5,555.56 / RM 20,000 = 27.78%. (the calculations exclude any dividend payment, if any)


Conclusion

By applying the Dollar Cost Averaging concept, the investor will acquire more units from the investment made during the market downturn, thus lower his cost per unit & enable him to earn more profits when the NAV of the fund going up.

Do You Know?

Do you know that there are 3,548 people declared bankrupt because of credit card debts in Malaysia?

1,774 or 50% of them were below 30 years old. As at 30th March 2009, Malaysia's credit card debt amounting to RM23.3 billion.

Young urban Malaysian are actually managing debt rather than their finances. Cash flow to our financial well being is like our blood flow to our body. Any disruption to our cash flow will affect our success in life just like when if our blood is infected, we get sick.

Just like exercise is so important to our health, financial planning exercise is crucial to achieving our financial goals.

Be Humble In Investing

By staying humble, we will at least have a chance to recognise and acknowledge a mistake, if and when we do make a mistake.

And when we do, it's utmost imperial that we correct our mistake(s) immediately and not hope and pray for the market to correct our mistake(s) for life is never always that kind to all of us.

Now if one is arrogant, would one ever admit that perhaps one is wrong in their stock selection?

"Only fools refuse to be taught. Wisdom calls out in a loud voice waiting to be heard." Proverbs

The Importance Of Timing In Investing

If you believe me, it is true that “timing is everything” in investing strategy. It is even more true for politicians, actors, comedians, singers, and athletes. They all rely on timing as a key skill in their success. Putting yourself in the right place at the right time is a crucial part of the skill for some kind of success.

Successful investors create their own luck, take calculated risks, and put themselves in situations where they can take advantage of investment timing opportunities. Investment timing can make or break the investment opportunity. Many people have haphazardly entered the stock market at the wrong time and made very hugh losses or little profit.

The best investment advice is to continually develop your investment timing skills and be able to recognize opportunities as soon as they arise. Think laterally, broaden your perspective, and learn how to predict how local and world events will shape things financially. Then take calculated risks based on those factors. If you can get comfortable with this new kind of thinking, then you will benefit from investment opportunities that others miss.

A good case study is when I bought index linked unit trust fund when the market at its lowest and sold it when the market was high. I made a profit of 44% within 9 months. Now I am heavily invested in the same fund and hope to make another killing.

"What is being said is that the market makes all the decisions. Our only decision is to listen to the market and obey its signals. Always and without exception. Remember the market never lies. It is only we lie to ourselves." The Zen Of Trading

Investing In Public Index Fund

I write to share with you the benefits of investing in unit trust that are manage by Public Mutual Berhad, a subsidiary of Public Bank Berhad as compared to investing in other type of investment instruments such as fixed deposit, Tabung Haji, Employee Providend Fund and Amanah Saham Bumiputra .

Why Public Index Fund
It is simply because Public Index Fund can potentially give an average return of 20% per annum as compared to Fixed Deposit ( 4% ), Tabung Haji ( 5.5% ), Employee Providend Fund ( 5.65% ) ans Amanah Saham Bumiputra ( 9% ).

My Investment Is The Proof
Friend, you may think I am making up stories but let me show you how much I get from investing RM113,200 in Public Index Fund. As at 30th April 2010 closing price, my investment value is RM139,870, giving a profit of RM26,670 which in turn giving a margin of 23.56%.

My average price is RM0.60. In year 2009 and 2010, Public Index Fund declared dividend of 7 cents and 5 cents respectively.
Just for your information, for every one (1) cent increase in the market price, my investment is making additional profit of RM2,027.40. Therefore the more units you have, the higher the quantum of profit you make. I advise you to withdraw as much as possible from your EPF account to take advantage of this investment opportunities.

Average Returns From Other Public Mutual Funds

10 Years 5 Years 3 Years
Public Index Fund 23% 26% 24%
Public Saving Fund 24% 29% 25%
Public Itikal Fund 21% 26% 25%

My Investment Strategy
My investment strategy is simple , “buy when low and sell when high” and that is why Public Index Fund is my choice. If you buy now at RM0.68, you may be able to make a gain or profit of RM0.32 for every units you purchase because the highest market price of PIX was at RM1.02 in November 2007 when the KLCI was at its peak of 1,500. Now the KLCI is 1,330.

KLCI index is supported by our government and fund managers . Public Index Fund invested in nearly all the 30 companies that are in the basket of KLCI index.
You don’t have to worry as I will monitor your investment and advise you when to buy and sell. If you are still not convinced, you may try investing RM1,000 first and see how it grows.


How To Invest
Investing in unit trust is easy. Minimum initial investment is RM1,000. You may either invest in cash or through withdrawing your EPF in account 1. All you need to do is to sign and have your thumb print on the form.

I conclude with what Confucius once said, “A journey of a thousand miles begins with the first step.” Take action now because procrastination is very costly. This is illustrated by the story of Tim and Tom.

Cost Of Procrastination

The Cost Of Procrastination.

Collins Cobuild dictionary says if we procrastinate, we are slow to do something because we keep leaving it until later.

The root core of the term is from Latin - two Latin words "pro" meaning "forward, in favor of," and "crastinus" meaning "of tomorrow". Consequently, it clearly means putting forth or in favor of tomorrow.

Procrastination can be beneficial in some cases. Procrastination sometimes can prevent us from making some serious mistakes like we may not have enough information that we need to start up a project or it may not be the best time for us to get into business. If procrastination becomes advantageous in this way, then it accomplishes a good goal otherwise and in 95% cases – they are detrimental – they are real destiny killers.

The disadvantage of procrastination becomes more glaring in the investment world when we do not take immediate action to invest in the right product at the right time when the opportunity arises. Lost opportunities will definitely cost us money.

A case to show that procrastination cost us money is illustrated by the action of Tim and Tom. Tim started investing RM1,000 every year for ten years since he is 18 years old. He stop investing at the age of 27 and let his investment grow. Assuming at 10% compounded growth, at the age of 65, Tim received RM655,617.00.

Tom on the other hand waited 10 years after he was 18, then he invest RM1,000 a year for the next 38 years. He received RM441,536.00 when he reach 65.

Tim invested only RM10,000 and it multiplied 65-fold, while Tom invested RM39,000 and multiplied only 10-fold. Tom’s opportunity loss is RM214,081.00.