I started serious Investing Journey in Jan 2000 to create wealth through long-term investing and short-term trading; but as from April 2013 my Journey in Investing has changed to create Retirement Income for Life till 85 years old in 2041 for two persons over market cycles of Bull and Bear.

Since 2017 after retiring from full-time job as employee; I am moving towards Investing Nirvana - Freehold Investment Income for Life investing strategy where 100% of investment income from portfolio investment is cashed out to support household expenses i.e. not a single cent of re-investing!

It is 57% (2017 to Aug 2022) to the Land of Investing Nirvana - Freehold Income for Life!

Click to email CW8888 or Email ID : jacobng1@gmail.com

Welcome to Ministry of Wealth!

This blog is authored by an old multi-bagger blue chips stock picker uncle from HDB heartland!

"The market is not your mother. It consists of tough men and women who look for ways to take money away from you instead of pouring milk into your mouth." - Dr. Alexander Elder

"For the things we have to learn before we can do them, we learn by doing them." - Aristotle

It is here where I share with you how I did it! FREE Education in stock market wisdom.

Think Investing as Tug of War - Read more? Click and scroll down

Important Notice and Attention: If you are looking for such ideas; here is the wrong blog to visit.

Value Investing
Dividend/Income Investing
Technical Analysis and Charting
Stock Tips

Monday 31 May 2010

Kep Corp - CE for KGT

KGT’s listing will be distributed by way of a dividend in specie to entitled shareholders in proportion to their holdings in Keppel, with every entitled shareholder receiving 1 Unit for every 5 shares held. The distribution amounts to approximately S$379 million in the form of up to 326 million KGT Units. This translates into an implied value of approximately S$1.16 per KGT Unit, and a distribution value per share of approximately 23 cents.

Sunday 30 May 2010

Fundamental or Technical Analysis? - Revisit

Fundamental or Technical Analysis?

By visiting investment blogs, some time I really get entertained by some retail value investors trying to convince others how they have done their wonderful works of deep fundamental analysis while forgetting what their Grand Master towards to the end of his investing life said:  A Conversation With Benjamin Graham

Technical or Fundamental analysis

One uses technical indicators and charting to forecast the stock price movement while the other one uses financial ratios, understanding businesses and attending AGMs to judge the quality of the Management and by asking the Management a few questions here and there to justify their investment decisions.

Technical or fundamental analysis are both guesswork and speculative in nature and the final results of such analysis are never certain and often lagging in nature.

The future of any company can turn unexpectedly in short time due to the external circumstances far beyond the control of the company and often the Management of these affected businesses will shut their mouths for as long as possible. Some may even deny it outright.

Portfolio Management - Diversification Is Your Friend - Part 3

Some retail investors disagree that diversification is your friend and like to quote Warren Buffet's saying.

"Diversification is Nothing More Than Protection Against Ignorance." - Warren Buffett
I advocate diversification for the purpose of risk control as investing in stock market by nature is risky.
Doing the Maths
For example:
You have $100K as investing capital and invest in a portfolio of 10 diversified stocks - $10K per stock. You are taking a risk of 10% of your investing capital per stock.
If unfortunately bad thing happen to one of your stocks in your portfolio and get wipe out.

Your portfolio lost 10% and your investing capital is down to $90K. This $90K capital will require an average 11.3% returns on 9 stocks to break-even. Do you think it is easy to achieve an average 11.3% returns for 9 counters.
But what if your weight-age of each stock is only 5% of your capital or total of 20 diversified stocks, then the portfolio will require 5.3% returns to break-even. An average of 5.3% returns on 19 counters may be achievable.
See the table below for different weight-age:

Portfolio Management - The Importance Of Realized Profit (Part 3)

To pursue an all passive income strategy, the amount of investing capital required to hold in the stock market at the different rate of returns for the desired amount of stock dividends received.

Saturday 29 May 2010

Future planning: Investing for retirement is a non-negotiable financial goal.

When buying a car, upgrading the family residence and providing for retirement or your children's quality education, there are limitations and trade-offs to consider

By Roy Varghese

UPPER middle-class families in Singapore typically have four main lifestyle goals: replace the family car every five years, upgrade the primary residence at least once, educate the children overseas, and achieve financial independence by age 60 or so to enjoy a comfortable retirement lifestyle. But unless the family's combined household income is in the top 10 per cent bracket nationally, there are limitations and trade-offs to consider before constructing a realistic financial plan that includes all four goals.

Car ownership

The price of new cars has fluctuated considerably over the years owing to COE, import duties, foreign currency exchange rates and so on. If we assume that our model family owns a 2-litre Japanese car which they replace every five years over a 40-year period, this is how the math works out in the Singapore context. At an average price of $120,000 (in 2010 dollars) for a new car, the monthly instalment for the car loan works out to about $1,000. The road tax, insurance and maintenance costs add up to another $500 per month. The cost of petrol, ERP and parking fees similarly may cost a further $500 each month. From age 30 to 70, this couple will have paid the bank close to $500,000 in absolute dollars ($1,000 per month over 480 months) for owning a new car and replacing it every five years or so. The price for convenience makes car ownership the top lifetime consumption item and drain on family resources. With the money spent on eight new Toyota Camrys or Honda Accords, you could send two kids to Princeton or Columbia, if they manage to get admitted.

Home mortgage

Let's paint a picture of a hypothetical couple's home ownership pattern. They graduate from university, work for a few years, marry at age 28 or 30, buy an HDB apartment for $300,000 and then upgrade to a private property by age 35. If we assume a very nice condo or even a terrace house, the purchase price in 2010 dollars would be about $1.5 million, without renovations. We can amortise renovations over the life of the house and treat this as an operating expense rather than as capital expenditure for the purpose of our analysis.

Let's assume that the HDB flat was fully paid for at the time of sale in 2010 and that the proceeds were used as equity in the upgraded private property. At an average interest rate of 3 per cent pa, the $1.2 million mortgage over 25 years would result in a monthly outlay of $4,000 in cash and CPF. The interest element to the bank for the financing of the private home would be about $600,000 in total.

It may appear that the borrowing cost for the home is comparable to the money spent on cars. However, there is a crucial difference - the home has an investment value in retirement whereas the cars depreciate the moment they leave the showroom.

Saving for retirement

This is the one long-term goal that almost everyone has in their financial plan. 'We need a retirement income of $5,000 per month in today's dollars from age 60 onwards.'

A very modest lifestyle aspiration indeed and realistic too. If you exclude mortgage payments, income tax, life insurance premiums, and the children's higher education costs, the model couple can live comfortably on $5,000 per month if they retire today.

To make the retirement capital last till 90, without having to sell the family condo or terrace house, this 60-year old couple would need to accumulate at least $1.5 million today. With a combined monthly household income of $12,000 by age 40 (see The Business Times March 20, 2010 'Double Your Income Every 10 Years'), it is possible for our hypothetical couple to save and invest an average of $4,000 per month over 20 years for the target retirement capital accumulation. This works out to about $1 million ($48,000 per year over 20 years) saved or twice the amount spent on cars or mortgage interest on the home. An average annual rate of return of 5 per cent compounded over 20 years will provide this couple with the nest egg for their retirement lifestyle.

Apart from having a roof over your head, saving and investing for retirement is a non-negotiable financial goal. The issue for young and middle-aged parents is: can you afford the trappings of upper middle-class lifestyle (present and future) and educate your children abroad at a world-class institution?

Ivy League education

If you embark on constructing a comprehensive financial plan in your early 40s, funding your children's tertiary education is usually a medium-term goal. If you have 8-10 years to save and invest for the children's university education, there is a high probability this can be achieved without having to compromise your other financial goals. The math is fairly straightforward. If you wish to send your child to SMU, NUS or NTU, the cost is about $50,000 per child for a 3-year degree program in today's dollars. This is almost the equivalent of financing one new Camry per child's entire local tertiary education. In order for your child to graduate from Yale University, parents will have to shell out S$300,000 today for a 4-year undergraduate programme.

If you have more than one child, good luck as you have to play Solomon and decide who stays home and who gets to go to New Haven, unless your resources are unlimited or there is a scholarship available for at least one child.

There is no doubt that our children can receive quality tertiary education in Singapore despite the widely-held perception in some circles that a degree from a prestigious foreign university provides an edge over a local degree. There is no data available to suggest that an Ivy League education guarantees a higher lifetime income compared to local degrees. It may be that a child who qualifies for admission to an Ivy performs better in her career because she is a high achiever by nature.

In conclusion, there are some lessons to be drawn regarding funding overseas tertiary education. If you can accept driving a smaller or used car, there is some hope of capping spending on car ownership. The affordability of housing is critical in limiting finance charges for owner-occupied private property.

By the time you are 50, you will most likely have set money aside for your children's local or overseas education. This means that retirement funding is typically the last goal to be realized and for some, this may be leaving it too late. To fund a comfortable retirement lifestyle, a good number of upper middle-class families may need to trade down their private homes in their 60s to make up for the shortfall in liquid assets.

I know many parents are happy to scrimp and save so that their children can enjoy the returns on a world-class education. And it is laudable to help our children realise their dreams and reach their potential with a branded college education. But unless we are confident about being financially independent in retirement, it is best to consider trade-offs for the big ticket items in life before promising our children an expensive overseas university education.

The writer is Foundation Adviser at ipac Singapore. These views expressed are his own and not ipac's. He can be reached at roy.varghese@ipac.com.sg

Portfolio Management - The Importance Of Realized Profit (Part 2)

Portfolio Management - The Importance Of Realized Profit

Portfolio's Balance Sheet

Current Value of stocks + Cash available for investing

= Injected Capital + Total Realized P&L + Total Dividends Received + Total Unrealized P&L

Sources that help to increase portfolio value
  1. Injected Capital: Periodic injection of more capital; but this doesn't really help to improve your investing skills and experiences in the stock market. It only provides you with a feel-good factor.
  2. Total Realized P&L: More frequent profit taking can help to increase the cash available to re-invest for compounding effect as it is much easier to re-invest the gains together with the recovered capital. It is always easier to buy with more money on hand.
  3. Total Dividends Received: These are periodic and less frequent and it can also help to increase cash available to re-invest; but it is usually harder to achieve compounding effect for average retail investors with smaller capital base. It is lot harder to buy with less money on hand. For example, someone who has received $50K of dividend income will definitely find it easier to re-invest than one with $5K.
  4. Total Unrealized P&L: These are just paper gains or losses that exist in the investors' mind and can't really do anything with it. Some days it makes you happy and other days it makes you sad.
Have you realized that depending on dividends alone is not enough to improve the portfolio's balance sheet, we really need more frequent realized profits and together with the capital recovered to re-invest them for compounding growth. So we need both!

Friday 28 May 2010

The day when doctor brings bad news. It can happen to anyone.

Under-estimating risks and over-confidence - The day when doctor brings bad news. It can happen to anyone and nobody is exempted.

Friday, May 28, 2010

'I was in denial ... it was sheer stupidity'

Health minister hopes confession about surgery delay will be 'life-saving reminder' to others

05:55 AM May 28, 2010SINGAPORE - He has spoken to many patients in denial when confronted with an illness. But faced with the same situation himself, Health Minister Khaw Boon Wan fell into the same trap.

With a high calcium score and an abnormal electrocardiogram stress test reading, it was obvious to the cardiologists that he needed a coronary angiogram as soon as possible.

"But I was in denial," Mr Khaw, 57, wrote on his blog, in two postings titled 'A lifesaving discovery' and 'Living at cliff's edge'.

This resulted in a "risky six weeks delay", against doctors' advice, before he finally got the angiogram done on May 3. He is now recovering well after undergoing heart bypass surgery on May 4.

It was in March that Mr Khaw, who professed to have been "fit as a fiddle" with normal cholesterol and blood pressure levels, discovered - during a scan for calcium deposits in the heart - that he had a serious problem.

He thought he would be "in the mild or at most moderate range, say around 100. So it was a shock to me when the NHC (National Heart Centre) cardiac radiologist reported a reading of 507 ... I was literally disoriented", Mr Khaw wrote.

NHC medical director Professor Koh Tian Hai pressed him to go for a coronary angiogram that very week, but a "very reluctant" Mr Khaw negotiated for more time to mull over the situation.

When an NHC staff member called up a few times to schedule the angiogram session, "I played delay tactic".

Mr Khaw kept the information from his siblings, when he went to Penang one weekend for Qing Ming, the Chinese tradition of ancestral worship at the graveyard. "I did not want to alarm (them) and I still thought that it was all a false alarm," he said.

But he did confide in labour chief Lim Swee Say, who was most alarmed and thought that he was wrong to postpone the angiogram.

Mr Khaw even intensified his exercise routines - against doctors' advice - to prove he was in top physical form. "I used to run on treadmill three times a week, I increased it to five."

His doctors had also urged him to carry a Glytrin spray, which he should spray under his tongue in the event of angina, so as to bring down his blood pressure while waiting to be taken to hospital.

Mr Khaw faithfully carried the spray with him wherever he went - but only for a few days. "Then I told myself: I am not going to get a heart attack; I am not going to carry this."

Looking back, the Health Minister wrote: "While it is understandable why I did what I did, it was sheer stupidity and madness."

He expressed his gratitude to the NHC, Prof Koh and the NHC Sister who persisted in getting him to finally sit down with doctors and run through his options. "That session pulled me from cliff's edge and got me back on the rational track." Mr Khaw also recalled the comments of a general practitioner (GP) with over 30 years of experience, who had noted that patients who comply well with his advice, especially in taking the lifelong medication, are largely still around.

Those who suffer from a heart attack, stroke or other major complications, come largely from the group who do not comply, or do so half-heartedly - either in denial or over-confidence of the state of their health.

"I was stubborn and was not a good patient for nearly six weeks. I am making this confession so that hopefully, it can be a life-saving reminder to others.

"Please do not follow my example," said Mr Khaw.

Portfolio Management - Your Personal Over-Sold and Over-Bought Indicator - Revist

"One thing you don't want to do, 'whether you're a professional or an individual investor, is to make an emotional judgment about the marketplace." - Larry Hatheway

Keeping your emotions at the sideline - buy slowly and sell slowly. Buying the top 10-20 blues with good dividends and growth is the way to go. There is no need to crack your head and squeeze your brain juice so much.


Thursday 27 May 2010

Keppel receives approval to list K-Green Trust

Createwealth8888: This is Dividend In Specie valued at 23 cents

SINGAPORE : K-Green Trust (KGT) has received conditional eligibility to list on the mainboard of the Singapore Exchange.

Keppel Corporation first announced its intention to list the green infrastructure assets of its waste management, water treatment, water reclamation, renewable energy arm, Keppel Integrated Engineering, in January this year.

KGT recently received permission from the National Environment Agency to add the Senoko and Tuas waste-to-energy plants into its portfolio.

It also counts the Ulu Pandan NEWater plant as one of its assets.

The trust aims to invest in environmentally-friendly assets in Singapore and abroad, with an eye to Asia, Europe and the Middle East. - CNA/ms

Wednesday 26 May 2010

Stop loss or Cut loss?


Stop Loss

Stop loss is when you pre-determine your own exit price to take the loss and walk away. It is just one of those bad trades and it is not that painful as the loss tends to be smaller.

Cut Loss

Cut loss is different from Stop Loss. Cut loss is when you felt so hopeless at the falling stock price and it has reached your threshold of pain. You bite your finger and sell it and move to the sideline for a while.  Cut loss is usually bigger and more painful.

BT, Wed, May 26, 2010, Singapore

Resisting the urge to sell low

When stock markets lurch, hasty decisions taken at anxious moments can be extremely costly to investors

IF you've got money in the stock market, take a deep breath: It's one of those moments. The market is lurching, and that is precisely when impulsive behavior can hurt the most. Investing can be a delightful pastime when stocks are rising. When they are falling - which has often been the case lately - it can be excruciating. But hasty decisions taken at anxious moments can be extremely costly.

'When a lot of people reach their threshold of pain, they sell their stocks and try to move to more secure holdings.'

'When a lot of people reach their threshold of pain, they sell their stocks and try to move to more secure holdings - cash, bonds, Treasuries,' said Louis S Harvey, president of Dalbar, a fund research firm in Boston. 'These decisions don't work out very well for most people.' Over the long haul, the average investor has badly underperformed the overall stock market: Through December, over the last 20 years, the average stock fund investor has had annualised returns of only 3.2 per cent, compared with 8.2 per cent for the Standard & Poor's 500-stock index, according to Dalbar. Short-sighted moves in down periods account for much of the deficit, Mr Harvey said.

Lately, anxiety among investors undoubtedly has been rising. The flash crash of May 6 - the biggest intraday swing in market history - didn't help. Shortly after 2.30pm that day, the Dow Jones industrial average fell 1,000 points - and then came most of the way back, all in a matter of minutes.

The causes of that sharp drop aren't yet entirely clear, although they appear to be related in part to glitches in the connections of lightning-quick computerised stock trading across the United States.

In response, the Securities and Exchange Commission (SEC) last week said it would temporarily impose 'circuit breakers' on stocks in the S&P 500 when they have fallen 10 per cent or more in a five-minute period. The SEC and the Commodity Futures Trading Commission say they are still studying the crash, but don't yet understand it. And then there's the Greek crisis. Since the announcement of a nearly US$1 trillion bailout package for Greece and other fiscally strained eurozone countries, turmoil in global markets has not abated. Despite an upturn on Friday, stocks have been choppy; the dollar, Treasury bonds and gold prices have risen; and oil and the euro have plummeted.

Professional asset managers have been responding as best they can.

Robert C Doll, vice-chairman and global chief investment officer for equities at BlackRock, the investment management firm, says he thinks the American market is likely to remain relatively volatile for an extended period - and then resume its climb.

In addition to the angst caused by the flash crash, and the problems in Europe, Doll points to the bear market in China and the threat of economic slowdown there, as well as domestic issues in the United States. These include continuing uncertainty about regulatory reform, investigations into the activities of Goldman Sachs and other banks, and the unsettled state of the American economy. He says two other 'scenarios' are possible, but much less likely.

One is a global meltdown, with the Greek crisis morphing into 'Lehman II', the probability of which has been reduced by prompt action by European authorities. And the other is a quick resumption of the roaring bull market that took the S&P 500 up 80 per cent. But there are too many problems for that to be very likely in the next month or two, he said.

For long-term diversified investors, he said, it probably makes sense to ride out the storm, and, maybe, add to your holdings. 'Keep your shoulder harness on, and your seatbelt secured, and your life should be OK,' he said.

There are even reasons to be encouraged by the health of the global economy, said Larry Hatheway, chief economist and chief strategist at UBS Investment Bank. While he acknowledged the negative effects of the 'sovereign debt crisis' in Europe and myriad problems elsewhere, he also said: 'Signs of growth are very strong and incoming data is beating expectations, and this is true in all major economies, in all major regions around the world.'

Corporate profits are surging, Mr Hatheway said. Firms that cut costs in the recession are reaping immediate bottom-line benefits as revenue rises in a global recovery. And, finally, he said, central banks in Europe, the United States and Japan have kept short-term rates 'extraordinarily low, near zero.' 'We've got low rates, strong profits and strong growth,' he said.

'That's a pretty powerful combination to boost stock prices.' It makes sense for big institutions to engage in tactical manoeuvres - buying stocks that seem cheap because of a market drop, for example, and emphasising sectors that may benefit from economic shifts, said Derek L Young, chief investment officer at Fidelity's global asset allocation group. Fidelity is analysing the implications of a possible 'prolonged period of weakness in the eurozone'.

One thing you don't want to do, he said, 'whether you're a professional or an individual investor, is to make an emotional judgment about the marketplace.' - NYT

"When you are emotional, you make unwise decisions rapidly." - Warren Buffet

Tuesday 25 May 2010


Sembcorp acquiring 49% stake in Thermal Powertech Corp India for S$319m

SINGAPORE: Sembcorp Industries is taking a bite into India's growing energy market with a major stake in a power company there.

The local conglomerate said that its fully-owned subsidiary Sembcorp Utilities is acquiring a 49 per cent stake in Thermal Powertech Corporation India (TPCIL) for S$319 million.

A joint venture agreement has been signed between Sembcorp Utilities and Gayatri Energy Ventures (GEVL), which will hold 51 per cent stake in TPCIL, the firm said.

TPCIL is set to build, own and operate a coastal power plant in Krishnapatnam, SPSR Nellore District, Andhra Pradesh, India.

It will invest S$2.1 billion on a 1,320 megawatt coal-fired power plant in Krishnapatnam, which will serve the energy demand in the southern, western and northern regions of India

The plant will be operated by an O&M company, of which 70 per cent will be owned by Sembcorp while 30 per cent will be held by GEVL.

The full commercial operation of its two 660-megawatt units is expected to begin by end-2013.

The acquisition will be funded through internal funds and borrowings, Sembcorp said.

It is expected to be completed in mid-2010 once conditions for the implementation of power projects in India are satisfied.

The transaction is not expected to have a material impact on the earnings per share and net tangible assets per share of Sembcorp Industries in the current financial year. - CNA/vm

Monday 24 May 2010

Reality Check - Early retirement?

While many of us are planning to retire early but Govt doesn't think that many people can really afford to retire and  they are going to extend the official retirement age for us to worker longer.

Sunday 23 May 2010

Are you the money magician?

Eight money archetypes

So are you the money magician with the Secret of Compounding?

This is the ideal type and every one should learn and move toward this type.

  • Armed with the knowledge of the past
    •  Be a ever-learning student of the market and follows financial and companies news closely.
  • Made peace with his personal history, and understands that his source of power exists within, in his ability to see and live the truth of who he is
    • Understand the power of Mind, Money and Method in investing or trading
      • Your size of capital and investment goals should determine your investing strategies and risks control in your investing time frame.

Investing in STI defensive stocks - May be just another Market Myth

Can investing in STI's defensive stocks with good dividend yield really shield us from the pain of falling portfolio value?

E.g. A portfolio of market perceived defensive stocks or the likes of defensive stocks such SPH, SingTel, Starhub, SMRT, SingPost, and etc with good dividend yield.

Thank to the world of blogging that helps us to learn and share experiences.

A Case Study of An Experienced Retail Investor

His portfolio of  Singtel, SingPost and Cambridge

Singtel and SingPost are market perceived defensive stocks with good dividend yield.How does it perform against STI?

Portfolio's Total Gain (Realized Gain + Unrealized P&L) down by -26.2% from its recent peak while STI down by -10.5% from its recent peak. The drop in portfolio is more severe than the drop in STI.

Thinking aloud
  • The market perceived defensive stocks with good dividend yield may not really help much in a bear market.
  • Avoid concentration in just a few defensive stocks. Diversify into more sectors may actually help to limit the bad fall.

Making buy-and-hold investing work

Go ahead and invest for the long haul, but lock in your profits once your targeted return is achieved

By Vasu Menon

(Createwealth8888: Similar to the strategy of Createwealth8888 - Short-Term Trading and Long-Term Investing)

The success of any investment strategy depends, among other things, on when you make your foray into markets, whether you overpaid for your investment and if you had locked in your profit when your targeted return is met.

THE extreme volatility in global stock markets over the past three years has raised questions about the wisdom of a buy-and-hold investment strategy, epitomised by one of the world's best investors, Warren Buffett.

Mr Buffett's investment philosophy of buying outstanding companies at a fair price and holding them for long periods is often cited as a strategy for successful investing. No doubt, Mr Buffet has done very well with this strategy, and it has made him one of the richest men in the world. But does the strategy still work in this new age of investing, where significant uncertainty and volatility appear to have become fixtures in the marketplace?

A look at the Chicago Board of Options Exchange's VIX index shows that market volatility has increased significantly over the past three years after the onset of the US sub-prime crisis in 2007.

The US sub-prime crisis and the debt woes in Europe have highlighted deep-seated problems in Western economies and financial systems, which could take several years to resolve. The dislocation and uncertainties posed by these problems are likely to resurface regularly in the coming years, causing intermittent turbulence in financial markets and sharp pullbacks.

Given this prognosis, does it make sense for investors to take a strategic or long-term view of their investments or should they be trading markets instead, to get the most out of their money?

While more turbulence and market volatility seem a surety, the question that investors have to ask is whether markets are likely to trend higher over the next few years or if the uptrend will stall and give way to a bear market.

No one can predict this with certainty; but if investors are comfortable that economies are on a gradual mend and earnings of companies will continue to recover, then fundamentals should eventually prevail. This, coupled with still attractive medium-term valuations, should help markets head higher, even though the road ahead will be a bumpy one.

Despite the uncertainties looming on the horizon, there is a role for both strategic and tactical investments in one's portfolio. It is important for investors to be very clear about their objectives from the onset, and be disciplined and unemotional about their investments.

It is perfectly alright to trade in markets, but limit it to a small portion of your portfolio and set realistic targets. If you are aiming for, say, a 30 per cent return in a short span of time, this may be unrealistic. However, a 5 per cent target may be something that is more realistic and achievable in the short term. Also with tactical investments, be sure to set loss limits to minimise losses.

However, the bulk of one's investments should still be invested with a strategic view of at least three to five years.

(Createwealth8888: Similar to the strategy of Createwealth8888 - Short-Term Trading and Long-Term Investing. I use Pillow Strategies for my Long-Term Investing without using my own capital)

For strategic investments, even though you may start off investing with a view of say five years, it does not mean that you have to stay invested for the full period. This is where many investors get it wrong with the buy-and-hold strategy.

A cardinal mistake that many investors make is to set off investing for the long haul, with a certain return in mind, but they do not take profit when their target is achieved because they get overcome by greed and hold on to their investment, hoping to make even more gains.

If your investment objective is to make a return of say 8 per cent per annum over a five-year period, it works out to a targeted total return of 40 per cent. Now if for some reason, you make that return in say one year or two years instead of five years due to a sharp rally in the markets, like we saw for many bourses in the past 12 months, then it is probably best to sell and lock in your profits when you have hit your target, even if it is well before your five-year time horizon.

The fact of the matter is that, unless you take profit, you will never realise your gains, which could wither away if markets experience a downturn subsequently.

Let's take Singapore's benchmark Straits Times Index (STI), for example. It was trading at around the 800 level in September 1998 and currently stands at around 2,800, representing a significant 250 per cent total return in almost 12 years.

However, an investor who had ploughed his money into the STI in September 1998 could have done even better if he had locked in profits just 15 months later as the index had surged more than three-fold to about 2,600 in January 2000, at the height of the technology fervour.

The gains would have been much smaller if the investor had held on to his investment and cashed out after four to five years, as the STI fell significantly after the technology bubble burst in early 2000.

On the other hand, if an investor was swayed by the market frenzy during the Internet boom in January 2000 and made his foray into the STI then, he could be sitting on only a small gain despite buying-and-holding for more than 10 years, as the index is currently trading just 200 points above the 2,600 level.

The chances of success are likely to be lower if you indulge in indiscriminate investing, buying the flavour of the month at any price, and holding it no matter what. In essence, the success of any investment strategy depends, among other things, on when you make your foray into markets, whether you overpaid for your investment and if you had locked in your profit when your targeted return is met.

A buy-and-hold strategy is premised on the assumption that you stand to enjoy better returns if you invest for the long haul. Time increases the probability of achieving better returns, but it is not a guarantee. So go ahead and invest for the long haul, but hedge your bets by locking in your profits once your desired return is achieved. In other words, buy-and-hold until your investment meets your targeted return. Once your target is met, be disciplined about selling and locking in your profit.

(Createwealth8888: Be Far Better At Selling Than At Buying? - Revisit )

There should always be an exit strategy for whichever investment strategy you subscribe to, and buy-and-hold is no exception. If the original premise for your investment changes and the fundamentals take a significant turn for the worse, it may be better to liquidate your holdings before your investment horizon runs its full course, even if it means suffering losses.

Saturday 22 May 2010

A history of market bubbles and crashes

Portfolio Management - Your Investing Capital

LP's Reality check 2

LP said "Drum roll please....... Ladies and gentlemen, I need 140k by end of the year. Hmm, based on what I have now and my savings target by end of the year, most likely I will be able to hit 85% of the target without any help from the market. THAT is quite reassuring. This means that I can tap maybe 10k of my reserves to average down some holdings, but when the market rebounds, I'll have to take an equivalent amount or more of my capital out. In other words, USE SPARINGLY."

Do you need to liquidate some of your investment when you need cash to meet near-term expenses?
I believe it is not uncommon for some retail investors to think that they can easily liquidate some of their investment at profit when they need cash to meet near-term expenses.
Reality Check 3

Don't ever come to the stock market and expecting the market to help you to meet your near-term expenses when the needs arise.
When you are already in the stock market, your only defense against any panic selling is your holding power during the Bear Raid and the small consolations for your misery come from your stock dividends.
So it is wise to invest only with money that is not needed for next five years and then only you are emotionally steady enough to face the future bulls and bears.

"Unless you can watch your stock holding decline by 50% without becoming panic-stricken, you should not be in the stock market." - Warren Buffet.  

"If you have trouble imagining a 20% loss in the stock market, you shouldn't be in stocks." - John (Jack) Bogle
Take note of wise men's advice.

What if the Bear market begins?

Peter Drucker once said, “What gets measured, gets managed.”

"Insanity: doing the same thing over and over again and expecting different results". said Albert Einstein

Thinking aloud ....
  • STI is down -10.5% from its recent peak on 14 Apr 10 at 3020
  • Portfolio is down -6.5% from its recent peak.
Stock Market Is War - Part 4

Yup. I am getting ready to activate the 1st batch of reservists if the Bears continue to press on.

Friday 21 May 2010

Petrobras share move gets nod

Brazilian state-run oil giant Petrobras said today its board approved an increase in its capital base, a necessary step for a massive share offering to help fund a $220 billion four-year investment plan.

The company may issue up to 2.4 billion preferred shares, compared with 200 million previously, and 3.2 billion voting shares, according to the new limits set by the board. Petrobras' statute barred the company from issuing voting shares before.

The new limits on share issuance will go to a general shareholders vote on 22 June.

Petrobras suffered several recommendation downgrades by stock analysts in recent weeks over uncertainty created by a government-backed oil-for-shares capital plan that the company says could bring in $25 billion in new cash to fund exploration of the vast pre-salt fairway.

The company said the board approval of new issuance limits doesn't mean it plans to sell the entire amount of stock at once as it still needs congressional approval for the oil-for-shares plan.

Petrobras most-traded preferred shares firmed 0.4% to 27.53 reais in early morning trade today, while the voting shares were up 1% to 31.37 reais, compared with a 1.6% jump in the benchmark Bovespa index, a Reuters report said.


Positive for Kep Corp and SML

Swiber wins South Asia deal worth US$618m

Award follows last week's contract of US$17-US$27m

SWIBER Holdings, an integrated construction and support services provider to the offshore industry, said it has been awarded a deal worth approximately US$618 million by a major oil and gas operator in South Asia.

Mr Goh: Latest contract is the biggest Swiber has won in a consortium bid

Announcing this yesterday, the group said this represents the single largest contract it has secured in a consortium bid to date. It did not disclose who awarded the deal.

The scope of work comprises the design, engineering, procurement, fabrication, transportation, installation and commissioning of major platforms, said Swiber.

The work is expected to be completed in Q2 2012.

'As our fifth contract win for 2010, this very significant contract win gives a major boost to the strong momentum of our recent contract wins,' said Raymond Goh, executive chairman and group chief executive officer of Swiber.

'Just last week we announced a contract for the transportation and installation of heavy structures. We continue to enhance our position as a one-stop service provider for the region's leading oil and gas players,' he added.

The contract Swiber announced last week was worth between US$17 million to US$27 million, and came from an oil and gas operator in South-east Asia.

Swiber currently has a fleet of 43 support and construction vessels, comprising 34 offshore vessels and 9 construction vessels.

It reported a net profit of US$8.03 million in the first quarter of 2010, 18 per cent lower than the net profit a year ago.

Revenue slipped 2.9 per cent to US$84.51 million.

Swiber is also seeking a proposed listing of its subsea services business on Catalist.

Swiber shares closed up one cent at 99.5 cents yesterday.

Kep Corp - Got it back @ $8.50

Bloody Friday! Example of don't know how to die?

Yalor. Going for Round 93

Thursday 20 May 2010

Noble's dividend: $0.050447

The Directors hereby announce that the Applicable Exchange Rate in respect of the Final Dividend is US$1.00 : S$1.4013. Based on the Applicable Exchange Rate, the Singapore dollar amount of the Final Dividend to be paid is Singapore 5.0447 cents per Shar


Under such market condition, I don't think I will be able to sell Noble any sooner so I have to be happy in collecting 2.5% average dividend yield.

SML - Got it back @ $3.81

May be I am too early for it. LOL


Sembcorp Industries Ltd (the Company) would like to provide an update on the legal action commenced by Cascal N.V. (Cascal) in the United States in connection to the proposed voluntary tender offer for the common stock of Cascal as announced on April 26, 2010.

On May 11, 2010, Cascal filed a motion for a temporary restraining order and/or for a preliminary injunction to stop the launch of the offer. An initial preliminary hearing was held before the United States District Court for the Southern District of New York on May 12, 2010, during which Cascal withdrew its motion for a temporary restraining order, Sembcorp agreed not to launch the voluntary tender offer before May 21, 2010 and the court set a May 19, 2010 hearing on Cascal's motion for a preliminary injunction.

The matter came before the court again as scheduled on May 19, 2010. After considering all of the evidence presented by the parties, including the sworn declarations of key individuals, the judge hearing the matter concluded, among other things, that based on the record before the court there was no likelihood of Cascal succeeding on its legal claims. The court then denied Cascal's motion for a preliminary injunction and cleared the way for the tender offer to go forward.

The Company is pleased that the court has found no basis for Cascal's claim that the prospective tender offer is in breach of any laws, regulations or contractual obligations and it remains committed to completing the transaction.

Wednesday 19 May 2010

Protecting Our Portfolio From The Next Bear - 2nd Revisit

Protecting Our Portfolio From The Next Bear - Revisit

Market Truism: Every Bear market is followed by a Bull Market, and every Bull market is followed by the Next Bear market.

Today STI closed @ 2776, STI has lost -8.1% from its recent high @ 3020 while my portfolio has lost -4.5%. 
So diversification is your friend. It is true once again.
How about your portfolio?

Monday 17 May 2010

Noble Group buys assets of US-based Northville Product Services

By Ephraim Seow

Posted: 17 May 2010 1621 hrs

SINGAPORE : Mainboard-listed commodities trader Noble group said its wholly-owned subsidiary, Noble Petro, has entered into an agreement to acquire certain assets of Northville Product Services (NPS).

NPS is a wholly-owned division of NIC Holding, a Long Island-based international petroleum and renewable fuels company.

The assets acquired focus on the refined products blending, trading, distribution and marketing business based in Houston, Texas and Denver, Colorado.

The acquisition is expected to complete in June and includes the employment of the key management personnel as well as other employees.

This acquisition will give Noble access to an additional 3.7 mm barrels of storage in Pasadena, Texas and the mid continent, as well as supply contracts with key US Gulf coast refiners and a wholesale marketing system in the Magellan, Plantation and Teppco pipeline systems.

Noble said the combination of Noble Petro and the NPS assets will give it access to over 6 million barrels of storage capacity.

It will also broaden its refined product distribution, trading and marketing network in the US.

The group said the acquisition also supports its global clean fuels platform as the US is a major importer of gasoline, as well as being a major exporter of distillates. - CNA /ls

Noble - Adjusting the buy price after bonus issue: 11 for 6

Market price adjustment for Noble Friday closing price of $2.98 is $1.928. You may adjust your purchase price simply as follows:

($Buy Price x $1.928) divided by $2.98 = adjusted buy price after bonus issue.

Bought at $3.11 is internally adjusted to $1.87 by getting more than its fair share from the total bonus issue entitlement for the purpose to sell them at board lots.
Bought at $2.85 is adjusted to $1.72

So after the bonus issue, Noble holding will have 55% value impact for every price bid movement. Enjoy the slightly more portfolio price volatility.

Sunday 16 May 2010

Saving matters but Investing determines - Part 3

Saving matters but Investing determines - Part 2

invest, thesundaytimes, May 16, 2010

Ex-pastor turns evangelist of wealth

Desire to do more than pray for poor drives him to create wealth foundation.

For 15 years until 2002, he worked as a pastor in south Africa but could do nothing more than pray for them.

It was only in 2002 that Mr Carstens, now 48, realised he could do more if he became a successful investor and created a wealth foundation.

He started reading feverishly on finance. He did well with property investments when South African had a real estate boom between 2002 and 2006


Noted this:"He started reading feverishly on finance."

The key to your success in wealth creation lies with the knowledge and skills in investment. Skills can be improved over time through real-life practical hands-on experiences in investing through market cycles. Learning to live with the bulls and bears as it is too difficult to avoid them.

Start reading feverishly in finance and investment if you haven't really get going.

Newbie To The Job Market?

Financial literacy is one of the most important skills an adult should have


If You Still Don't Believe ILP is a Time Bomb? One more experience shared ..

Why Regular Premium Investment Link Policy Makes Bad Investment Sense To Me?

Saturday 15 May 2010

Insurance Companies Work for Shareholders, Not Customers

by Flexo on May 7, 2010.

The entire concept of insurance, particularly public insurance companies with shareholders, is backward. If a company is to survive year after year, it has to make money for its owners. In the case of public companies, executives answer to the board of directors and the shareholders.

The goal is, of course, to make money for everyone involved.

Here is how insurance companies make money, reduced to the absolute basics:

  • Collect as much as possible from insured policyholders in the form of premiums.
  • Pay out as few claims as possible (but enough to avoid regulatory scrutiny) to policyholders.
  • Profit.
An insurance company that pays all legitimate claims could not survive in a free market economy. To compensate for paying more claims, the company would be forced to raise its premiums, and would lose its business to less expensive insurers. In order to increase profits and keep shareholders happy, the company must deny legitimate claims. (Createwealth8888: This is where the fine print that helps them to deny claims. Honestly, do you really spent your time and effort to understand and clarify this fine print?)

When you battle with a publicly-traded insurance company that doesn’t want to pay your claim, it is trying to earn another fraction of a cent per share. You just want the company to honor your insurance agreement in exchange for the premiums you have been paying.

It makes more sense for an insurance company to exist as a mutual company, where the policyholders (customers) are the owners. With this type of structure, the shareholders and policyholders don’t have competing priorities. Claims can be paid, and customer-owners will be happy. When there is a surplus, the mutual company distributes the excess money to its customer-owners. This is clearly a better way to operate for all parties involved.

Mutual companies tend to demutualize, or go public, to get access to more capital from millions of happy investors. It’s at that point the company no longer works for its customers, it works for the huge institutional investors and to a lesser extent individual shareholders. While policyholders will have their mutual shares converted to stock shares, they will no longer be the primary focus of the company.

Public insurance companies are the only companies that improve their business by not providing a service to their customers. While everyone jokes about cable companies, they provide customer service by making sure you’re getting hundreds of channels all the time. They may not show up at your door to fix problems, but there are hardly any problems. If a cable company categorically refused to deliver service despite charging its customers every month, it would go out of business; yet, this is exactly how public insurance companies must operate in order to succeed.

"Old men are fond of giving good advice, to console themselves for being no longer in a position to give bad examples." - François La Rochefoucauld


Buyers beware - Read the fine print especially on Critical Illnesses claim.

We bought coverage for Critical Illnesses on good faiths and don't ever expect the insurance companies to pay on good faith as they are not your father or mother who helps to pour milk into your mouth as they exist to make money for their Management and their shareholders.

Use insurance wisely as a hedging tool and treat it as expenses.

It is where you have to ensure that you are first adequately covered by medical insurance and H&S for treatment expenses.

You tend to hedge more when you are low in saving and less savvy in investment in your early stage of life and progressively be able to hedge less when you have more saving and become more savvy in your investment.

Savvy in your investment and get better returns is a better hedge against all future expenses.

Friday 14 May 2010

NOL narrows losses in Q1, sees full year profit

How will NOL perform next week?


NEPTUNE Orient Lines narrowed its losses year-on-year for its first quarter ended Apr 2, 2010 by posting a loss of US$98.5 million compared to a loss of US$244.6 million in the corresponding period last year.

The better performance was attributed to higher volume and increasing freight rates under the improved container shipping operating environment.

Revenue for the quarter grew a robust 36 per cent, from US$1.54 billion the year before to US$2.1 billion. The increase in revenue is mainly due to the increase in container shipping revenue which experienced volume and rate improvement.

Loss per share stood at 3.82 US cents, compared to a loss per share of 15.01 US cents in Q1 2009.

NOL expects to return to profitability for the full year on continued improvements in volumes and freight rates in its principal markets.

The group's counter closed a cent lower in trading today, to $2.14.

Critical illness insurance pays you for living - Revisit

Critical illness insurance pays you for living

This article first appeared in "Mind Your Body", a Straits Times Supplement.

Dr Ang Peng Tiam

The medical director of Parkway Cancer Centre has been treating cancer patients for nearly 20 years.

Buyers beware - Read the fine print

The financial world has been in turmoil recently. I understand very little of it because there is too much fine print – when even experts are divided on what is the right thing to do, what are retail investors to do?

Part of the problem arose because the financial instruments are just too sophisticated for laymen to understand. The banks which sold these products argue that the investors have been told of the risks. In fact, these risks have been spelt out in the contracts.

But if these points are buried in fine print, people just don’t take the time to plow through them all. They assume that they can trust their brokers and relationship managers to give them the best investment advice. And when their investment falls off the cliff, they feel shocked and betrayed.

All too often, I see this same problem with patients’ medical insurance.

Many buy health insurance because they understand the rising cost of health care and the need to protect themselves if they ill. They assume that if they have medical insurance, they are going to be able to afford medical care if the time comes.

I am not sure that this is true, especially when the illness is cancer.

There is a form of medical insurance that pays out a lump sum upon diagnosis of a “critical illness”. Cancer, being the leading cause of death in Singapore, is of course included as one of the illnesses. However, not all cancers are covered under this provision. There are many cancers, which are deemed “not serious” and are not included.

For example, pre-cancerous conditions like non-invasive breast cancer, or cancers with low risk of metastases like skin cancer are excluded. Sometimes, patients cannot understand why they have been diagnosed with cancer and yet they do not get the money “promised” to them.

Another form of medical insurance helps to pay hospitalization, radiotherapy and chemotherapy bills.

Back in the early 1990s, when I was working in Singapore General Hospital, I noticed a trend of cancer patients delaying chemotherapy by a week or 10 days. I did not think much of it until I started asking them why they did not keep to the appointed schedule of three weeks (most chemotherapy programs are designed to be administered once every 21 days).

I found out that the reason was that Medishield would only pay for treatment once every month. Many of these patients depended on the $700 from their basic Medishield. I tried my best to discourage them from delaying treatment as this could have a significant impact on their overall results. No matter what I said, I could not convince some who really needed the medical insurance to help out with their bills.

I eventually brought this matter up and after some discussion, Central Provident Fund Board who runs the Medishield scheme, agreed to change the coverage for chemotherapy to every 21-day treatment cycle.

But this problem could surface with private insurers, some of which can opt to pay for one treatment a month. Not many people will realize the significance of this adjustment, until they need chemotherapy.

What happens is this – if two cycles of chemotherapy falls within a month, patients tell me that they can only claim for one. As most chemotherapy programs are administered every 21 days, the patient will not be able to claim for at least one or two cycles of treatment. For this reason, wherever possible, I try to start patients off on the first cycle towards the end of the month rather than the beginning.

My advice for those who are planning to buy or have already bought medical insurance is to read their contracts carefully. But even this may not remove all perplexities. If you are really puzzled, here’s a radical suggestion. Pay your family doctor a fee, of say $100, to go through the medical aspects of insurance agreements so that you understand what you are buying. This will work out a lot cheaper than finding out you don’t have the payout you thought you had if you fall ill.

Last, knowledge really is power. Some years ago, a patient of mine told me meekly, “My insurance agent said that I couldn’t make a claim because my liver cancer has not spread.” That must have been one of the most ludicrous statement I have ever heard. I said to her: “You tell your agent that if he does not pay out by this Saturday, I will be on a soap box outside Tangs along Orchard Road, telling people about this case and asking them not to buy insurance from his company.”

The insurance company agreed to settle the claims on Friday.

Thursday 13 May 2010

Olam sees 2.6% rise in Q3 net profit to S$89.3m

By Chris Howells

SINGAPORE: Commodities supply chain manager Olam International said its third quarter net profit rose 2.6 per cent to some S$89 million. This was due to strong growth in all four of its main business segments.

Revenues for the third quarter rose 18.4 per cent to S$2.7 billion.

In the first nine months of the 2010 financial year, Olam's net profit rose 30.1 per cent to S$267 million as revenues increased 19 per cent to S$7.3 billion.

Olam saw strong growth in edible nuts, spices and beans, food staples and packaged foods and industrial raw materials on the back of stronger demand.

But its confectionary and beverage ingredients business grew at a relatively slower pace because of a short crop in cocoa in Ivory Coast and a short crop of coffee in Columbia.

Olam said it is on track to achieving its growth targets for the year.

Sunny Verghese, MD & CEO, Olam, said: “We've seen a fairly strong first quarter. I think there are some uncertainties about the current potential sovereign European debt contagion.

“But the fourth quarter of last year and first quarter of this year has been a pronounced uptick in demand and market sentiment. So far we see that continuing. The first two months of the second quarter has been along those trends.” - CNA/vm

Stop-Loss Orders: A False Sense of Security

Topics:Investing Ideas & Strategies
John Gabriel, On Wednesday May 12, 2010, 7:00 am EDT

The dust is still settling and fingers are still being pointed in the aftermath of what is now being called the "flash crash." Sorting out the mess will require much time and likely result in more fingers being pointed in multiple directions, but we simply have to accept the fact that markets will occasionally suffer bouts of extreme volatility--and be properly prepared to ride those waves until calmer waters prevail.

While at this point there seems to be more questions than answers, we can't help but feel for some of the unsuspecting victims of this erroneous market action. But the first step in avoiding disasterous results in the short term is to avoid taking potentially perilous actions. Followers of Morningstar's exchange-traded fund research are more than likely familiar with our strong preference toward using limit orders when executing ETF trades. This helps ensure that you get a price at or extremely close to the fund's net asset value. After all, in a properly functioning market, a fund is worth simply as much as its constituent parts. If you are selling and not getting something very close to fair value, we would recommend not selling at all.

One type of trade that we vehemently avoid more than any other is known as a "stop-loss" order. Consider yourself warned: If you perform an online search for this term, you're likely to find some misleading definitions. For instance, you may come across an explanation like, "setting a stop-loss order for 10% below the price you paid for the security will limit your loss to 10%." Our main problems with this statement are that it is blatantly false, imparts a false sense of security, and can lead to truly disasterous results.

Such misinformation likely makes employing a stop-loss strategy sound appealing to a risk-averse investor who cannot actively monitor his portfolio. In the case of a traditional stop-loss order, once the "stop" price is reached, a market order to sell the security is entered. Hence, the trade will be made but not necessarily at or near the predetermined stop price. As was the case last Thursday, if there is insufficient liquidity or the market is moving quickly, there's a good chance that the order could fill at unfavorable prices.

In order for a fund to trade near net asset value, the prices of all of the individual securities in a fund must be known. A mutual fund accomplishes this by waiting to the end of the day. This periodic pricing masks the intraday volatility. There is little risk for the mutual fund company because all of the prices at the end of the day are known. But for an ETF, which trades throughout the day, waiting until the end of the day to set a price is not possible. Instead, the ETF depends on arbitrage. In order to keep the price trading near net asset value, a trader needs to be able to quickly calculate the net asset value. The magnitude and urgency of the calculations lends itself to electronic and algorithmic trading.

When volatility increases, so does the uncertainly of the net asset value. In response, a market maker is going to widen out his bid-ask spreads and reduce trading until after making an assessment of market activity. The market makers and algorithmic traders are using sophisticated order instructions. They are not going to make market orders when they have no idea where the market is. As an individual investor, we need to be aware of when our trades are going to be executed and at what price. After all, a stop-loss order is a very unsophisticated form of algorithmic trading. It becomes a market order precisely when volatility has increased.

To paraphrase Peter Lynch, if you buy a stock with a stop-loss of 10%, the only thing you are guaranteeing is that you'll lose 10% on that trade. We couldn't agree more. In fact, we often quip that a more appropriate name for stop-loss order would be guaranteed loss order. Those of us who experienced the violent volatility that was so prevalent at the height of the credit crisis should also agree with Lynch's point of view on the matter.

Of course, there are likely many investors/traders who swear by the use of stop-loss orders. A popular strategy we've started to hear more of as people dip their toes back into the market is the use of trailing stop orders. Such dynamic orders are used with the intention of maximizing profit when a security's price is rising and limiting losses when it falls. For example, a $1 trailing stop on a $20 security would be triggered if the price fell to $19 or below. However, if that security were to rise to, say, $25 (without breaching the $1 trailing stop) then the stop price would reset to $24, thereby helping the investor "lock-in profits."

Frankly, if you have such little confidence in your investment, you probably should not own it in the first place. But if utilizing stop-loss orders is something you're comfortable with as part of your investment strategy, we'd simply advise that you make sure to use limits. There are "stop-limit" orders and "trailing stop-limit" orders available. While just placing a stop-loss order will trigger a market order, these stop-limit orders will result in limit orders being placed if the predetermined price is breached. This can mean a world of difference in erratic and volatile markets.

Consider the hypothetical investor who had a 10% stop-loss on an ETF sitting out on the market last Thursday when things went haywire. As soon as the 10% decline was registered, there would have been a simple market order entered for that investor to sell his shares. Because the NYSE went into "slow mode" in order to step back and try to make sense of the chaos, trades spilled over into other exchanges in search of "bids" (courtesy of Regulation NMS). When the NYSE slowed, it shifted to 30-second or one-minute intervals, as opposed to the fractions of a second we'd typically see under "normal" market conditions.

The problem was that the NYSE was the only exchange to go into "slow mode." What happened was there was a large influx of sell orders but very few buy orders. In between these slowed intervals at the NYSE, the market sell orders (which had no specified "ask" price) went out onto other exchanges looking for bids to hit. Unfortunately, during this (very short) chaotic period, many market makers widened their bid-ask spreads enormously until they could figure out what was happening. In effect, the market makers were stepping away from the market. However, the market sell orders coming through the system were looking for bids to hit, regardless of how erroneous they were at that given instant.

The result was the malaise witnessed last Thursday--ETFs representing ownership of hundreds of stocks trading down 60% or more from the prices they were traded at less than an hour before. In our example above, what was supposed to be a limited loss of 10% essentially turned into a loss of 60% to 100%, and most of those losses were recovered in a matter of minutes for those who wisely held their postitions. This happened because there weren't any "real" bids at that moment in time. One moral of the story is to avoid using market orders. Moreover, it always pays to know what the value of your investment is at any given time. Thankfully, with ETFs you can always check the intraday indicative values, which are published every 15 seconds throughout the trading day.

Wednesday 12 May 2010

The Total Money Makeover by Dave Ramsey – Baby Step Seven Building Wealth

Will You Try To Pay Off Your Housing Loan ASAP If You Have One? - 2nd revisit

The Total Money Makeover by Dave Ramsey – Baby Step Seven Building Wealth

by Hank on May 10, 2010

In a previous posts, we reviewed the first six steps of Dave Ramsey’s seven-step guide for reducing debt and building wealth in his book, “The Total Money Makeover”. As we will be covering each of these “baby steps,” as Ramsey calls them, in individual postings, let’s look at the final one.

All Debts Paid. When you complete the Total Money Makeover plan, you will have all of your debts paid off including your home. Without any payments for a car, a house, college, and other everyday expenses, you are free to invest and spend your money to live the life that you always wanted to have. With no payments to make on consumer loans, you can really attack your investing, buy real estate, invest in a small business, etc. The possiblities are endless when you have all of your obligations paid for.

Live Like No One Else. Dave Ramsey is famous for saying several catch phrases. One of his most popular is, “Live like no one else, so eventually you can live like no one else”. With a little bit of pain and discomfort early in life while you live on a strict budget, you can have the life that you always dreamed of later during your retirement years. It takes hard work to live a carefree life with no debts or money worries. It is not easy, and Dave Ramsey never pulls any punches with that respect. But, he does paint an awesome picture of the end result. It is a life of doing whatever you want….living like no one else. Normal life in America is living paycheck to paycheck, poor, no savings, and a mountain of debt. But, it does not have the be that way. If you follow the baby steps, incredible things are possible.

Give Like No One Else. One of the incredible benefits of being debt free and having no payments for loans is that you can give to all of the charities that you want to. You can give freely to your church without worrying about bouncing the check to the electric company. With no bills you can give freely of your time and energy to the causes that mean the most to you. The possiblities are endless, and the world is at your fingertips at the end of this journey.

A Review of the Basic Steps for Saving, Eliminating Debt, and Building Wealth

Ramsey’s program and book, “The Total Money Makeover”, include the following baby steps to financial freedom…

Step One: Save $1,000 for an emergency fund
Step Two: Use the debt snowball method to pay off your debt
Step Three: Complete the emergency fund
Step Four: Invest 15% for retirement
Step Five: Save for your children’s college
Step Six: Pay off your mortgage
Step Seven: Start building wealth

Will You Try To Pay Off Your Housing Loan ASAP If You Have One? - 2nd revisit

Will You Try To Pay Off Your Housing Loan ASAP If You Have One? - Revisit


The Total Money Makeover by Dave Ramsey – Baby Step Six Pay Off Your Mortgage Early
by Hank on May 9, 2010

After you have saved and contributed to an emergency fund, your retirement account, and your children’s education, you are now prepared to take the initiative and completely pay off your mortgage. Paying off your mortgage early is baby step number six in Dave Ramsey’s plan for building wealth which is outlined in his book, “The Total Money Makeover”.

If You Will Live like No One Else, Later You Can Live Like No One Else

By getting rid of your monthly mortgage payments, you will impact your cash flow significantly and will now be able to use that payment towards building wealth. As Ramsey repeats time and again in his book, “If you will live like no one else, later you can live like no one else.” Sacrificing now will enable you to have the life that you dreamed of later on in life and in retirement. Like a baseball team, September is not the time that you earn your playoff spot, May is the time to lay the ground work. Your 50s are not the time to buckle down and finally pay off debt. That should happen in your 20s or 30s if you want to have an absolutely incredible retirement.

Building Equity. You have a number of avenues that you can take with regards to prepayment of your mortgage. For wealth building purposes, prepayment makes sense as you will increase the equity in your property. An extra $1,000 that you are forking out for a mortgage payment can be allocated toward other investments that will increase your overall holdings financially if that mortgage was paid off. Obtain the necessary mortgage information and figure out, creatively, the best way to facilitate your payments.

Look at Your Loan Documentation. For example, examine your mortgage documentation to determine how much you can prepay and if there are any limitations or penalties for doing so. Some lenders require that you can only make so many additional payments in a year. Therefore, make certain you read and understand your loan and mortgage documentation so you can execute any additional payments with an extra measure of confidence.

Pay Attention To Your Statements. Because, at this stage in the game, you have become quite accustomed to saving, paying off your mortgage is simply an extension of the discipline you have acquired thus far. Making payments early can help you realize a savings of thousands of dollars as well. Just make sure that the additional payments you make are handled appropriately. Because mortgage payments are installment payments, it is good to alert the lender in writing of the amount for the additional payment or payments on a separate check and making a notation in the subject line. Ensure that you additional payments are being credited against payment to your principle only! You can also arrange with your lender to have the extra amount automatically deducted each month from your checking account.

Watch Your Real Estate Market. Make sure you stay apprised of the current interest rates and financial products offered from mortgage lenders. Develop an understanding of any penalties that are assessed for prepayment and shop for financial products that may aid you in saving money even further. I move around a lot, and I am always attune to how much my neighbors’ homes are listed or sell for.

Ways To Prepay. You can make great strides in saving if you even pay small amounts on the principal of your mortgage. Add the extra prepayment amount by regularly including a remittance or by making a lump sum payment. Did you know that if you make one additional mortgage payment to your 30 year fixed rate loan, that you can pay off a 30 year mortgage in as little as 22 years. That may be a lot of money in the lump sum format, but it may equate to less than $100 extra dollars per month if computed that way.

You can see why Dave Ramsey’s plan of taking baby steps works, especially when prepaying a mortgage. Some people try to prepay their mortgage when they are also holding a substantial amount of credit card and other consumer debt. By the time you have reached step 6 in Ramsey’s plan though, you have paid off your credit cards and prepayment can be readily achieved.

A Review of the Basic Steps for Saving, Eliminating Debt, and Building Wealth

Ramsey’s program and book, “The Total Money Makeover”, include the following baby steps to financial freedom…

Step One: Save $1,000 for an emergency fund
Step Two: Use the debt snowball method to pay off your debt
Step Three: Complete the emergency fund
Step Four: Invest 15% for retirement
Step Five: Save for your children’s college
Step Six: Pay off your mortgage
Step Seven: Start building wealth


Sembcorp Industries Ltd (the Company) would like to provide an update the legal action commenced by Cascal N.V. (Cascal) in the United States in connection to the proposed voluntary tender offer for the common stock of Cascal as announced on April 26, 2010.

As previously reported, Cascal filed a complaint in the United States District Court for the Southern District of New York against the Company and its subsidiary, Sembcorp Utilities Pte Ltd (1) to enjoin Sembcorp's voluntary tender offer for the Cascal shares, (2) to enjoin Sembcorp's use of Cascal’s confidential information in connection with the tender offer and (3) to claim unspecified damages as a result of the tender offer. On May 11, 2010, before Sembcorp had the opportunity to respond to the complaint filing and before the United States judge had an opportunity to consider the claims asserted, Cascal filed a new amended complaint seeking the same relief as requested in its original complaint. With the filing of the amended complaint, Cascal also filed papers seeking an emergency temporary restraining order to prevent the launch of the voluntary tender offer. The US court has scheduled a hearing on Cascal's request for a temporary restraining order for May 12, 2010 and Sembcorp will file its defence to the request for a temporary restraining order in advance of the court hearing.

Sembcorp intends to assert in its response that Cascal has no standing to maintain any claim under Section 10(b) of the U.S. securities laws, and that Cascal has failed to plead any violation of US securities laws in any event. In addition, even if Cascal is a proper party to the litigation, Sembcorp will assert that the non-disclosure agreements specifically permit the use of the information provided by Cascal for the purposes of a voluntary tender offer made to all of Cascal’s shareholders. Lastly, Sembcorp will show that the tender offer should be allowed to proceed to allow the shareholders to make an informed decision concerning their shares.

The company continues to be of the position that we are not in breach of any laws, regulations or contractual obligations in respect of the transaction. It has retained US lawyers to act on its and its subsidiary's behalf in this matter and will make further announcements as and when appropriate.

Monday 10 May 2010

Money can't buy you happiness

(WASHINGTON) Your parents were right: money can't buy you happiness.

That was the message from the Federal Reserve chairman Ben Bernanke last Saturday to graduates of the University of South Carolina.

'We all know that getting a better-paying job is one of the main reasons to go to college . . . But if you are ever tempted to go into a field or take a job only because the pay is high and for no other reason, be careful!' Mr Bernanke said in his commencement address.

'Having a larger income is exciting at first, but as you get used to your new standard of living and as you associate with other people in your new income bracket, the thrill quickly wears off,' he said.

The Fed released his prepared remarks before he gave the speech.

Studies found that just six months after winning a large lottery prize - even in the millions of dollars - people reported being not much happier than they were before winning, Mr Bernanke said.

His advice blended what economics and social science have to say about personal happiness. When you boil down all the studies and fancy formulas, it sounds a lot like what your parents told you.

Other findings: Happy people tend to spend time with friends and family. Happy people tend to do what they love for a living or a hobby. Happy people tend to feel in control of their lives.

Happiness research is useful for policymakers, too, Mr Bernanke said. The Fed's goals include promoting economic growth and employment.

Richer countries tend to report higher levels of satisfaction because their people tend to be healthier, have more leisure time to pursue hobbies and have more interesting work, Mr Bernanke pointed out.

Richer countries tend to have few citizens in deep poverty, he added.

Sometimes, being unhappy is a good thing.

'It is possible that doing the ethical thing will make you feel, well, unhappy,' Mr Bernanke told the graduates. 'In the long run, though, it is essential for a well-balanced and satisfying life.' - AP
Related Posts with Thumbnails