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

By TEH HOOI LING
SENIOR CORRESPONDENT

A FRIEND from my university days called to say that she and her husband had committed to buying a second property and are finding their finances a little tight despite having two incomes. Then she asked a question that I get rather often: 'Got any good stocks to buy or not? Any inside information?'

'No,' I said. 'I never get any inside information! You go do your own analysis!' She said: 'You mean you do your own analysis when you buy stocks? I buy on 'tips'. Anyway, I don't know how to analyse stocks. Where did you learn how to do that? In school ah?'

Yes, I did. My studies in Business Administration and Applied Finance and the CFA programme did equip me with some of the principles of investment analysis.

I told her that financial literacy is one of the most important skills an adult should have and that it should be taught in schools. Increasingly this is being recognised, and such courses are being offered as part of enrichment programmes.

But for those of us who didn't have that privilege, there is no lack of material available out there if one really takes an interest in the matter. I have friends from non-financial industries who through years of reading the 'how to' investment books, have become very savvy investors. A number of them came to know me through this column.

One of them is from Penang. He used to run his own construction business and is now retired. He said he was an ignorant young man in the 80s and had lost money investing in a fund. He then resolved to educate himself on investment. Like most value investors, he idolises Warren Buffett. He bought a few lots of Berkshire Hathaway shares some years back, with the intention of leaving one lot each to his grand kids as their education fund.

But he sold some near the peak in 2007, sensing the frothiness of the market. Earlier this year, he bought into Citigroup when it sank to around US$1. He has sold some to get back his capital. What's left in the stock now is all 'free money'.[Createwealth8888: Pillow stocks ah!]

Having experienced and seen the results of wise investments, this friend is very fervent about convincing others of the importance of learning that skill. [Createwealth8888: Me too, but how many people will believe me?] At 60-plus, he still buys and reads books like Trump Strategies for Real Estate: Billionaire Lessons for the Small Investor and Accounts Demystified by Anthony Rice.

Some months back, he asked me to help him edit a two-pager that he had penned on his investing experience. He wanted to share it with his friends, particularly the younger ones. I think many readers can benefit from his advice as well. Here's what he wrote:

'I have no money to invest in stocks! - This statement is wrong! Why? Because one can always start small. Below are two real life examples. Case 1: With her monthly salary of less than RM200 back in 1958, a 'poor' Chinese primary school teacher (my friend's cousin) managed to put some savings away every month. In the early 1960s, she started to buy stocks as investments.

She did the 'right' thing in investment. She chose the 'good' stocks - companies with good businesses. She held on to the stocks for the long term. Over the years, she bought more of the stocks with her additional savings as well as the dividends received. Her stockholding also grew as the companies distributed bonuses and issued rights.

Thirty years later, she had become a millionaire. She managed to send her kids to England to study. Despite her wealth, she is still very careful with her money. As a retired civil servant, she receives a pension of RM1,000 a month. But dividends from her stocks come to RM3,000 a month. Case 2: In 1985, a young 'ignorant' young man (my friend himself) invested $500,000 of his hard-earned income/savings in a fund managed by a bank. He didn't know much about stock investing. He thought the bank's fund managers would be in a better position to help him invest. But over the next one to two years, his invested fund decreased in value. He lost about $150,000! He lost confidence in the fund managers, and withdrew what was left of his money.

The lessons from the examples are: One, it's not true to say one has no money to invest. Two, even if you have money, without sound knowledge of investment, it is 'useless'. People will try to take away your money. Three, it is better to start learning how to invest when you are young so that your 'good' investment can enjoy the 'magic of compounding' over a longer time frame.

The compounding effect is such that the longer the time, the bigger the money will grow to! For example, a $100,000 invested with a compounded return of 8 per cent a year, will: in 10 years grow to $216,000; in 20 years grow to $466,000; and in 30 years grow to $1,006,000!

It's never too late to start. And from your own experience, you can pass on to your next generation the 'correct' way to invest their hard-earned money.

Also, it is not true that we have no time to manage our own investment. This is the misconception that so-called 'experts' perpetuate to mislead us, so that they can slowly take away our money through the 'clever' knowledge of investment! Remember Bernie Madoff? (How cleverly he cheated his clients!)

It is not a time factor, nor a cost matter. It is a matter of focus and priority. So equip yourself with good knowledge and attitude of investment. There are a few good books to teach/guide us.


The Richest man in Babylon;
Rich Dad and Poor Dad;
Who Moved My Cheese?
The Intelligent Investors;
Beating the Street;
Common Stocks and Uncommon Profits;
Books on Buffett's investment strategy, including The Warren Buffett Way; Buffettology; The New Buffettology.

You can finish reading these books within one year and they will cost you less than $2,000! This is another way to self-study an Investment MBA course.

Yes, it is simple but yet not so easy. It needs determination and belief that this is the right and only way. 'Yes, you can!' as Mr Obama would say.

Good luck and have a happy life. It's achievable if we choose the 'right' track. Laziness and greed are the biggest enemies! And no 'quick money' mentality, please!'

Well put indeed. To readers who have written in to ask which are the good investment books, perhaps the list above is a good place to start.

Along the vein of 'experts' trying to profit from the uninitiated, another friend pointed out to me what he deemed to be the latest instance of that - the just launched POSB's MyHome Fund.

Managed by DBS Asset Management (DBSAM), the fund will invest in two exchange traded funds (ETFs) - namely the DBS STI ETF and ABF Singapore Bond Index fund. Both ETFs are listed on the Singapore Exchange. Depending on risk appetite, investors can choose from two portfolios offered which differ in their allocation to the two ETFs.

Why pay DBSAM a fee of 0.5 per cent when investors can buy both the ETFs directly from the market, he asked. Some observers see the MyHome Fund as a ploy by POSB - a unit of the DBS Group - to raise funds for the DBS STI ETF which hasn't attracted that much monies since its launch earlier this year.

Another friend cheekily said they could launch their own 'Milk the People Fund'. 'That's why learning to invest or at least understanding the gist of it should be rated as an essential life skill in this world of sharks that we live in,' he said.

'Sadly, most laymen will not be able to pass it down to their kids. [Createwealth8888: The purpose of this blog is to record the truth and fact of investing down to our kids] And these kids will grow up wondering how to invest, read the ads in the papers and end up enriching those guys selling trading programmes or courses but still end up nowhere.'

Also commenting on the MyHome Fund, the website The Book of Wise Investors concluded: 'Finance companies, insurance companies and banks are not benevolent donors to your wealth. The most important fact in growing your hard- earned money is really more financial literacy and not paying unnecessary expenses for nothing.'

But to be fair, as pointed out by financial adviser Martin Lee of Den of Lion Investors, MyHome Fund investors don't have to incur costs rebalancing their portfolio. For investors who want to do regular investments of $100 to $1,000, the upfront costs will be lower via the fund.

Also, according to him, if MyHome Fund manages to attract a big pool of money, its manager - DBSAM - may be able to get the manager of the DBS STI ETF, also DBSAM, to create units at net asset value. Hence, investors would save on the bid-ask spread, a cost that someone who buys the ETFs directly from the market will have to pay.

My take on all these is: Do your own research, and weigh the costs and benefits of any investments you intend to make. Then decide for yourself whether they suit your needs. Nobody else but you should be the most diligent in safeguarding your hard-earned money.

The writer is a CFA charterholder

Are you buying into business or just buying stock?

Some people are thinking that they are buying into a firm's business, when they are just buying a stock.

When you are buying x% or xx% of the firm's share, you are buying into the firm's business as you become a major shareholder of the firm. The firm's management will have to warm up to your presence and you may even have a board seat.

With a board seat, your interest in the firm is represented. You will have access to the Management to understand their immediate and long term prospects, assess the real ability of the management team, cognitive of the goals of the board members, their future products in the pipeline, the expected acquisitions, the competitive landscape and many more ..

If you buying x or xx or even xxx lots of the firm's shares, you are just buying stocks and don't have the falsehood of thinking that you are buying into the firm's business. Is your interest in the firm in anyway represented? Do you have access to the management team?

You are likely at your disposal for detailed analysis of the company's business and its future earning prospects through quarterly and annual reports, and probably attending AGM and asking a few questions; and most of the time the Management is very careful not to mention any undisclosed information; otherwise, they will have to rush out a press release.

Warren Buffet and the likes of Warren are buying into firm's business and even home-grown Warren-like, Dr Michael Leong like to buy 3-5% of the firm's share. These people are buying into business and not buying stocks. They buy a good business at good discount and hold for forever if the business continues to be good.

But, buying a stock is different because the primary reason to buy a stock is to sell it.

Even you are a long term value investor, you should at least look at chart for a 200 days EMA, if the stock price ever falls below the 200 EMA, at least do a partial sale.

Are you investing or speculating?

When people are speculating, but they think are investing? Here is the definition from


West's Encyclopedia of American Law

What is investment?

An asset or item that is purchased with the hope that it will generate income or appreciate in the future. In an economic sense, an investment is the purchase of goods that are not consumed today but are used in the future to create wealth. In finance, an investment is a monetary asset purchased with the idea that the asset will provide income in the future or appreciate and be sold at a higher price.

Investopedia Says:

The building of a factory used to produce goods and the investment one makes by going to college or university are both examples of investments in the economic sense.

In the financial sense investments include the purchase of bonds, stocks or real estate property.

Be sure not to get 'making an investment' and 'speculating' confused. Investing usually involves the creation of wealth whereas speculating is often a zero-sum game; wealth is not created. Although speculators are often making informed decisions, speculation cannot usually be categorized as traditional investing.


To me, it is just very simple, are you holding any hard or soft asset after the purchase? If the answer is no, then it is not categorized as investing. Can you call koala a bear? The koala is not a bear.

Payback period

From Wikipedia, the free encyclopedia

Payback period in business and economics refers to the period of time required for the return on an investment to "repay" the sum of the original investment. For example, a $1000 investment which returned $500 per year would have a two year payback period. It intuitively measures how long something takes to "pay for itself." Shorter payback periods are obviously preferable to longer payback periods (all else being equal)

When come to stock investing, do you really seriously think and care about Payback period?

Any businessman will want to recover his capital quickly and then let the biz takes care of itself to generate future cash flow. He will then look for the next biz prospect to deploy his recovered capital.

For stock investing, why are we not thinking like a businessman? Shouldn't we quickly recover the invested capital and let the stocks take care of themselves to generate future cash flow. This is the similar method which I called it "Pillow Stocks Investing" strategy.

Read? Pillow Stocks Strategy

Trading Performance Review

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

Since Nov 08 that I have given up the fast exciting active contra trading after successive months of contra losses for a slow moving position trading, how am I doing now?

1. ROC from 3.8% to 34.3% (I don't use stop loss so no negative ROC)
2. Holding Days from 1 to 226 days
3. Average ROC: 12.6%
4. Average Holding Days: 47.8 days


Next performance review at end Dec 09.

Insufficient savings? No wonder with poor insurance returns

http://tankinlian.blogspot.com/2009/08/insufficient-savings-no-wonder-with.html <--- TKL's view: Many life insurance policies taken today require more than 15 years to 'break even'. This is the point where the cash value of the policy is more than the premiums that were paid over the years.

Createwealth8888's view on his insurance policies:

My insurance policy was purchased more than 13 years ago, and coming to its 14th year anniversary and its cash value as on Jul 2009 is about 80.3% of premiums paid, and still far from break even.

So I still believe that certain insurance products will continue to give poor insurance returns regardless whether it is today or in the past 15 years ago, or in the future.

Another insurance policy maturing in Oct 09 and I have received the letter from the insurance company and its total return is 8.2% over 5 years, and it is nowhere near its projected returns. Projected returns are USELESS statement and don't ever believe it.

Fortunately, those relatives and friends of mine have been successful in their FA careers or they have move on, and unlikely they will come to me for meeting their quota. Cheers!

bull run or a bear market rally?

Published August 8, 2009
Albert Lam
Investment director
IPP Financial Advisers

THE global stock market has seen an incredible transformation over the past few months - from an Armageddon scenario to a super bull run that yielded a 40-80 per cent rally on most Asian bourses. Those who are invested have been handsomely rewarded, while those who are not adequately invested are hoping for a retracement that has yet to materialise. One common question among investors is: Have we missed the boat?

Many people expected a rebound from March's low but very few or none predicted the strength and length of this rebound. What caused the massive run-up after March 2009? I can think of four reasons:

1. There was a genuine sigh of relief that the financial system did not collapse, which restored investor confidence. However, just because the financial system did not break down, does not mean there are no problems within the system. I will use an analogy to describe what has happened. Mr Financial System was supposed to die from cancer but last-minute surgery got his heart pumping again. Everyone was happy that Mr Financial System did not die. However, Mr Financial System is only in cancer remission mode - there could be a relapse. His condition needs to be monitored carefully and he needs lots of long-term treatment and regular reviews before he can be pronounced well.

2. The concerted effort by governments worldwide to inject money into the financial system helped restore investor confidence, which resulted in risk aversion abating. Before long, chasing risk was back in form. We must go back to time-tested wisdom like proper asset allocation, diversification and regular portfolio reviews. Do not panic when others do, and do not be overly bullish just because others are jumping in big time.

3. Massive liquidity also played a big part in this rally. There was more than US$4 trillion in money market funds in the US alone at the start of this year. And since March, more than US$500 billion has flowed back into other higher-yielding assets. We see similar stories worldwide. In fact, many commentaries have called this a liquidity-driven rally.

4. The low interest rate environment means money in the bank is not a good alternative because the returns on deposits are not worth much. Therefore, investors have been encouraged to put their money to better use in the stock market. And rightfully so, if I may say.

However, fundamental economic data does not support such a massive rebound. The foundation of any economy is consumption - cycle feeds on demand.

Let's look at the US, which represents roughly 20 per cent of global GDP. The unemployment rate is heading towards the 10 per cent and could go beyond that. To add more pain, banks have reined in the availability of credit, which is a temporary lifeline to some. Property prices are still deteriorating year on year and the option to borrow from this asset class is out of the question. In these circumstances, we conclude that the US economy is still extremely weak. Unfortunately, Europe is in a similar condition. And Eastern Europe is in even worse shape.

Let's look back and recall what sparked the 2008-2009 Great Recession? It started with a financial crisis, which culminated in an economic crisis.

What we experienced last year is a serious crisis that almost broke the entire financial system. Liquidity was quickly soaked up and lending came to standstill. Banks were forced to either sell investments to meet demand or face collapse. This is what we saw recently when lending came to a standstill. No one trusted the banks with their deposits, prompting several governments to guarantee such deposits.

This evolved into an economic crisis, with most countries now in recession. They suffered a sudden downturn brought on by a financial crisis, with falling GDP, negative growth and high unemployment.

Can we have a genuine bull run under such conditions? It is not uncommon for bear market rallies to reach 50-70 per cent. The Dow Jones Index hit a high of 11,750 points at the peak of the technology bubble in January 2000 and collapsed to 8,062 in September 2001. It then staged an incredible bear market rally for the next six months to a high of 10,673 before crashing to a low of 7,197 six months later. The Straits Times Index went through a similar ride in the 1998 currency crisis. It fell from a high of 2,145 in January 1997 to a low of 1,040 in January 1998. It then rallied to a high of 1,553 in March 1998 and subsequently bottomed at 800 in September 1998.

Throughout the economic and financial crises of the past few decades, bear market rallies have come across as fierce and over-optimistic.

I am not saying this is definitely a bear market rally. However, I would rather be cautious than overly bullish. The foundation is still weak, although we have seen much improvement in sentiment, corporate results and some improvement in economic numbers. The International Monetary Fund has forecast a US$4 trillion loss from the credit/financial crisis, and the banks have written off about half of that so far. What will happen to the balance? All types of loans, led by sub-prime, are seeing a surge in delinquency.

Whether this is a bull run or a bear market rally, we must go back to time-tested wisdom like proper asset allocation, diversification and regular portfolio reviews. There are investment products out there that are not correlated with the stock market. There are regions and sectors that are still doing well despite the downturn. Do not panic when others do, and do not be overly bullish just because others are jumping in big time.

Parents can be an Asset or Liability to the children?

Bill Gates said: "If you born poor it's not your mistake. But, if you die poor it's your mistake."

La Papillion once said: "Parent can be an asset or liability".

How true!.

My deceased parents were definitely not an asset and more of liability. My mum died from cancer at age 42, and my dad was unable to carry on working as a painter due to chronic asthma as the smell of paint made his illness worse so I have no choice to give up going to the University after NS and have to start working to support the family.

So as parents, it is definitely important to start as early as possible in our financial planning to ensure that we have adequate retirement fund to take care of our own living expenses so that at least we are not liability to our children.

I foresee our children are going to have real tough life slogging very hard to earn enough money to purchase a home for living.

STI going where?

The market is too risky to short so it is less likely to crash down by taking the elevator down; but, it is more likely to climb the floor like some shopping mall. They make you walk round the shops at that level before you come to climb the staircase to the next level.

Did you notice them in the chart?

When you have money, what would you do with it?

When you have money, what would you do with it?

1. Spend it,
2. Save it,
3. Invest it,
4. Lose it,
5. Give it.

To spend, to save, to lose or to give it away, all these actions require very little effort from you. Only, to invest it is really tough, and it is so tough that to really do it well requires you to spend lots of effort and time to build up your investing knowledge and skills, and yet after putting so much effort and time you may even Lose it. That is the paradox of investing.

There are only 2 primary reasons to invest:

1. To preserve Wealth,
2. To build Wealth.

There is a saying that the RICH invest to preserve wealth, if they don't lose it, it is considered successful investment. However, the not so rich invest to build wealth and you can't afford to lose it..

So are you building wealth or preserving wealth? Each requires totally different strategy.

If you are building wealth, you may have to be a little more aggressive in your outlook and let the Magic of Compounding works harder for you. But, there is no free lunch, other than finding them in some temples or churches; you have to spend lots of time and effort to build up your investing knowledge and skills, and yet after putting so much effort and time you may even LOSE IT. That is the paradox of investing.

Happy National Day and may you build up your wealth as years go by!

STI - healthy correction?

The 4 consecutive days of pullback to -4.9% from its last peak may be a healthy correction to offload the weak holders and preparing STI for the next leg of rally breaking through 2700 to test the next major resistance at 2800.

Unfortunately, no show on Monday. *sigh*

Measure, Measure, Measure - Part 2

http://createwealth8888.blogspot.com/2009/07/measure-measure-measure.html <--- Part 1


Investopedia explains Compound Annual Growth Rate - CAGR

What Does Compound Annual Growth Rate - CAGR Mean?

The year-over-year growth rate of an investment over a specified period of time.

The compound annual growth rate is calculated by taking the nth root of the total percentage growth rate, where n is the number of years in the period being considered.

CAGR isn't the actual return in reality. It's an imaginary number that describes the rate at which an investment would have grown if it grew at a steady rate. You can think of CAGR as a way to smooth out the returns.

Don't worry if this concept is still fuzzy to you - CAGR is one of those terms best defined by example. Suppose you invested $10,000 in a portfolio on Jan 1, 2005. Let's say by Jan 1, 2006, your portfolio had grown to $13,000, then $14,000 by 2007, and finally ended up at $19,500 by 2008.

Your CAGR would be the ratio of your ending value to beginning value ($19,500 / $10,000 = 1.95) raised to the power of 1/3 (since 1/# of years = 1/3), then subtracting 1 from the resulting number:

1.95 raised to 1/3 power = 1.2493. (This could be written as 1.95^0.3333).
1.2493 - 1 = 0.2493
Another way of writing 0.2493 is 24.93%.

Thus, your CAGR for your three-year investment is equal to 24.93%, representing the smoothed annualized gain you earned over your investment time horizon

Here is Excel formula that I am using CAGR=POWER(G13/G10,1/(ROUND(E8/365,1)))-1. (Email me if you wish to have the Excel spreadsheet.)

Now that you have know your CAGR of your investing/trading portfolio and the knowledge of the Secret of Compounding Effect, and you will have to constantly review your investing/trading strategies and refine them if necessary for you to reach your Final Investment Goals or Objectives.

From the above table, your CAGR come from 2 components:

1) Realized P/L
2) UnRealized P/L

To increase your CAGR, you have to increase your Realized P/L or UnRealized P/L or both and you have to deploy your available cash timely in the market. Too much cash at the sideline may not be helpful.

To increase your Realized P/L

Classic textbook's recommendation for Reward/Risk ratio of 2-3 for taking an investment is a good return.

I use CPF Ordinary Rate of 2.5% per annum as benchmark, I aim for at least an average of 5% ROC which is at least 2 x Reward/Risk ratio.

I have set for myself Yearly Target which is then translated to average monthly target as milestones towards the Final Investment Goal. We have to be realistic in the Stock Market as there is going to be some bad months that are below target.

For UnRealized P/L, you are just trying to outguess the Market forces to grow it and you have absolutely no control over it. The Market will determine your Exit Price when you need to cash them out unless you have no intention to sell your shares during your lifetime then it is not a matter of concerns.

My strategy is to keep growing the size of Realized P/L, which is then translated to MORE cash available to buy MORE Quantity of shares, and over time, hopefully to let the Magic Of Compounding work its way for me.

For example:

You bought 10 lots of Stock A @ $1.00 for $10K and then subsequently sold 10 lots @ $1.20 for $12K, and not considering brokerage fees just for a simple illustration.

When the Stock A pulls back to $1.1, you could buy back 10 lots of Stock A @ $1.1 for $11K. Now, you still have the same quantity of stock as before but with extra cash available ($1K) to to buy more shares and let the Magic of Compounding works its way through.

So have you started to measure your CAGR?

Semb Corp: Sold $3.41, ROC 7.9%

Hope to gather more feathers for a bigger pillow soon ...


Round 49: ROC 7.9%, 91 day, B $3.14 S $3.41

Hmm.... The last affair with this old lover - Semb Corp was in 8 Aug 08. That was 1 year ago!!!!

When you reached 50 years old ....

When you are reaching 50s you are going to earn less as your CPF Employer's contribution is going to be cut.


Some companies when you reach 60, they will cut your salary by e.g. 10% and that is on top of your CPF Employer's contribution rate cut.

So when you plan for your long term housing loan, have you considered these?

Charging Bull!

The Bulls charging to National Day Rally?

Are you shaken by this Grizzly Bear?

Are you shaken by this Grizzly Bear and now the Bulls have come to your rescue and probably your stock portfolio may have break even or making some profit and now you are seriously thinking that stocks are too volatile and too risky for wealth building and thinking that investing in property for long term is a lot safer.

You may wish to re-visit ..

http://createwealth8888.blogspot.com/2008/12/investing-in-property-may-be-less.html

Your First $100K realized profit from the stock market?

Let say you have total investing capital of $100K and you use whatever strategies, either TA or FA or both, money management and practise market timing. Of course, you will get stuck in some counters, but let assume you are good enough have about 30% of total investing capital giving you an average of 3 profitable trades at an average 5% ROC per month and starting with $10K each for the first 3 trades . How long will you take by the Magic of Compounding to make Your First $100K realized profit from the stock market?

Let see ... Hmm



Yeah. Doing the maths, you probably need between 17 - 32 months. That sounds pretty good so are you ready to take $100K Challenge? Alamak, but life is not so simple as that; but, it is still worth to seriously ponder over it. Yes, you can. Cheers!

Major STI market cycles - Horrible Bears and Beautiful Bulls!

MW asked me how many bears I have encountered?

I would say that the last STI's Greatest Bear should be Asian Financial Crisis. Many Singaporeans had lost their fortune especially in the CLOB saga when overnight everything was gone.

I have never invested in any oversea market before, and also unlikely in the future as I don't believe that with my limited investing capital, SG market cannot provide enough opportunity for me to make decent returns.

There is no need to look so far away when the pot of gold is just in our own backyard. So I have escaped the CLOB saga, but my father-in-law and brothers-in-law were all badly burnt.

BTW, SIAS was born out of the CLOB saga.

I don't really remembered that I felt painful or scary during the Asian Financial Crisis. Probably at that time I only have $XX,XXX capital to invest in the stock market.

When you are in 30+ and you only have $XX,XXX capital and losing 70-80% of it in the bear market, you can still earn back by saving harder to raise new capital to continue your investment venture.

But, if you are in 40+ or 50+ and likely to have accumulated more wealth and have bigger capital like $XXX,XXX. Losing 70-80% of it in the bear market; it is going to be sleepless nights.

So I would say this is the most terrible bear market that I have encountered because I am in 50 and have much larger capital at stake. I don't have the luxury of time to earn more money and save harder to raise new capital to fight another bear battle. Scary man!

Read? Who Took My Wealth?

Can I find back the Lost Profit in 2007? Yes. I can as I am Beary wiser now. Cheers!

STI - Any parallel with Asian Financial Crisis?

During Asian Financial Crisis, STI fell from high of 2,504 to low of 800, down -68.0% in 941 days and recovered from the low to the high of 2,583, up 222.8% in 486 days.

This Sub Prime Crisis, STI fell from high of 3,876 to low of 1,457, down -62.4% in 515 days and as on Friday has recovered from the low to 2,659, up 82.5% in 144 days.

This time STI has crashed down at a greater velocity in a shorter time compared to the last Great STI Bear, and will it also recover at a greater speed in a shorter time?

Do you believe in the Law of Averages?

Your Size of Investing Capital Matters

Your investment strategy and the choice of assets and markets for investment should fit into your size of investing capital. You only have small capital to invest and yet trying to follow other big boys with plenty of capital investing across different markets and asset class.

http://createwealth8888.blogspot.com/2008/11/assets-in-your-portfolio.html

Larry Williams once said: Your fortune will come from your focus - focus on one market or one technique.

A jack of all trades will never become a winning trader. Why? Because a trader must zero in on the markets, paying attention to the details of trading without allowing his emotions to intervene.

A moment of distraction is costly in this business. Lack of attention may mean you don't take the trade you should, or neglect a trade that leads to great cost.

Focus, to me, means not only focusing on the task at hand but also narrowing your scope of trading to either one or two markets or to the specific approach of a trading technique.

Have you ever tried juggling? It's pretty hard to learn to keep three balls in the area at one time. Most people can learn to watch those 'details' after about 3 hours or practice. Add one ball, one more detail to the mess, and few, very few, people can make it as a juggler. It's precisely that difficult to keep your eyes on just one more 'chunk' of data.

Looks at the great athletes - they focus on one sport. Artists work on one primary business, musicians don't sing country western and Opera and become stars. The better your focus, in whatever you do, the greater your success will become.

Investing in Property or Stocks - Revisit

Given that you only have enough capital for just one type of investment, will you invest in Property or Stocks? I have been asking this question again and again as I want to seek a better option to invest my limited capital to create wealth for my retirement fund. I am sure you too asking this question.

Size of Investing Capital

Even if you only have smaller investing capital, you can easily without using any leverage to start investing in stock market; but, unlike investing in property market, you will need a fairly larger capital, and use certain degree of leverage to get started.

You may wish to read earlier posts on leverage:

http://createwealth8888.blogspot.com/search?q=leverage


Quick Entry and Exit

For stock market, you can be very short term or very long term or not so short term and not so long term. You may even to be out within minutes, if you manage to get a good return on it.

Unlike the property market, where you have to go through a lengthy procedure of acquiring a property and then again go through another lengthy procedure when you want to sell it off.

Ease of transctions

Given the power of the Internet, you can easily sit in the comfort of your own home or secretly in the office, and be able to invest in stock market. You only just need to click a few buttons on your brokerage portal and transaction is completed. You can never click a few buttons to complete your property transaction, can you?

For stock market, you can literally start a new transaction every trading day.


Affordable Mistakes

I always remembered my Finance Professor once told me this: "For property investment, if you got it at the wrong Property market cycle, you are going to work many, many hours of labour for free". You have to get it right and there is little room for you to learn from repetitive mistakes.

But, for stock market, you can afford to make repetitive mistakes and still be alright, and hopefully you learn enough to be a smart investor.

Power of Compounding

http://createwealth8888.blogspot.com/2009/07/best-secret-in-investment-and-trading.html

Yes. You can let the Magic of Compounding works for you in stock market. Not sure as a small investor can you really able to flip property for compounding effect?

Oh. It is going to be a long story to tell and if you may wish to continue the rest of story on Property stuff in your pleasure reading ...

http://createwealth8888.blogspot.com/search/label/Education%20-%20Property

My final answer is:

For limited capital and without resorting to leverage, investing in the stock market is a better option to get reasonable good returns. Hmm ... some of you disagree. Cheers!

STI testing the next Hard Resistance level next?

Will there will be a National Day Rally for STI to break the next resistance convincingly to put to the rest all the talk of brown shoot?

Cheers!

STI broke through the mother of all resistance level since 1990???

The Bull is about to push the Bear over the cliff!!!






So are you betting for the BULL???

Using OPM (Other People's Money) for investing?

Using OPM (Other People's Money) to invest can be an effective and fast way to build wealth if you got it right. Got it wrong it can sent you fastest to Dr DOOM.

The world's richest man and greatest Investment Guru, Warren Buffet once gave this advice: Stay away from leverage. Nobody ever goes broke that doesn't owe money.

Why a Buy and Hold and don't even bother thinking of Selling Can be Wrong Strategy for You? - Part 3

http://createwealth8888.blogspot.com/2009/07/why-buy-and-hold-and-dont-even-bother_26.html <---- If you may wish to read Part first. Beware the risks of Value and Average Down Traps

While shares with low valuation may be an undiscovered gem and market may have mispriced them or at other times, shares that appear cheap, and getting cheaper could be due to Big Boys getting out as they believe the company fundamentals continue to deteriorate. Low stock valuation may be a Value Trap.

Warren Buffet and the likes of Warren Buffet (the Big Boys: Institutions) have enormous resources at their disposal to do due diligence to uncover undiscovered gem and avoid the Value Trap. But, it can be very challenging for many small boy value investors as it can take a great deal of time and enormous resources to recognize that a stock is a real undiscovered gem and not a fake one.

As stock price falls further, the margin of safety gets wider, the small boy value investors likely to fall into the next trap: Average Down Trap, and start averaging down with more shares with their free capital and likely to average down until they run out of capital.

So beware of Value and Average Down Traps. Take care!

Why a Buy and Hold and don't even bother thinking of Selling Can be Wrong Strategy for You? - Part 2

http://createwealth8888.blogspot.com/2009/07/why-buy-and-hold-and-dont-even-bother.html <-- If you may wish to read Part 1 If your strategy of "buy and hold" over very long term e.g 10-30 years is for the primary reason to receive dividend income and for future capital appreciation if any.

The truth is that few companies are immune to economic and market cycles, and from time to time, they may need to raise more capital to meet their corporate needs. Companies may raise additional capital through enlarge private share placement, convertible bonds or warrants, or right issues, and etc. Such corporate actions can inevitably expose you to future share and dividend yield dilution risks and may even have some valuation impact on your initial share purchase price.

Do consider this risk. Cheers!

Can I really find back the Lost Wealth in the last Bull Market???

Asian markets rise to pre-crisis levels!!!

STI at 2,533.43 - its highest level in 10 months.

HSI at 19, 9982.79 - exceed 20,000 for the first time since the collapse of Lehman Brothers in Sep 09.

DOW at 9,069.29.

STI has recovered 73.9% from 09 Mar 09 low in 137 days, and 652 days has passed since 11 Oct 07 Peak.

Bulls or Bears. They can be your Good Friends or your WORST Enemies. The Bulls can set Bull Traps to hang their fellow Bulls at the top; while the Bears can set Bear Traps to kill their fellow Bears at the bottom.

So where is STI going?

Are the Bulls climbing up the Wall of Worry or the Bears sliding down the Slope of Hope?

Although my Portfolio Value has recovered 97.7% from its lowest point; but, it is still far away from its highest point in 2007 so can I really find back the lost wealth in the last Bull market?



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

Hmm... I will need to go to Labrador Park Hill Top tomorrow to think and to plan ahead ....

Why a Buy and Hold and don't even bother thinking of Selling Can be Wrong Strategy for You?

Who are they? They are the small boy Value Investors who practise Buffetology.

I am NOT saying that value investing is wrong and don't EVER get me wrong. Quite the contrary - if you are the likes of Warren Buffets (and those big institutions) with very, very long holding period where the base unit of time is a Decade (A decade is a period of ten years); buy and hold "forever" strategy makes a ton of sense.

These Warren Buffets have that kind of resources to know the inner workings of a company, and can meet the Management to understand their immediate and long term prospects, assess the real ability of the management team, cognitive of the goals of the board members, their future products in the pipeline, the expected acquisitions, the competitive landscape and many more .....

Honestly, tell me what kind of resources you have to really make near close true valuation of the company's business and its future earning prospects. You are likely at your disposal for detailed analysis of the company's business and its future earning prospects through quarterly and annual reports, and probably attending AGM and asking a few questions; and most of the time the Management is very careful not to mention any undisclosed public information; otherwise, they will have to rush out a press release.

Unfortunately, many so-called small boy value investors are just trying to outguess the Market by using a value analysis with very limited resources at hands to do a really tough job. I am NOT saying they cannot succeed, of course they can definitely do well as we have heard many proven success stories; but, I am saying it is really very, very tough and demand plenty of time and effort to do a good job. BTW, you still have your day job to take care. Cheers!

You may wish to read on ...

http://createwealth8888.blogspot.com/2009/04/fundamental-analysis-working-very.html

Measure, Measure, Measure

Read the Secret first ...

http://createwealth8888.blogspot.com/2009/07/best-secret-in-investment-and-trading.html

The Secret is out!

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

So we need a tool to measure our Investment/Trading performance over long term e.g. 5, 10, 20 or even 30 years. For me, I use Average Annualized ROC (Return On Total Capital) to measure my performance and managed it for success.

Computing for the Average Annualized ROC is quite simple. All I have to do is to add the total Realized and Unrealized Profit/Loss and divide it by the Total Capital, and then divide it by the Number of years. Thus, the formula is:

Average Annualized ROC = (Total Realized + Unrealized Profit/Loss) / Total Capital / No. of Years

What is your goal for investing over long term? Mine is for Retirement fund.

Why should we need to evaluate our investment performance? The main reason is to perform an objective analysis of our investment performance to overcome self-deception or over-confidence and take a sober, non-emotional assessment of our investing returns and consider whether we are either under-performing or meeting our GOALS.

We have to remember that the only reason to invest is to create more wealth. If we are not building up more wealth over a period of time, then our strategies may not be effective, and we may have to seriously review and change strategies.

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

STI testing the mother of all resistance levels since 1990???

STI closed @ 2533 at a new high and will it continue to stay above 2500 next week due to National Day Rally?

Are the Bulls climbing up the Wall of Worry or the Bears sliding down the Slope of Hope?

Hmm.. so today, I took a step back as I have enough zebras to cross the Mara River.

You can bet your bet.




Just For Laugh

One buys, another one sells, someone waits and all three think that they are smart.

One analyst calls for buy, another analyst calls for sell, and both think that they are smart.

When the Support/Resistance level is near, the brokers tell 50% of their clients to sell, the other 50% to buy, and 50% of their clients will think that their brokers are smart.

Since everyone in the Market are so smart, so where do the Greater Fools come from?

The stock market is so weird!!!

Olam - Sold @ $2.41, ROC 5.9%

Round 4: ROC 5.9%, 15 days, B $2.26 S $2.41

Round 3: ROC 9.6%, 8 days, B $2.18 S $2.40
Round 2: ROC 7.0%, 8 days, B $2.18 S $2.35
Round 1: ROC 9.8%, 161 days, B $1.37 S $1.52


Making the next pillow in progress. Cheers!

Noble - Sold $1.82, ROC 5.7%

Hope to gather more feathers for a bigger pillow soon ...


Round 9: ROC 5.7%, 74 day, B 1.71 S 1.82

Round 8: ROC 34.3%, 100 day, B 0.96 S 1.30
Round 7: ROC 5.7%, 10 day, B 1.02 S 1.09
Round 6: ROC 3.8%, 1 day, B 1.01 S 1.06
Round 5: ROC 12%, 27 days, B 0.965 S 1.08, (2nd Half)
Round 4: ROC 14%, 8 days, B 0.965 S 1.11, (1st Half)
Round 3: ROC 7.1%, 8 days, B 0.830 S 0.895
Round 2: ROC 31.6%, 20 days, B 0.800 S 1.05
Round 1: ROC 16.3%, 28 days B 0.910 S 1.08

STI closing a new high @ 2485

STI has recovered 70.6% from 09 Mar 09 low in 130 days, and 652 days has passed since 11 Oct 07 Peak.

Will STI be able to break the all time RESISTANCE level at 2500 and stay above it next week?

Tips On Child Life Insurance - Part 2

You may wish to read it first

Read? Tips On Child Life Insurance



Sometime ago, the topic to buy Child Life Insurance or not was hotly debated among the super friends.

Personally, I don't believe in buying Child Life Insurance as I don't think why parent should be looking for financial gain from the death of a child.

But, some argue to buy Child Life Insurance that have coverage on major Critical Illnesses.

OK. Let examine what are the 30 major critical illness that are covered:


















Put your emotions aside, and examine carefully what is the risk level that the child will be affected by 30 critical illnesses?

Most of the child in Singapore are already covered by Medishield. 

MediShield is a low cost catastrophic illness insurance scheme. Introduced in 1990, the government designed MediShield to help members meet medical expenses from major illnesses, which could not be sufficiently covered by their Medisave balance. MediShield operates on a co-payment and deductible system to avoid problems associated with first-dollar, comprehensive insurance.

Premiums for MediShield can be paid by Medisave. A very large medical bill can easily wipe out your Medisave balance, as it is only a savings account. For this reason, you are advised to take up MediShield or an appropriate private Integrated Shield Plan in order to stretch your Medisave dollars. Your co-payment and deductibles can also be paid using Medisave or cash.

MediShield will cover up to 80% of your large medical bill at the Class B2/C level.

For Singaporeans who plan to use Class B1 or higher ward classes, you may wish to consider purchasing Medisave-approved private Integrated Shield Plans on top of your Medishield. MediShield and other Medisave-approved private Integrated Shield Plans are designed to cater to your different insurance coverage needs.

MediShield is operated by the CPF Board.

So, the big question is for parents to think over it without the emotion of love for the child, as some of us may have limited financial resources to afford comprehensive insurance coverage and may have to be satisfied with a reasonable insurance coverage as we have to allocate the limited financial resources wisely among competing needs and for investment too.

But, if one can easily afford it, just buy and treats it as a gift to the child. Nothing to debate about. Cheers!

Fear of missing out??? Fear of losses??? Part 3

http://createwealth8888.blogspot.com/2009/04/fear-of-missing-out-fear-of-losses-part.html<--- Part 2

So what will we have for STI next week?

I will simply be more cautious, but there might be National Day rally. One of the great ironies of the stock market is that more people believe it will go down, the more likely it is to go up. When everyone thinks it go down further and delays buying, then market slowly moves up. Market is weird!

The Best Secret in Investment and Trading – Compound Interest

Albert Einstein' once said that Compound Interest was the greatest mathematical discovery of all time", and some said this is the 8th Wonder in the World of Investing & Trading.

Before you make any investment or buy a stock, you have to look at the expected "high" rate of return on capital (ROC), but it is the compounding of the interest (or ROC) on that principal or capital which creates the biggest returns over time.

The compounding of profits, or dividends, or interest or ROC applies in all financial markets, so if you are a short term stock market trader, property investor or other short or long asset holder, you may find the magic of compounding interest very interesting.

The rule of 72 and long term returns

You might not have learnt this at school, but Einstein’s rule of 72 is one of most magical and simple formulas around. What this says is that to work out how long it takes to double the value of an investment, you simple divide the return into 72.

To estimate how long it would take to double you money on an investment just divide 72 by the percentage rate you are earning on your investment; and that's it.

For example, if you have a savings account with $500 deposited in it. The rate of interest is 4% per year. So the doubling point, the length of time it will take you to double your $500 to become $1,000 is:

72 divided by 4 = 18 years

If the rate of interest were 6%, then the doubling point to be 72/6=12 years.

Doubling and doubling again

Once we have the time it takes to double your money, this is where the magic of compounding comes in, because it becomes possible then to extrapolate some very tasty figures over the longer term.

For you to think about .... how long will it take to become Millionaire in Investing or Trading with an initial capital of $100K. if your average ROC per trade is 2.5%, 5% or 7.5% etc?

Now, your first CHALLENGE is to make $100K realized gain from your investing capital of $100K, and rest of the 1st $1M will follow not far from behind.

So are you ready to double your money and take the first $100K Challenge? Put up your hand please!

STI last closed @ 2427

STI has recovered 66.6% from 09 Mar 09 low in 130 days, and 645 days has passed since 11 Oct 07 Peak.

Will STI be able to break the resistance level and stay above for the week?

So ... Are You Married To You Stocks?

Are you married or will you marry? If you are married, surely I bet you won't like the divorce!

So ... are you married to your stocks? If you are married to your stocks, I am betting that you won't like the divorce (SELL)!


http://createwealth8888.blogspot.com/2009/07/time-in-market-or-timing-market.html <--- If you may want to read on Time In Market or Timing The Market The primary reason to buy a stock is to make a reasonably high rate of return on capital (ROC) at an acceptable level of risk to you.

You have to determine what is your high rate of ROC and don't be too greedy? Once you have fulfilled the reason of buying , don't you think it is better to recover your capital as soon as possible. You can always buy back the same stock when you can't find better ones to buy.


So how do you tell that you are married to your stocks and deeply in LOVE with them?

1. You love their dividends. You don't see any reason to ever sell this stock as the stock gives you such a good relative yield. You are madly in love and you don't even have target price to sell it to recover some or all capital.

2. You love the products that the company make. You love the management style. You love the company culture. You love how the company beats their competitors. You are like MacDonald ads: Loving It!

3. You did a lot of research on this company before buying its stock. You are so convinced that the company will continue to grow, and the management style and skills will continue to be effective in the future. (When the company owner who is also the CEO, and there is no clear line of succession plan, this company is damn risky.)

4. You are convinced that it is only just 1-2 bad years when the company didn't do well. You think the company will certainly get better in the near future and fail to realize that no company is totally immune from obsolete business model due to ever changing economic environment and competitive landscapes.

5. You keep averaging down whenever you have more capital available. You are convinced that when its stock price gets lower, the margin of safety gets better. You don't even bother to consider the fact that it is becoming heavier in your portfolio. You don't even bother to look at other stocks that may be as good as this one or even better.

So don't treat your stocks as your wife, but treat them as your pillows. Pillows are good to rest your head and sleep soundly on them. Can you sleep without your wife? I bet you can sleep without your wife when you are on business trip or doing your in-camp training. Can you really sleep without pillow? I can't! http://createwealth8888.blogspot.com/2009/04/pillow-stocks-strategy.html

So what is your PRIMARY reason to buy the stock? Cheers!

Time In The Market, or Timing The Market??

http://sgmusicwhiz.blogspot.com/ <-- If you may want to read MusicWhiz post on "Time In The Market, or Timing The Market". Quite a good debate happen there. Now, let me share my version on "Time In The Market or Timing The Market" ..

What is the primary reason to buy a stock?

. The stock is under-valued and offers good margin of safety
. The stock has incredible dividends for many years
. The stock has perfect technical entry
. blah ...

So are these really primary reason to buy a stock?

I don't think so. You buy the stock to make a reasonably high rate of return on capital (ROC) at an acceptable level of risk to you.

In simple words, the primary reason to buy a stock is to sell it.

Since I don't believe in STOP LOSS, the moment after I have bought a stock; it will spent its Time In The Market while I am Timing The Market to make a reasonably high rate of return on capital (ROC) to compensate me for taking the level of risk that is acceptable to me and I will be doing "Timing The Market" to buy the next stock. The cycle goes like this: Timing The Market ---> Time In The Market ---> Timing The Market --> Time In Then Market and so on .....

You may want to tell me your version of the story. Cheers!

Possible Annualized Returns from Investing

For you to think about .... how long will it take to become Millionaire in Investing with initial $100K capital?

But, your first CHALLENGE is to make $100K realized gain from your investment and rest of the 1st $1M will follow not far behind. Anyone putting up your hand for this challenge? Cheers!

Tips On Child Life Insurance

Life Insurance policies for children are sold purely on emotion and not on true need. The advertisements and sales agents will use lines like "if you love your child..." you will protect them with a life insurance policy. They will also explain how inexpensive life insurance is for children. There are a couple of problems with this.

While the commercials and sales agents may appeal to your emotions, the financial facts are that a loss of a child will actually relieve you of a financial commitment. That's not trying to make light of the emotional devastation that comes with a death of a child for which nothing can compensate. The fact, however, when looking at it purely from a financial perspective is that a family will not have to spend as much money when they no longer have a child to care for. It cost less not having a child than having one.

Another ploy is that children's life insurance is cheap. It is inexpensive compared to adult life insurance because, plain and simply, children rarely die. While the numbers that the sales agent puts together may make children's life insurance sound like a great deal, take the time to run what you'd have if you instead invested the exact same amount used on the insurance fees into a Roth IRA and you'll find the true cost of purchasing this type of life insurance.

When purchasing life insurance, it's important to remember that its main purpose is to replace an income that is lost when one dies. A child rarely has an income. Unless your child is a child TV star or the the main source of income for your family in some other way, there is rarely a need to have life insurance for him or her.

Nick
www.superb-tips.com
-----------------------------------------------------------------------
The Life Insurance for Children Debate
Wednesday March 8, 2006

I get a good amount of disagreement from other insurance agents about purchasing life insurance for children. Yes, for some people, the life insurance they bought for their child did pay off later. Obviously though, children do not have dependents that need financial care once they are gone. Since life insurance is designed to care for loved ones that depend on you once you are gone, it does not make sense to purchase a life insurance policy for a child.

This does not mean that the risk is non-existent. We could of course insure everything since there is a risk of losing everything, but we need to determine if that risk is high enough for our personal situation to insure. By this, I feel buying life insurance for children should not be a routine insurance purchase. (Createwealth8888: so if you have plenty of spare $$$, by all means go and buy and made yourself an asset to your child). On the other hand, life insurance for parents should be a routine insurance purchase since parents do have loved ones depending financially on them (their children).

There are other insurance choices that should not be routine insurance choices. The article Don't Buy Insurance You Don't Need reviews types of insurance policies that should not be purchased routinely. Again, this does not mean that by purchasing these types of insurance you will never use them, you may. The risk is so small though, that your money could be spent more productively on such things as savings or investments.

By Bobbie Sage, About.com Guide to Personal Insurance since 2002

How Much Life Insurance Is Enough?

There are two common methods for calculating the answer.

By: Richard A. Dulisse, CLU, MSFS, LUTCF

In the aftermath of the World Trade Center tragedy of Sept. 11, 2001, countless Americans are re-evaluating their life insurance portfolios. Many people are taking a hard look at their coverage and asking themselves whether they are adequately protected. They are seeking our guidance in determining exactly how much is required to sufficiently provide for their loved ones if they were to die. To that end, we need to be familiar with the two generally recognized life insurance industry methods for quantifying these desired amounts of coverage.

Human Life Value method

The concept of comprehensive life insurance planning is not new. There is certainly a moral obligation to provide adequate protection for one's family. Dr. Solomon S. Huebner, founder of the American College in 1927, said, "The growth of life insurance implies an increasing development of the sense of responsibility." But how do we do it properly?

Dr. Huebner purported the Human Life Value approach. This theory says that, like a corporation, a person who works has capitalized earning capacity over his or her lifetime. Therefore, although everyone is unique and irreplaceable, "each human life potentially has an economic value, which is derived from its earning capacity and the financial dependency of other lives on that earning capacity." Human Life Value is the present capitalized value of a person's net future earnings after subtracting self-maintenance costs, income taxes and life insurance premiums being paid.

To practically apply this concept, let's take an example. Suppose you have a 35-year-old client whose gross salary today is $60,000. His net take-home contribution to the family after subtracting self-maintenance, life insurance premiums and taxes, is $40,000. Also, assume that this person will work until age 65, which is 30 years. If we discount this earnings stream at a reasonably conservative after-tax discount rate of interest of 4 percent, the amount of insurance required to continue this income stream for the worker's loved ones would be as follows: $40,000 x 17.29 = $691,600.

Explanation: Using a compound discount table, the present value factor for a series of payments of $1 due at the end of each year for 30 years discounted at 4 percent is rounded to 17.29. Therefore, $691,600 today, earning 4 percent interest after taxes, would provide the insured's family with the $40,000 a year that they would have received if the worker lived and worked until age 65. This disregards the effect of inflation. If we factor in a 3-percent inflation rate over those 30 years, $1,036,714 of capital or life insurance would be required.

Although this is a simplification of a process that can be very complex, it demonstrates the point.

However, there are several issues overlooked in the application of the Human Life Value method. First, it presumes that a non-wage-earning spouse has no economic value. Second, it does not take into account that there may be a lump sum needed immediately upon the death of a worker to satisfy certain financial obligations such as loans that may be called in by various creditors.

These quandaries have led to the adoption of the second, and generally more widely used, approach to adequately insuring lives.

Total Needs method

This approach attempts to quantify how much life insurance would be needed to maintain the surviving loved ones' lifestyle by looking at two categories of need: cash needs and income needs.

There is certainly a moral obligation to provide adequate protection for one's family.


Cash needs consist of lump sums required at death for such items as final expenses, an emergency fund, a readjustment fund, a home-care fund, a mortgage/debt liquidation fund, and possibly even an education fund. Income needs address the replacement of a wage earner's income for at least their working years, reduced by any available cash resources already in place such as existing life insurance or possibly even savings. Further reductions in calculating the income need would include factoring in Social Security survivor benefits payable to the dependents of a covered worker. (Many practitioners choose to disregard or plan on a reduced percentage of these benefits due to the perceived uncertainty of the Social Security program.)

To apply the Total Needs approach, let's carry forward some assumptions from our previous case. Suppose the 35-year-old worker had a 30-year-old spouse and two children ages two and five. Let's say that the cash needs at death included a $20,000 final expense fund, a $30,000 emergency fund, an $80,000 mortgage fund and a $160,000 education fund. These amounts total $290,000 of cash needs at death. Let's further assume that the family needs $3,400 per month during the two-year adjustment period, declining to $2,920 per month for the next 14 years until the youngest child turns age 18, and then to $1,942 per month for the rest of the surviving spouse's life. If we discount the stream of income needed at 4 percent, then $589,600 of capital would be needed to provide this income. Thus, the total funds for both cash and income needs would be $879,600.

However, if we factored Social Security into the formula, the income need may be reduced to about $200,000. On the other hand, if instead of systematically liquidating the capital sums required to fulfill the income needs, we take a capital conservation approach, as in the Human Life Value method, then the capital needed would be significantly higher than $589,600. Of course, inflation would compound that number further.

So, which method is better? You need to decide which approach is best for your client. Your company's software programs will surely allow you to make an educated comparison based on a given set of facts.

In the final analysis, it is important to remain focused on our primary mission: to provide comprehensive life insurance protection and thus financial stability for the families of those we serve.

--------------------------------------------------------------------------------
From Createwealth8888:

You may have to consider how to allocate your projected annual income over very long term to meet your personal needs on the following:

1) Housing
2) Living Expenses
3) Insurance
4) Children Education fund
5) Emergency fund (saving for raining days)
6) Investment fund (for Retirement)


You cannot be overly worry about insurance; become over-insured and divest too much cash into insurance, and under-allocate cash into other needs. It is very personal; and you can have to really do soul-searching on how to optimize the allocation of your projected annual income and strike a good balance among all the needs.

You need to understand that insurance product has 15-20 years to breakeven on your premium payment and don't really give good return after that.

http://createwealth8888.blogspot.com/2009/07/saving-life-insurance-and-investing.html <--- read more if you may

Take care!

Saving, Life Insurance and Investing

What are the main differences related to Saving, Life Insurance and Investing?

Saving is NEVER an INVESTMENT and will never get better return as it is almost risk free. There will NEVER be such investment product where there is almost risk free and yet gives good returns. All investment products by nature carry risks and you may potentially lose some or all your investing capital. The provider of such investment product need to be able to earn good margins for them to assume the risks on your behalf. In another word, they assume your risks and expected to be paid first before giving you the leftovers.

Generally, the purpose of life insurance is to provide peace of mind by assuring that financial loss or hardship will be lessened or eliminated in the event of death or permanent disability or in some cases critical illnesses if covered.

The value for the policyholder is derived, not from an actual claim event, rather it is the value derived from the 'peace of mind' experienced by the policyholder, due to the negating of adverse financial consequences caused by the death of the Life Assured.

Since life insurance is not really a "good" investment product so don't expect better returns. So do you use Life insurance as an investment for retirement planning? Weigh the pros and cons carefully when deciding whether life insurance has a place in your investment or retirement plans. If it does, educate yourself and shop wisely as you are sinking probably a huge sum of your potential investing capital in life insurance; and knowing what are your opportunity costs.

A better option is to spare some of your valuable time in educating yourself in active investing and builds a well balance portfolio of saving, life insurance, and investment. Happy learning. Cheers!

Earning more than your boss?

Can someone possibly earn more than one's boss assuming both have the same length of service in the company? Probably, the answer is definitely NO. Why? Your boss's NAV in the company is definitely perceived more than you so he/she will be paid more. So how can one earn more than his/her boss?

http://createwealth8888.blogspot.com/2009/07/your-most-important-asset-is-yourself.html <-- increase your NAV

1) Increase NAV in the company until you can be promoted above your boss, and you become his/her boss.

2) Increase NAV in your investing/trading to earn more income in addition to your employment income.

Remember what Clement said: "Nobody is stopping you from investing your own money. For investing and trading, you don't have to appear physically somewhere. You can make money using the Internet or (createwealth8888: Broadband on Mobile), and you don't need to face suppliers or competitors. You just need to face yourself."

You can do it quietly since the Mobile technology provides you the enablers. Now, with iPhone you have the computer at your palm to trade online.

So it is for your boss to earn more than his/her boss. Maybe your boss is already doing that, didn't you realize it?

Warren Buffett's Top Three Investment Rules for the Average American

aiyo... Buffet has new Investment rules!!!!

there's no mention of intrinsic values, durable competitive advantages, or even buy-and-hold.


Time has changed. Now, we are living in a globally connected economy; and news travel at the speed of electonic light wave and drive stocks prices crazy before you even realized it. Isn't time for Buffetology followers to start thinking on his new investment rules??? Why doesn't he mention his old favourite rules???

Hmm... Buffet's Rule No 3 looks same as one of my own Rules?

If you like to read more http://createwealth8888.blogspot.com/2009/01/understanding-debt-risk-and-leverage.html and follow up with search on keyword: leverage

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By: Alex Crippen
Executive Producer

Warren Buffett isn't shy about giving advice. If he hadn't gone into the investing business, he could well have made teaching his profession.

Now that he's the world's greatest living investor, there are plenty of pupils anxious to attend class.

Today (Friday), ABC's Good Morning America featured several Buffett lessons.

In a taped interview, Bianna Golodryga asks Buffett for his "top three pieces of advice for average Americans who want to grow their savings and keep their money safe."

In this venue, there's no mention of intrinsic values, durable competitive advantages, or even buy-and-hold.

Buffett's response:

1) If it seems too good to be true, it probably is.

2) Always look at how much the other guy is making when he is trying to sell you something.

3) Stay away from leverage. Nobody ever goes broke that doesn't owe money.


Buffett also finds important life and investing lessons in his favorite game:
AP

Warren Buffett plays bridge at the 2005 Berkshire Hathaway shareholders meeting
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"In bridge, everything anybody does or doesn't do, you're drawing inferences from, including your partner and your opponents. You're working with a partner. If you don't work well with partners you're not going to have a winning bridge team over time. And everything you've learned from the past has some utility on the next hand you play. The next hand, you've never played it before and you'll never play it again in your life. But on the other hand, the problems you've solved in the past are useful in solving the problems there. And you have to keep paying attention all the time. You can't coast."

And while Buffett doesn't think that everyone should necessarily get a college degree, he does strongly believe in the value of learning, as any good teacher would.

"Generally speaking, investing in yourself is the best thing you can do. Anything that improves your own talents. Nobody can take it away from you. They can run up huge deficits, the dollar can become worth far less, you can have all kinds of things happen. But if you've got talent yourself, and you maximize your talent, you've got a terrific asset."

http://createwealth8888.blogspot.com/2009/07/your-most-important-asset-is-yourself.html<--- If you wish to read more ...

STI going where?

Gosh. Two big resistance levels ahead???/

Olam - Got back @ $2.26

Back in play again.

Invest in Singapore companies???

LOL. Finaly, come across some big name like CEO of WheelLock, Mr David Lawrence talking in the same frequency band as CreateWealth8888.

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He said: “Personally, I never buy any structured product. I only buy stocks… There are very good stocks, with good boards of directors, that pay good dividends. So don’t be greedy. Just invest in Singapore companies (such as the three local banks, Keppel, Fraser & Neave, Singapore Press Holdings, SingTel and Singapore Technologies) … with boards of directors - executive and independent directors - with proven integrity.”

He also cautions retail investors to beware of the risks entailed in exchange traded funds (ETFs). In the US, for instance, regulators have ruled out the sale of leveraged and inverse ETFs to retail investors. 'Personally, I never buy any structured product. I only buy stocks,' he said. 'Even if I buy commodities, I buy shares of mining companies like Rio Tinto and BHP. I buy stocks because I have complete control over it. It's a low-cost entry.

'I don't trust fund managers. You invest in funds. What happens? You get a crash, you get redemptions, they have to sell.'

But Mr Lawrence is not suggesting investors rush into the stock market after the recent surge. 'I think, just start looking at the moment and wait and see. A lot of profit has already been made,' he said.

'If you can get the timing right, or a little bit right - I am never clever enough to buy at the bottom and sell at the top - you can do very well. You can make very good capital appreciation.

'But what you don't do is buy, then panic and sell as prices go down, because you are investing in well-run companies that will survive. They pay you a dividend. So even if you buy high and they go low, you just keep them and live off the dividend. Don't buy unless you're going to hold them for the long term.'

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Yalor. I fully agreed with him. If you only have capital like $xx,xxx or even $xxx,xxx, please stop fooling yourself by behaving like big boys investing globally for diversification. Stop making your investing strategy more complicated by taking in foreign currency exchange rate risk. When you made a hundred buck in Singapore market, that is definitely S$100 but it is not same for profit made in foreign currency, it can be less than S$100 or in worst case may end up in nett losses.

Your most important asset is yourself?

Adam Khoo said: "The returns are infinite. When you invest in yourself, it's something that on one can take away from you."

Clement Chiang said: "Nobody is stopping you from investing your own money. For investing and trading, you don't have to appear physically somewhere. You can make money using the Internet or (createwealth8888: Broadband on Mobile), and you don't need to face suppliers or competitors. You just need to face yourself."

Joseph Chong said: "Inertia is an investor's worst enemy. It means time wasted and money foregone. Every year you delay saving and investing, it becomes worse and worse. People should start learning about investing as soon as they start saving. If you don't do that, the tuition fee becomes a lot heavier. the mistakes made earlier are cheaper. It was already mathematically clear then that just working and saving wouldn't do it. To be free from the "bondage" of employment, you must invest and compound your money."

Robert Kiyosaki said: "Most of us are so enamoured of the idea of security that, even when you are unhappy with our jobs, we will stay with them, day after day, year after year. The truth is that staying in situations which are unsatisfying only increases our sense of insecurity. We begin to feel there is no other choice but to sell our souls in the name of security."

CreateWealth8888 said: "I already realized it one day in 2001? after reading the book "Rich Dad, Poor Dad" that I need to be successful in my active investing in Singapore stocks only so as to free from the "bondage" of employment and that is the reason why I am blogging here."

Richard Smitten said: "Certain rules of the market are to be studied as closely as if you were a law student preparing for the Bar."

Jesse Livermore said: "Since I was 15, I have studied this subject (createwealth8888: Market) closely. I have given my life to it, concentrating upon it and putting into it my very best."

Frank McKinney said: "Take risks but never gamble."

CreaeWealth8888 said: "I agreed with Frank. Never gamble. I don't do professional gambling like trading FOREX where there is no assets involved, you are basically playing professional poker game with your retail forex brokers. I like to take risks with stocks that are paying regular dividends that are better than CPF rate of 2.5%,and prefer blue chips that our government has a hand or leg in it and if necessary the government men will kick the asses of those management."

Tom Gardner said: "The best time to start investing was yesterday. The next best time is today."


CreateWealth8888 said: "Kick your ass and get started in active investing and get yourself educated in investing and financially related knowledge." and do the following if you are newbie to active investing:

1. How much capital do you have? (This is the money that you can safely set aside and will not be needed for next 5-7 years as this is the average length of a market cycle if you are caught investing at the wrong time)

2. What is the your final target sum you wish to accumulate over your investing time frame?

3. Set your yearly performance target to reach your final target sum over your investing time frame. (Please note that in the worst years you may not achieve your yearly target; but, it should be reverting to your mean yearly target.)


Happy active investing and be hardworking in getting yourself educated. Cheers!

Live Simply?

Live Simply is NOT THE SAME as trying to save every penny one has and living like a miser. No, it is not like that. Remember that we ONLY live ONCE, and let try to enjoy ourselves and still have fun, and yet not spending too much time and energy acquiring more money to sustain that kind of lifestyle.

We can choose our own lifestyle. We can choose how to spend our time, energy, and money or we can choose NOT to catch up with frenetic urge to acquire more to show off. We can choose to slow down in the later stage of our work life and forgo climbing the corporate ladder once we have less family liabilities.

I have chosen to be DEBT FREE before 40 and will remain that way till the day I say bye bye to planet Earth. I don't bother with the idea of GOOD DEBT OR BAD DEBT. Every debt by nature carries the risk of default in the event of a BLACK SWAN happening. How to live a carefree life if one still have debts to pay off as you will need to divert some time and energy into debt management.

I choose not to upgrade my four-room flat so that I will not get into another debt.

I choose BMW as transport. (Bus, MRT, Walk)

I choose to be partial blind and unable to see clearly what others have in their everyday processions.

So what did you choose and that will determine how you are going to slog it out in your work life?

Retirement Planning?

A recent survey revealed that 39 per cent of Singaporeans feel they have a good understanding of their short-term finances. But only 23 per cent can say the same for their long-term finances. The survey also showed that 91 per cent of Singaporeans do not know what their retirement income will be.

'The lack of understanding and knowledge of long-term financial milestones like retirement could be intensified by the current economic downturn, which may have led more people to divert their attention to short-term survival needs instead of long-term goals,' says Sebastian Arcuri, head of Personal Finance Services at HSBC Singapore.

'The consequence of focusing on the short term may be a struggle to make ends meet when it is time to retire.'

Retirement planning includes identifying ways to generate passive income, may be some active income, and manage cash flow, supplement medical coverage, prepare for medical uncertainties and plan for a lifestyle after retirement.

This deep Bear market is a good opportunity for one to carefully build up a base for one's retirement portfolio for future passive income from stock dividends and draw-down for cashflow management.

Anthony Yeo Toon Yong's last wise words

Anthony Yeo Toon Yong was a very recognizable public figure, distinguished by his greying goatee. A much sought after counsellor, he had helped many. The mass media often quoted him on Singapore’s social and political life.

He appeared often over TV, wrote an occasional newspaper column, encouraged others to speak out, and taught from all platforms, church and public. He is credited to have trained more than 1,000 counsellors.

One underlying message of his: live simply, do not be caught up with Singapore’s and Singaporeans’ frenetic urge to acquire more. It was one of the last sermons he delivered last March when, unknown to him, leukaemia had already begun to gnaw away at his life.

He said: ”You can experience the richness of life without the riches of life. You can experience abundant life without the abundance of life. You can experience health and well being without wealth.” (Createwealth8888: Many people still quite blur between being wealthy and being rich. One can be wealthy but not rich. My goal is to be wealthy and not necessary I am rich as I live simply. I think it is not easy to live simply as you need to be thick skin, and you have to learn to ignore how other people look at you)

Of his own mortality, he had said: “If I do not see another day, at least I can leave this earth with open hands, knowing that I am not grabbing on to anything.”