Review on 1H2015 sell transaction

Everyone also wishes to buy low and sell high. I mean everyone. But that's not the case in reality. That may be someone able to do it, but I think the consistency is not there. 

I'm am not a very long term investor. I will sell it if I think the price meet my target or I think I have better return elsewhere.

So, half year gone and I think it's better for me to review my sell transactions for the past few months. 

SCGM

I sold it at RM2.7x with around 50% gain in April. Although I knew the drop in oil price and currency exchange are all working in favour for the group as well as its own organic growth and new product launching, but I think its price already reflected that as well as it was trading at a PE of around 18 that time. So, I made a sell call. The company continue to perform well and so its share price till trading at RM3.4x currently. Perhaps I should use forward PE to evaluate this kind of growth stock next time. 

ABRIC

ABRIC was a asset play for me due to its high net cash per share. I sold it around RM0.52 with around 25% gain in April too. Patience always the key when investing based on asset as you have no idea when the market will value its assets. The price once shot up to around 60 cents before retraced back to current price. I'm quite satisfied with this transaction as asset play always provides certain margin of safety and its concept is easy to understand. Just sometimes, you may need to park your capital there for a while.  

PJDEV-WC

I sold it at a loss of around 10% in April too. I bought it at a rush and at a high price in the beginning as well as its mother share. I thought the corporate transfer will take place within 6 months, little bit I know it can be taken for so long. And at that point, I was running out of capital so I decided to sell it as I did not want to place too much capital on the same stocks (mother & son) although the warrant will provide better gain in percentage and loss also in opposite. I only left the mother share and used the proceed generated and converted into HKD to invest in HK stocks. 

IFCAMSC

I sold the counter around May at RM1.4x with a gain of around 70%. The counter once shot up to RM1.8x plus as well as being dumped until RM0.8 thereafter. The counter still has some growth prospect, but the valuation is quite high and there is some sort of frying element on it. So, I decided to say good bye to him. 

TAKASO

I made a loss close to 25% in this short trade. I bought its warrant & converted them into mother share as the share price of the mother share up a lot while the warrant did not move very much. The substantial shareholders, Ong Kah Hoe kept increasing his ownership in the group and the group diversified into construction business look like something good going to happen. So, I bought in. It turned out to be a bad trade as the share price dropped a lot after 2 weeks of conversion. This really taught me a lesson, never touch warrant that trade at a big discount to his mother share again. Fishy fishy. 

CHINA SILVER

I cut half of my holdings on the stock at around 150% gain, so the remaining will be considered as free shares. This trade contributed significantly to my overall realized gains this year. It's share price is quite volatile but I think its coming half year result will be quite good. So, I will just keep it for the time being. 

So, that's for this half year. 

Some losses, some gains. 

When looking back now, there are some stocks trading higher after I sold. Some trading lower currently. 

I believe buying low solves the problem of selling as you still earn in the end, it's just the matter of how much you earn. So, margin of safety is important. Very important indeed.

I still learning day by day. Hopefully, can minimize my mistakes moving forward. 

Recap on last week

Market was bit volatile last week.

Greece issue and Chinese stock market sells-down as well as Najib and his 1MDB issue in local filled up the newspaper's headlines. 

And on last wednesday, Hang Seng index closed almost 6% down, its biggest one-day drop for nearly seven years. 

Nearly half of the listed companies in Shanghai and Shenzhen filed for trading halt in an attempt to prevent further losses explained the seriousness. 

Even the regulatory commission made a new rule that controlling shareholders and managers who are holding more than 5% of the company's share could not reduce their holdings for 6 months could not stop the sold off. 

Local bourse index dropped below 1700 again, after few months of crawling back to above 1850.

So, is it a good chance for investors to buy some fundamentally good companies during this volatile market?

Just like what Warren Buffet said "Be fearful when others are greedy and greedy when others are fearful" ?

But it's always easier to say than done. 

Watching your paper gain getting lesser and lesser is no joke. 

And to buy it when the counter drops more than 50% made you wonder is it something bad happened to the company which you may not aware of.

The angel of your side told you that the company fundamental remains unchanged. You had studied it few times and it's a bargain now. 

But the devil of your side told you to wait and it may drop even lower. Your hard earn money will just gone like that. It's very scary. Stay aside first. 

Discipline, mentality and decision making. 3 important elements that you cannot learn from books and others. 

Experience it 

Investing really is a life long journey. 

Journey Continues ..

Guys, I think I left my blog for far too long already until recently I think I should start to write something similar to diary as well as my analysis towards the companies I studied.

 It definitely help in my learning curve especially the mistake I made during the past. Else, I will repeat the same mistakes again and again

So, I kick start my blog writing again .. 

I make a new blog and imported all the old investment posts from my old blog into here 

Hopefully, I can get some readers back and chat, discuss and learn together to achieve continuous satisfactory performance in stock market :)

Let's Roll~

算一算冷眼的股份价值

前几天看到 Investalks 里， 有人放上冷眼现在拥有的公司股份。在好奇之下，就算一算他现有的股份价值

我一路来都是用着 HLebroking 的服务. 以上的搜索功能是 CIMB iTrade 里的其中一项功能，看起来好像不错。。而且还有好像 Google Screener 的功能呢

再用星期五的闭时价格算一算，总数都有四千多万。

最高的是 Globetronics, 最底的是 Yee Lee Corp. 

再保守估计有 5% 的股息率，一年都有两百多万股息。一个月也差不多有两百千的股息用!!

何况，我相信冷眼的股票及财产不止这么少，而且股息率也没有5%这么少吧

哎，我还是做做功课，向着我的目标继续前进吧，加油!

p/s: 两百千的股息，要怎么花呢?? 嘻嘻

Share Margin Financing (SMF)

All this while whenever people mentioned about share margin financing, the first thing that always came into my mind was share margin is risky, very risky indeed. This was probably due to many stories of investors who took up margin financing ended up losing out their hard earned money or even worst became bankrupted came into my ears since I was small. Some even ran away to other countries to avoid paying the huge sum of borrowings leaving behind their families.

A sudden interest that came from nowhere at share margin financing struck my mind lately. Frankly speaking, I’m quite new to share margin financing. After glancing through the forum and a quick search in internet.  I made up my mind and dropped a couple of emails to few local banks and investment banks to enquire about share margin financing. Basically, banks able to provide a better package compared to investment banks in terms of benefit and restrictions. It’s understood as it’s believed that the banks have better and stronger financial support compared to investment banks.

Since the risk of using the share margin is extremely high, I intended to utilise the cash safely and conservatively. Only borrow 20-30% of my capital, this will at least provide me a certain distance away from hitting margin call. No rollover fees, as I may only use the loan to trade once in a while and do not wish to be charged because of no trading activity in a certain period. Interest rate must be as low as possible, this is for sure. Invest in company that going to pay dividends that enough to cover the interest charged from the loan.

At the end, I applied the service from Hong Leong Bank which having a promotion currently. One of the promotions is the trader can get 20% rebate on the interest charged for the first 3 months. That means for the first 3 months, the interest charged will be around 3.8% as the interest rate offered is BLR-2%. The other promotion is the rebate on the stamp duty paid if the total income generated for the first 12 months is more than 2 times the stamp duty paid. Total income is the sum of the interest charged and brokerage fees during this 12 months period.

Other details for the SMF from Hong Leong Bank are

• Interest rate is BLR – 2%, no matter how much is the borrowings amount.
• Interest rate is calculated daily and credited monthly.
•  Hong Leong Bank valuation on stocks is update every 3 – 6 months.
• No roll over fees.
• Margin of financing : 60%, margin call: 65%.
• Trading limit is up to 1.5x against shares and 2.5x against cash/FD.
• Facility limit: User defined. Stamp duty is charged at 0.5% of facility limit amount.
• Brokerage fees is 0.38% (<100k 0.18="" and="" contract="" value="">100k contract value). This rate is applicable when you trade using the loan and purchase or sell using the money or counters that you pledged for the share margin account.
• Lock in period is 12 months. Penalty is 2% of facility limit if breach. Thus, you are not allow to transfer the counters that you pledged to HLB to other banks’ share margin account for the first 12 months.
• Upfront fees: RM85
• Margin call is 65% which is lower than other banks’ offers but the interest rate and no roll over fees met my criteria.

Margin of financing stimulation:

Shares cost: 100k, loan amount: 30k (purchase stock), Bank value on stocks I purchased: 80%.

Margin of financing: 30k / [(100k*0.8) + (30k*0.8)] = 30k / 104k = 28.84%

In the event of the counters I bought dropped 50%, it will become

Margin of financing: 30k / [(50k*0.8) + (15k*0.8)] = 30k / 52k = 57.69%

 (Not yet hit margin call, but it’s approaching, and I did not included the interest charged in the calculation)

To hit margin call, the counters I bought need to drop around 56%,

Margin of financing: 30k / [(44k*0.8) + (13.2k*0.8)] = 30k / 45.8k = 65.5%

Thus, if I take 30% loan and leave out the interest charged in the calculation, the counters probably need to drop slightly more than half before margin call is raised.

Apart from that, you can pledge cash or FD instead of shares as the cash or FD will have no effect from the bank valuation in stocks. 

              Margin of financing: 30k / [(100k*0.8) + (30k*0.8)] = 30k / 124k = 24.19%

Interest charged stimulation:

Interest rate: BLR – 2% = 4.6%, loan amount: 50k

Note: Interest is calculated in daily basic and credited into outstanding loan monthly

Total interest charged is RM2396 which is equivalent to around 4.79% from my original loan amount. Additional close to 0.2% interest being charged. That is the difference between interest charged daily and annually.Dividend received from the counters bought using the loan will directly used to reduce the outstanding loan. 

Take an example if I use the loan to purchase 10 lot of Dutch Lady which is expected to pay RM1300 dividends twice annually. 

So, invest in a company that has dividend yield higher than the interest rate charged will help to reduce the outstanding amount. Dividend payment in quarter will have better reducing effect than semi annual and annual distribution. But make sure the company is a good company and has the ability to pay dividend as you expected. Of course, enter at a right price is another important element to take note. 

So, I probably will take up the share margin with a loan amount of 10% of my capital. Hahaha. My first objective is to get myself familiar with the financing and see how it goes by. 

Cash Conversion Cycle

When you look at the balance sheet of one company,it must have inventory, trade receivables and trade payable under the current assets and current liabilities columns respectively. 

Inventory, as the name applies is the raw materials, semi-finished products or finished products that are ready for sale. One metric to evaluate it is through inventory turnover days which is defined as number of days the company takes to sell the inventory on hand. (Source:Investopedia) and its formula is as below, 

Inventory Turnover Days = (365 x Average Inventory) / Cost of Good Sold

The higher the days, the longer the company takes to clear its inventory, but it still depends on the company's business nature as if the products is perish or their products are fast become obsolete, of course the company will keep the inventory low to avoid written off. 

Trade Receivables, is the money the company will received within one year. One should be careful if the company has high trade receivables as this means that the company is slow at collecting money from their customers and lending money to them at an interest free rate. One metric to evaluate it is through receivable turnover days which measure a company's effectiveness in extending credit as well as collecting debts (Source:Investopedia) and its formula is as below, 

Receivables Turnover days = (365 x Average trade receivables) / Revenue

The lower the days, of course is better for the company as it proved that their cash collection is efficient. Some companies have high receivable turnover days because they extend the credit limit to their customers in order to get the business orders especially those companies in a competitive industry. 

Meanwhile trade payable is the opposite of trade receivables, which is the money the company owed to the vendors or suppliers and need to pay them within a year. It's also can be evaluated through payable turnover days too. 

Payable Turnover days = (365 x Average trade payable) / Cost of Good Sold

Of course it will be good for the company to have high payable turnover days as the company can maximize their cash flow and spent the money else way to generate income for the company before paying the bills. In other terms, the vendors are actually lending money to the company without charging any interest after provide their services or products to the respective company. 

And the last one is the summary of all three metrics above which is the cash conversion cycle. It measure the amount of time each net input dollar is tied up in the production and sales process before it's converted into cash through sales to customers. It also means to measure the time between outlay of cash and cash recovery. (Source:Investopedia)

Cash Conversion Cycle = Inventory turnover + Receivable turnover - Payable turnover

The shorter the cycle or days, the lesser the capital is tied up in the business process. It's best to compare the metric among the companies within the same industry like F&B companies probably have better cycle than construction companies as construction business orders are mainly contract based and in credit mode. 

I made a rough comparison between Amway, Zhulian and Hai-o which are in MLM industry. Amway consistently keeps a low inventory level, thus it needs a lower number of days to clear their inventory compared to Zhulian and Hai-O. 

Apart from that, Zhulian's gross margin is the highest among three due to its low cost of goods sold. Thus, you will see that its inventory turnover and trade payable turnover ratio is quite high. 

Zhulian is the best when dealing with trade payable turnover, thus having some spare cash to spend before paying to their suppliers or vendors. 

Hai-O is the worst among three which has inconsistent and high cash conversion cycle as the cash is tied up in their production or sales department.

Monthly E-statement from Bursa Malaysia

There is a new service from Bursa Malaysia that enables CDS account holders to receive CDS statements electronically via email instead of hardcopies being delivered using ordinary mail. It launched the service at the beginning of Dec last year. 

I guess everyone of us receive a monthly hardcopy statement from Bursa regarding the number of shares we're holding on the respective companies and I think majority of us also kind of ignoring it since we know what are the companies we bought and at the same time we also receive statements from our investment houses. 

So, this service is a good way to eliminate the hardcopies and at the same time save some paper. 

Simple log on to this link and register it.

You will need a so-called password phrase for the registration. You will get the password phrase at the latest hardcopy statement Bursa sent to you. 

I did mine last week and received their replied yesterday regarding my successful application and will receive e-statement with immediate effect.

Mr. Action vs Mr. Procrastinate

I think many of us understand the power of compounding effect. The compounding refers to generate earnings on top of previous earnings. The two paramount elements in this concept are time and annual return. 

I always put the numbers into an excel file and see how far or how close I am toward my goal. Let's take a comparison between two people,

Mr. Action who started to invest at the age of 25 and invest an annual amount of 3,600 for 10 years and consistently achieved a return of 10% each year. 

Mr. Procrastinate who only started to invest 10 years after Mr. Action started, at the age of 35 and invested a double amount of 7,200 annually for an even longer period of 15 years. He was able to achieve a return of 10% each year consistently too. 

At the age of 55, Mr. Action is still richer than Mr. Procrastinate even though Mr. Procrastinate invested triple amount of what Mr. Action did, but just 10 years later. 

Of course the annual return can play a role here. Mr. Procrastinate can easily surpass Mr. Action if he able to achieve a higher annual return. 

But I think it's easier to start invest early rather than to achieve high return, right? 

Let's compare with another two people with Mr. Action who invested the same amount and begun at the same time but with higher annual return rate than Mr. Action.

Mr. Smart who able to generate a 15% annual return has around 1.3 millions at the age of 55 while Mr. investor who able to generate a great 20% annual return has around 4.3 millions at the age of 55.

See the difference between Mr. Action and Mr. Investor. A 10% difference in annual return is what it takes for Mr. Investor to have ten times more money than Mr. Action at the age of 55. Of course, it's not easy to achieve 20% return consistently for 30 years. 

So, the annual return does has a greater impact than time. But I think we can easily manage our time better than the annual return. 

3,600 annually, 300 per month, RM10 per day. 

RM10 per day, a 15% annual return and you can be a millionaire in 30 years time. I think you can fork out RM10 per day, right?

So, do you want to be Mr. Procrastinate or Mr. Action or Mr Smart or the great great great Mr. Investor? 

Perhaps we can start with Mr. Action today :)

Put this at your note, Procrastination is the thief of dreams!! 

Money management

During the millionaire mindset intensive seminar, they taught about how to manage your money as well. Wealthy people aren't any smarter, they just have better money management habits. Poor people always complaint that they have no money, so no need to manage money. It's wrong because you become rich by manage your money, not manage your money when you're rich.

The most important part of money managing is separating your income into different accounts for specific purposes. Their method divides it into 6 sections which are as below, 

55% = necessities 

10% = Financial freedom account

10% = Long term savings for spending

10% = Education

10% = Play 

5% = Give

The first account is necessities, you use this account to pay your rental, daily expanses, food, insurance and transport etc. This account contributed maximum 55% of your income. If you cannot meet 55%, try to simplify your lifestyle. Wealthy people think long term while poor people think short term. Sacrifice a bit now to grow your trees and enjoy the fruit in later stage. 

The second account is Financial Freedom Account. This idea of this is to create your golden goose in order for it to generate golden egg for you to spend in later stage. Remember the ultimate goal is to become financial free when your passive income able to overcome your expanses. When you stop working, you get to spend the eggs but never the goose. This contributed 10% of your total income. 

Third account is account for long term savings for spending. This account helps you to save for one time off spending like marriage, house down payment, car, etc. This account contributed 10% of your income. 

Fourth account is for your education purpose which contributed 10% of your total income too. They kept emphasize the important of education no matter how old are you. You stop growing when you stop learning. And the moment your stop growing, you're dying. Education is important no matter whether in financial field, money management, health nor in science. Ben Franklin once said that If you think education is expensive, try ignorance. 

The fifth account is Play!! Time for relax. Play without guilt. Take time to enjoy while striking toward your goal. This account contributed 10% of your total income. 

And the last account is Give which contributed 5% of your total income. Give back to the society. Remember there is always someone having a situation worse than you no matter how bad the situation you are having with. Be blessed. You will understand and remember what your goal is when you have the willingness to give. 

I did my part and separated my expenses from my total income into few sections and summarized it as above photo. I spare an exact amount for my travel every months and it takes around 4% of my total income which still lower than the 10% "Play" account. Besides that, I have an insurance plan and a saving plan which total contributed 9% of my income. Insurance is for my protection and saving plan is just an alternative retirement plan as I do not contribute any income into CPF or EPF account while working in Singapore here. I able to keep my expenses at around 35% and if add on with the insurance premium, it will be a total 45% of my income, still slightly lower than the 55% benchmark taught in the seminar. 

The rest will goes to investment and saving account. I do not own any property right now as I still haven't make up my mind where to settle down. In addition, being working in Singapore, it's kinda hard for me to look for property for investment in Malaysia since it will involve a lot of travel. So, I believe my current situation is to maximize my return through equity investment rather than through property. Once my saving reach a certain amount, I will distributed more into investment section. 

I do not donate currently. I always think to do that but it's always still down to thinking with no action being taken. I need to further look into this. Besides, I do not spare any amount monthly for my self education purpose. All this while, the seminar, online course and books I bought were all from my savings section. I probably will keep continue doing in this way rather than spare 10% for it monthly.

Lastly, I strongly believe a good money management is essential. There is countless reading material stating that by keep track of your spending, having a comfortable debt/income level,  future planning and ways to improve your situation will help you to manage your money very well. You will know where your money goes to and what is the progress in moving towards your goal/target. 

So, did you do yours? 

Cook the books 做假帐

Recently, there are some comments and posts talking about some fraudulent activities. It may not be true yet there is some parties who support it while there are some who were against the statement. All this while, I didn't put much efforts on this kind of knowledge. It's a learning lesson for me as I'm more focus on the fundamental of the company for my investment all this while. So, if the management of the company is so freaking bad that make a 假帐 at the financial report so that his group performance looks good, hit the earnings benchmarks and the price forever at the up trend. I may be fooled by it and lost my hard earn money in the worst case.

I googled some info about this and found out that 假帐 actually is called Cook the Books in English. Cook the book? Sound funny, haha. Based on investopedia, it refers to fraudulent activities performed by corporations in order to falsify their financial statements. Typically, cooking the books involves augmenting financial data to yield previously non-existent earnings. Examples of techniques used to cook the books involve accelerating revenues, delaying expenses, recording debt payments as sales, moved debt into Special Purpose Entities (SPEs) while retained earnings in the mother company and implementing synthetic leases.

There is 2 case studies provided in this website, in fact it was really happened before for these 2 companies. Both companies also in the Fortune 500 Companies list that time. The first one is Enron. Enron's case is quite complicated. They're allowed to count projected earnings from long term contracts as current income. So, the revenue was inflated by manipulated projections for future revenue and appeared as the management was doing the good job in increasing the company performance years after years. Once the fraud being discovered, the group filed bankruptcy in Dec 2001 and its share price fell from $86 to 30 cents .... 开开开完笑. $86 to 30 cents wo... How many times is that?

The second case is WorldCom. WorldCom used the method of classified the operating expenses as long term capital investment and Capex so that the bottom line of its profit & loss statement looked good due to higher gross margin. 

There were some other fraud cases like Healthsouth & Qwest communications who manipulated their respective companies' earnings. 

Back to the quote, investment is simple but definitely not easy. I'm better equip myself for a better tomorrow. 

Millionaire Mindset Intensive

Do you who is T.Harv Eker? 

Did you come across the his revolutionary book, Secrets of the Millionaire Mind? 

I had a chance to attend one of its seminar called Millionaire Mindset Intensive in Singapore here several weeks ago. It was Mr. Robert Riopel, the assistant trainer who taught and shared the principles during the 2 full days event. I glad to say that I learnt a lot from the seminar and it did change my mindset a bit and focus on my goals. 

I tried to summary some of the key points here

1) How to win the money game so that you never have to work again. 

The no.1 reason most people don't get what they want is because they don't know what they want & why they want it. First thing need to do is to clarify it and write them down. Clarity leads to power and power is the ability to do or act. The essence of winning the money game comes from financial freedom. I think everyone of you know what financial freedom is. You will become financially free when your passive income exceed your expanses. 

2) The world's easiest and most effective money management method

The method separates your total income into 6 specific accounts as below. 

55% = necessities 

10% = Financial freedom account

10% = Long term savings for spending

10% = Education

10% = Play 

5% = Give

Will further elaborate on next post as I want to compare my financial status with it.

3) Recondition yourself for automatic and natural success. 

The only reason you believe what you believe is because it had credibility from past information and programming. Your beliefs are not based on actual experiences, but rather on your personal interpretations or mis-interpretation or assumptions of those experiences. Sit back and think back money, wealth and rich people you heard as a child. Something like "Study hard and get a good job; Investment is risky; save for the rainy days" will come into your mind. So, are they true? Think about it again. Often some assumptions keep inside our mind far too long that we thought it's indeed true. Do not let it be a barrier for you to succeed. You never do it before, what stop you. The idea is to re-examined your beliefs based on who you are today and who you want to be tomorrow. 

4) How to master money and relationships with spouses, business associates and kids

If your relationship with money is full of anger, fear, guilt, shame or sadness, it will have a negative effect on your money. You automatically bring your feelings and emotions to all your actions and decisions around money. Get rid all of the negative feeling and thinking. Learn to forgive. Remember, forgive someone does not matter to that person, it's only matter to you! Think of who going to make a loss in the end. It takes a lot of energy to hate someone.

5) The power of action

If you read the book, you definitely come across this. Action is the bridge between your inner world and outer world. What usually holds people back from taking action is fear. Poor mind's favourite phrase is "What If". "What if this happen?" ; "What if he found out?''; "What if I made a lost?" etc. You can simple observe your mind and say "Thanks you for sharing", and take necessary action to grow and succeed. The secret to success is to learn to act in spite of fear. Successful people have fear, they just don't let it stop them.

Remember, the only way to permanent change your outer world is to first change your inner word. Your inner mind create your outer world. 

The process of Manifestation: Thought -> Feeling -> Action = Result

If your want to change the fruits (result), you have to change the root (mind). Everything starts from your mind.If you think you're going to fail or could not make it, you definitely going to fail eventually as your negative mind keep dragging you down. Overcome the negative mind side of yours. I bet everyone has this thinking before when you want to exercise, the negative mind would keep telling you that "Argh looks like it's going to rain, not enough time, I'm tired etc .. " , but these thinking would vanish while you stepped out and took a sweat. 

So, make a change! The only thing that is constant is change

Group photo after broke down the stick

~ mAybAnk gOld InvEstmEnt Acc ~

As the gold price drops recently, I made up my mind to add gold investment in my investment portfolio today. 

As I do not wish to own the physical gold bar itself for security and troublesome concern, I opened up a gold investment account at one of the Maybank branches nearby to start my gold investment journey. 

Gold investment does not gives any interest or dividends throughout the holding period but I still add it to my portfolio due to its scarce resource and defective nature. 

~ tOp mOnEy tIps fOr mAlAysIA ~

Here came with the second book written by KC Lau I read about financial management. 
It mentions about the importance of financial literature from wealth accumulation, preservation to protection and some tips on money savings and accumulation in our daily lives. Frankly speaking, I'm feeling financial literature is getting more and more important in our life. Of course, it's easier to say than done. It's still useless if I do not act after I read and learn from all this stuff. I'm paying more attention to those economic section in newspaper nowadays and I also trying to influence the people around me to manage their financial pretty well in order to become a wealthy person. Hopefully everyone is on the path of getting what they want. 

~ vAlUE InvEstIng sUmmIt 2013 ~

Since the moment I purchased the tickets back in Dec last year, I was really looking forward to this summit. 

The Value Investing Summit 2013. 

The 2-day summit was organised by 8 Investment Pte Ltd and held at Kallang Threatre, Singapore. The summit gathered experienced speakers from equities, property and finance industry to share their success stories in applying value investing on their investment. 

I have been applying fundamental analysis for my stock market investment throughout the past 1 year, learning from books, forum, friends and of course the mistakes I made. 

Value investing, a method Warren Buffett and many billionaires use to achieve financial freedom in the world. Throughout the summit, it added a lot of values to my investment learning. I still have long way to go to achieve the goal I set. 

" Value investing is simple but not easy .. You're neither right nor wrong because other people agree with you. You're right because your facts are right and your reasoning are right - that's the only that makes you right. And if your facts and reasoning are right, you don't have to worry about anybody else. " - Warren Buffet

I must remember this in my investment principle. 

There is no short cut in investment. Do my homework, analysis and be discipline & rational  all the time. 

~ tOp 93 pErsOnAl finAncE FAQs ~

Having stepped into working society 2.5 years ago taught me the importance of financial management. As a typical employee, every pennies earned must be well managed in order to meet my financial goals as well as maintain the life style I wish to be. There must be a financial plan to succeed and I must discipline enough to make sure everything goes according to the plan

Having came across this book "Top 93 Personal Finance FAQs in Malaysia" in one of the local bookstore. Without any hesitation, I copied down the ISBN number and sent to my sister as she is entitled certain discounts to purchase any book in Mph. 

There is 4 chapters in this book namely Wealth protection, Wealth accumulation, Wealth management and Wealth distribution. 

Wealth protection,as its name applies, mentioned about insurance. What type of insurance suits you and how many percentage you should spare from your monthly salary to put on insurance. That's all depends on your age, family, breadwinner type and other factors. 

Wealth accumulation explained about the investment methods that we're having today in Malaysia. There are variety of investments available today that I am sure one of them sure suit you. Investment is a must to counter the devil inflation. 

Wealth management and Wealth distribution are the 2 chapters that I interested least as I do not have much assets nor taking up any loans currently. It explained how ones should manages his mortgage, car, credit card and personal loans. The latter part explained the importance of a will. 

There are still much more to learn for me. 

For those who interested in financial management, you can log on to kclau.com/ ( Author of this book) and subscribe to get update through email. KC always posts quite a number of posts related to finance and hosts a lot of webinar and seminar to the visitors. 

~ Road to My Investment Goal ~

I, like majority of the typical fresh graduates who stepped into working society without much savings and being took up a study loan to finish my tertiary education didn't make me feel better in terms of financial situation

I started to invest in share market during my first year of working with no investment background and knowledge, follow the rumours, purchase the share and pray the price will goes up the next day and sell it off. During that period, I made profit but at the same time also lost it back. What I get at the end is just waste of time and higher heart beat rate.

That changes when one of my friends introduced me some books regarding long term investment based on fundamental analysis. I read and learn all the way until today, learning just never stop. I earning some passive income through the dividends distributed by the companies I hold. There are many experts willing to share their knowledge too in the forums.

But one of the advice given is I need to set a goal. A goal that makes me stick to the plan and investment philosophy. My goal is simple, to get 15% annual return and reach RM1 million in my investment capital at the age of 55.

I just wrote a post regarding the power of the compounding interest earlier. Let's say I didn't invest in the first year and save RM250 monthly to get my initial capital of RM3k. Sparing RM250 monthly for investment will just keep on continue. At the end of the second year, I target to get 15% of my initial capital of RM3k plus another RM3k that I save every months, that will be RM6450 and the result of the following years will be as shown in the table below. 

Take note that the 15% annual return is based on the investment capital from previous year which does not include the annual RM3k that I spare out monthly for investment on that respective year. 

I will have RM1 million if everything goes according to the plan at the 29th year. Of course I will reach my goal faster if I can get higher annual return, or pump in more monthly investment especially during the early stages. 

One million may not seem quite much 30 years later compare of today due to inflation. But I believe if I have the ability to get this amount of money, it should not be problem to go on further from there. 

~ Magic of Compounding ~

" The most powerful force in the world" 

that is how the all time genius, Albert Einstein thought about the compounding interest.

He even called it as the 8th wonder of the world.  

In simple term, compounding interest is as you start earning interest on your investment and the interest you gained is added back to your investment. As time goes by, you start earning more interest on your interest!

Everyone knows this, understand this but not many people fully understand the impact of compounding interest in the long run. 

The 2 important elements in compounding interest is the interest rate and the time. 

Let's first compare the impact of interest rate on our initial investment capital. This is easy. 

Of course, the higher the interest rate, the higher return you get from your investment capital.

 Next, let's us apply the same interest rate with period of 10 years. 

By using Excel, you can easily get a table like this by multiplying 1.1, 1.15 and 1.20 from previous column. 

Few things to note here:

1. You get around 5k at the end of 10th year, it's 5 times your initial investment capital with the annaul return rate of 20% compare with around 2k with return rate of 10%. It's almost 3k more if you able to get addition 10% annual return from your investment from 10% to 20% annual return. 
2. You get 100% return from your investment capital at 9th, 6th and 5th year with annual return rate of 10%, 15% and 20% respectively. This is common sense as you reach your target (100% return) faster with higher annual return. 

Okay. It's always easier said than done. Who doesn't want to get rich faster. Higher return of course comes with higher risk. So far I only show you positive return which is profit. What if the return is negative or lost, you definitely will get your blood being sucked out faster and become a zombie. 

I, like a typical employee or worker/labour in other term, every penny earned is my hard earned penny which scarificied lots of time and sweat. 

But the good thing is I'm still young. I'm able to absorb failure and start over again. Learn from mistake I did on investment, I know I'm better than yesterday. 

Start react now or else the inflation evil will knock me to dead in the long run