Financial Crisis: Is it a lost or a chance?

Movie Reviews

I recently did a check on my blog readability,"My Blog Readability Test: What level of education is required to understand your blog?". The result, as you can see above, is of genius level. Under normal circumstances, genius is the most desired word to be rated, but in this case, I'm not so sure. If only genius can understand my blog, does that mean people don't understand what I wrote here?


There are always 2 sides of a thing
When people talk about financial crisis, most people will agree that it is bad for everyone. But is it everyone? C is a victim of retrenchment, and he was compensated accordingly. He spend part of the compensation on a landed property, which at that time is at all time low because the demand was low as a result of the financial crisis. After 3 years, his landed property gain 3 fold, and he is now a half a millionaire.

Gaining from Crisis
As you can see from C, one can actually gain from a financial crisis, but are you the one? The most important key to actually gain from crisis and overcome difficult times is to have a big enough reserve funds, and diversified it as you will never know what kind of crisis you may be facing.

Feel Good Funds

Recently I was informed that Public Mutual will launch 2 new funds in the month of April, namely Public China Titans Fund(w0w! Sounds really gigantic) and Public Islamic Optimal Growth Fund. The former will be available from 1st April (Aprils Fools Day), while the latter from 8th April.

The Selling Point
When I heard of the brief intro of these 2 funds, I was really impressed. I shall start with the Public China Titans Fund 1st. The strategy of this fund is to invest in Big Cap counter in China, and the Big Cap is really BIG, with market capitalization of over RM10 billion. While in recent time, people are saying the China market has heated too much, and the market there is going to burst, while some point to the poor performance, thus far, of the funds investing in China. Frankly speaking I agree with both these opinions, but I can point out how this fund is different.

Size Does Matter!
Today, the biggest bank in the world is no more Citibank or banks in the US. The biggest bank today belongs to China's Industrial and Commercial Bank of China Limited (ICBC), with market capitalization of US$254billion.

http://en.wikipedia.org/wiki/Industrial_and_Commercial_Bank_of_China

Besides ICBC, there are a big number of Big Cap companies in China who is already making their presence felt. China Mobile, which is the largest mobile operator in the world by subscribers. Other notable companies include Sinopec, China National Petroleum, China Construction Bank, and finally Asia's Richest man, Li Ka-shing's Hutchinson Whampoa.

While you may say that the bubble is going to burst (in fact Li himself also mentioned before), these Big Cap companies, will only get bigger as they possess a very huge domestic market and cash rich.

High Dividend Yield + Growth
The 2nd fund, Public Islamic Optimal Growth Fund strategy is to invest in high dividend yield and growth stocks. This is actually a nice balance to the investor as growth stocks offer higher profit but more volatile, while high dividend yielding company normally grow at a slower pace. With the combination of both, investors can maintain their dividend yield, while there are possibility of fast growing companies in the portfolio, which bring about higher profit. Perfect match!

Now let us look forward to their official launch of the funds!

Compound Interest determine whether you can retire a millionaire or not

So can you retire a millionaire? Yes, and NO!...
NO! if you keep your money under the pillow ( also can apply to savings account which offer no interest at all)
Basic maths, RM500 x 12 = RM6000/year
RM6000 x 30 = RM180,000..
NO CHANCE AT ALL!


If you are earning a 10% interest per annum?..Ok,let's see..
RM6000/year
1st year = 6,600
2nd year = 13,860
3rd year = 21,846
4th year = 30,631
5th year = 40,294
6th year = 50,923
7th year = 62,615
8th year = 75,477
9th year = 89,625
10th year = 105,187

So at this stage,you have your own family, and there more commitments to meet. Now you can only manage to save RM250 per month = RM3000/year

11th year = 119,006
12th year = 134,206
13th year = 150,927
14th year = 169,320
15th year = 189,552
16th year = 211,807
17th year = 236,287
18th year = 263,216
19th year = 292,838
20th year = 325,421

At this stage, you'll want to let yourself and your family to enjoy some luxury. So now you decided to stop saving every month.
Compounding Factor= (1+10%) to the power of 12 = 3.14

The exact figure is actually RM1,021,822. Congratulations! You are a millionaire!...

The exact money saved is only RM90,000, but compound interest turn you into a Millionaire!..

Rating on Public Mutual's Funds

Recently, Public Mutual published its funds' rating by the Morningstar Rating™ on its website. For Unit Trust Funds, Rating is similar to the Research Report done by the Stock Broking Company or Investment Bank on certain Stock Counters, just that Rating is even more simple. One may find it difficult to understand everything in a research report, while Rating is just based on the number of stars given. The Rating given is based on the return over period of time, normally 3-Year, 5-Year and 10-Year.

The Morningstar Rating™ is another guide for us when buying unit trust funds. For the full list of rating, visit

http://www.publicmutual.com.my/page.aspx?name=morningstar_all

strategy during falling market

There are good questions asked on unit trust recently.

"should I sell my unit trust now?"
"no."

"what if the market keep going down after this?"
"you will get more units."

"huh? but I'm not buying with the Dollar Cost Average method, I buy one-time only."
"Although you buy one-time, you will still get more units. If a company is making profit, it will distribute dividends to the shareholder right? Unit trust also invest in these companies, and the dividend distributed will be reinvest. If the market is dropping, when the dividend is reinvested, you will get more units, isn't it?"

Example: if you invest RM1000 on a RM0.25 fund, you will get 4000 units. If the price of the fund drop until RM0.20, when the dividend is reinvested (assuming the dividend is 10% of RM1000 = RM100), you will get extra 500 units.
(All calculations excluding service charge)

The Malaysian economy is doing well at the moment, with companies recording record earnings and dividend pay-out. The current drop in Bursa is mainly due to political reasons and the uncertain US economy. So don't panic if you are an existing investor, because with lower price mean more units for you when the dividend is reinvested.

Since unit trust is for a long run, you can sell at a higher price later on with more units. Buy low, sell high! But to ensure you will get better profit, do Dollar Cost Average!

Below is a very meaningful article for to read. Don't worry, be happy!

http://www.publicmutual.com.my/page.aspx?name=art_remaincalm_pg01

Non-Trading Days for Hong Kong Stock Exchange

Very often, we are said to have the most public holidays in the region in Malaysia, but then..there are still days when others are having holidays while we are not.
If you have bought any unit trust fund investing in Hong Kong and China, take note!
Below are the days where the Hong Kong Stock Exchange will close while we are not.

Good Friday
21 March 2008

Easter Monday
24 March 2008

Ching Ming Festival
4 April

Tuen Ng Festival
8 June 2008

Hong Kong Special Administrative Region Establishment Day
1 July

Mooncake Festival
15 September 2008

China National Day
1 October

Chung Yeung Festival
7 October 2008

Boxing Day
26 December

Transaction received during these days, be it purchase or repurchase, will be processed based on the closing prices of the next business day.

In cases of switching of funds involving china fund, the same applies, that is, transaction will only be processed based on the closing prices of the next business day, when both funds involved are opened for trading.

So do take note of this when making switch! Especially when there are events coming up! Take the recent Malaysian election for example. If you have decided to switch to a china fund on the 7th of March, but unfortunately 7th of March is a holiday in HKSE (for example), so the switch will only occur on the 10th of March, when both market are open.

So....DO TAKE NOTE!

Who are managing these unit trust funds?

Unit fund is managed by a group of professional managers (known as the unit trust company) who will invest the pooled money in a portfolio of securities such as shares, bonds and money market instruments or other authorised securities to achieve the objectives of the fund. Because of the large sums collected, the fund manager is able to diversify among various investments in such range and diversity that the risks of investing are minimised.

Why I highlighted the word Professional?
Still remember the 1997 financial crisis? The reason why it affected so many people is because at that time, almost everyone, or anyone buy shares! You can see people selling vegetables, and talk about how much he made in the stock market. And also because of these uninformed people buying into the stocks, a counter that worth only RM1.00 can be sold at RM5.00! Isn't that hilarious?!..

Well, I'm not saying that these professionals will surely make profit when investing in shares! In fact, if these people are really so good, they are already billionaire themselves, and wouldn't give a damn investing for people for a salary! Look at Warren Buffett!.. What I want to stress here is, at lease these people know a thing or two more than the general people investing in share market!...At lease they can differentiate between a stock that is "fried" up by speculations, or really have the fundamental to be priced at that level!

So if you know nuts about stock market, don't dive into it! Choose unit trust instead!

If you think you know a lot about stock market, and is already investing in stock market, do compare your profit/loss to the unit trust fund and benchmark! Cause most of the time people will find that they do no better than unit trust fund!

The profit is even much less if you count in the amount of effort spent on "researching" before you buy a certain counter, and also the minimum brokerage fee of RM40.

So at the end of the day, is it worth it to buy stocks by yourself?