malpf feature on New York street ...

malpf - not noticed by a walk by .....

FREE lunch at Melaka and Penang

Jupiter is one of the cheapest online trading brokers in Malaysia. Partnering with Bursa Malaysia they are organizing seminars on stock market talks. LUNCH and TEA provided, FREE registration !!

3 October 9am to 4 pm
Avillion Legacy Melaka, 146 Jalan Hang Tuah, MELAKA

24 October 9 am to 4 pm
Northam All Suites Hotel, 55 Jalan Sultan Ahmad Shah, PENANG

More good news – ZERO BROKERAGE for one month for all who open a new online trading account with Jupiter Securities Sdn Bhd during our Bursa Malaysia Market Chat 2009

REGISTER NOW. Please call 03-2026 9691 or send an email to servicecenter@jssb.com.my. Bring your friends along.

If you plan to buy sell a lot this coming month, this should be a good opportunity. Else just go for the free fried mee.

Investment Link Insurance products

Insurance is an industry that is most dedicated to the complete picture of our personal finances. This has become even more apparent when Investment Link Products (ILP) are introduced to the market.

There is really nothing new to ILP other than it actually reveals the elements of insurance to agents and buyers. Which used to be secrets and all they told you was "Don't worry, we will be able to pay you 6% interest every year".

Now with ILP, agents and insurance buyers can decide

1. What elements to put in their policies

2. How much of each element to put in

3. to change the allocation from time to time

This can go either way, good or bad, for you. Before there was ILP, the proffesionals inside the insurance company decide all these for you. In return they can vaguely promise you a 6% return ( in quotation but not in policy ). So in the simplest term, if you can DO BETTER than the pro, then ILP is better for you. Else you may not even get the return like others who are just paying premium, without the need to understand anything else, as in a truly 'passive' tool.

There are 4 to 5 important elemetns to understand in ILP but for simplicity we can group into 2 first; protection elements and invesments.

Protection element in ILP is almost the same as Term Insurance.

Investment element in ILP is the same as mutual fund.

So basically ILP = Buy Term Invest The Rest, which is one of the best ways to build your personal finance portfolio.

Since the elements are configurable now and that the agents are trained but most buyers have not caught up to the idea yet, the agents can configure in a way that;

High Protection Low Investment ~~> Cheaper than Traditional Products

Low Protection High Investment ~~> Gives Better Return than Traditional Products

without properly educating on the side effects

High Protection Low Investment ~~> May Not have enough cash value to keep the policy alive in future

Low Protection High Investment ~~> Not enough protection for initial years

So if the buyer is only stressing on one aspect only ie. Low Price OR High Return, then very likely the buyer may be getting an un-balance ILP, which carries a higher-than-you-can-take kind of risk. In addition, such a buyer may as well;

High Protection Low Investment ~~> Buy Term Insurance

Low Protection High Investment ~~> Buy Mutual Fund

The justifying detail factors may be too much to share here but generally in developed nations, one can expect to use 0.8 to 0.9 times of traditional insurance premium to achieve a good balance ILP. However, in developing nations, one may need to use 1.5 to 2x of traditional insurance premium in order to build a safe and solid ILP.

Do you agree with this rule of thumb ? Why or why not ?

Is Gold Pawning ALL BAD ?

There was an article that says gold pawning is strategically disadvantaged, usually by a 0.X% This implies that you will most probably lose out when you pawn more often (1) longer of time (2). So does that mean gold pawning is an all bad thing ?

The answer is NO!

There are 2 words in relation, Gold and Pawn. Gold is an investable commodity. As a matter of fact, gold could be viewed as the god of all commodities. There is an old saying "When you don't know what to do with your money, buy gold!". Gold is a well known hedge against inflation. So overall if there is Gold involved, it cann't be too bad.

Pawn on the other hand is a not-so-good-thing in general. Basicaly you exchange your valuable items for cash. Your item will be safe kept for a certain period. You can buy back your item before an expiration date. Usually total buying back is lower than initial surrender price so that the pawn shop can earn a profit. On cases where the opposite may happens, the pawn shop enforces a safe keeping fee to minimize loses.

Although pawning is not a good thing, as in you have cash flow problem and you pay extra fee to safe keep your own stuff, but if there is anything a person should pawn it is Gold and Silver.

So gold pawning is not bad at all.

Rob has Rich Dad in his life, as a matter of fact I went through a similar life path as his, but I have Rich Friend instead of Rich Dad. From where I grew up, gold pawning is a way of life. My Rich Friend runs a gold pawn shop. Despite the fact pawning is disadvantaged both strategically and psychologically but over the years we cann't ignore another fact that some people who pawn their golds are still surviving and some doing pretty well indeed.

Lets review some facts again, a 0.X% disadvantaged investment is still better than gambling, borrow money from illegal sources ( Ah Long ), over draft, credit card interests etc.

Some of the key reasons why quite a number of people can make it through their whole lives simply by pawning golds are;

1. Gold's trend growth is REALLY more than inflation rate and

2. Gold provides an excellent cash flow facility today.

If you are earning an interest that is higher than inflation rate, then minus it with a 0.X% disadvantage by adopting some not-so-good strategy ( pawning ), the worst it gets is you are still hurt a bit by the inflation. Relatively, most people do not save at all! Hence,

Earning Gold trend - pawning disadvantage rate > Not doing anything at all

After all, that is why there is the saying when you don't know what to do, just buy gold ! But there is NEVER a saying "Pawn your gold to get Rich".

The delusion of pawning gold strategy is because it does actually increase cash flow. And sometimes some people mistakenly take extra cash flow as wealth. Pawning gold is also a very valid leverage technique. Hence combining its leveraging 'fun' and extra 'cash flow', people easily mistaken it as a way of 'wealth path'.

Gold is an excellent tool to hedge againsts inflation,

Gold can provide you great cash flow especially at bad times,

but pawning will lower all the advantages you get above although in small scale only.

Pawning your gold is not an all bad thing but its NEVER going to be the best thing you can do in your personal finance.

Some of Robert Kiyosaki's sayings ...

Below are some of Robert Kiyosaki ( Rich Dad ) sayings and my thumbs UP or DOWN as a respond ...

"The recession is NOT over ... it has been Glossed over ..."

I was calling it the PM effect - (Prime Minister). I knew for sure Obama and Najib could have brought some effect but never did I know that they can really pull it off until today. Anyway, a nice 'gloss' they did indeed ...

"I park my money in gold, silver, oil commodities that goes up as USD goes down ..."

I agree but then again, don't forget in forex trading, USD down could easily be hedged by trading reverse currency pair too. I don't know if Rob knows about forex.

"Gold will crash in October November down to $800 range ..."

I was thinking December but there about share the same philosophy of gold trend.

"Market will be volatile for years to come, this means traders wins over long term investors."

I agree with the volatile part. Duh ... what market is not volatile in today's finance ? By traders Rob meant the speculators. This is the part why clearly Rob fails to make money from stock market for the past 40 years ( Not really true, but relatively it is true especially when compares to his passion in real estate). In a market that is more volatile than you, the higher frequency of transactions imply higher chance of losing. The only time when a speculator earn money in a volatile market is when the speculator's ability is still beyond the volatility, or in other words, to such a speculator, the market is not that volatile yet. This is a big topic and could probably be the last thing I can ever share in this blog but it will come eventually. But basically Rob gets this part in reverse and hence stock market is never his cup of tea.

"Stock market is not the place to invest for long term."

Its quite funny reading some of his views in stock market in his latest book Conspiracy Of the Rich to be published tomorrow. He was quoting the lows and the highs of Dow Jones. Then shows how bad it is going from the Highest to the Lowest. He also shows after one big cycle of Lowest to Lowest, there is really not much left. Although what he shared is true but nevertheless Definitely is NOT the complete picture. If a person is so smart spotting the cycles and patterns of ANY investment vehicle, why cann't he make use of it to his advantage ? That ... will always be my biggest puzzle to Rob's life story unless he admits he has personal preference to real estate and thats about all.

"Saving is bad."

This is a OMG respond some of the gun you sucker Rob kind of protest from me. USA is going through a very special kind of transformation in its finance today. So it may be ok to say savings is bad of USA folks but it ABSOLUTELY DOES NOT APPLY to the rest of the world.

Lets face the simple truth;

Spending less is better than spending too much,

Saving is better than NOT saving,

Able to INVEST with higher return is better than saving.

and lets review today's personal finance status;

Most personal investments produce an average return of less than fix deposit guarantee interest. Only 30% of such investments provides a positive returns, this means 70% lose money. And only 10% of them make a significant return in comparison with mutual fund return.

Although the title is 'Don't Save', but what Rob is really saying is 'Invesment is better than saving'. Which I agree with the content of the whole chapter. But the title is so misleading that it actually damage many young minds. All they see is the title and they stop saving and start spending ! They spend to lose, not spend to win. They would thought they are spending as to invest but as there is certain way that a human mind would work best - instinct - more and more fail just because our global personal finance guru, Mr. Robert Kiyosaki said that Saving is BAD.

The biggest conspiracy in "Conspiracy of the Rich" is Rob in need of making more money by abusing his global influence and cross the ethical line in his new book marketing ....

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.

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nevertheless still a good book to keep. Other than the crazy 'Don't Save' stupid marketing talks, there are a lot of useful contents inside ...

The FIRST Life insurance - a Whole Life Plan

Although Buy Term Invest the Rest is a better option but generally the first life insurance you should buy is a Whole Life Plan.

Typically such a plan runs until you die so its an insruance for them, not for you. One of the facts that some may overlook is that you will have to pay the premium your whole life too. However, the quotation is usually presented in a way that you pay a number of years and then the policy will be able to substain itself. Traditional policy would actually take a loan from yourself by paying interest to the insurance company. Which is usually viewed as a big disadvantage in personal finance planning. However in this article, it works towards our advantage, at least for 'most of us'.

Lets start by reviewing Buy Term Invest The Rest (BTITR), although it works best ideally but in real life when will it work and more importantly when will it NOT work ?

Statistically and historically, most people who practises BTITR starts with buying term insurance and almost certainly did not ends with investing the rest. Everyone has ups and downs in their lives. During the downs time, almost everybody's 'Buy Term' is stopped not to mention there is no such thing as '... The Rest' when cash flow is tight.

What is the ONLY requirment in BTITR to make it a success ? DISCIPLINE ! And guess what human nature is lack off ? DISCIPLINE !!

So if you have been having discipline your entire life up to this point, congratulation, you can start your first life insurance as BTITR. Else, buy a whole life insurance plan instead. You can always BTITR for your subsequent plans and just in case when lack of discipline really screw you in future, you still have at least one plan you can always fall back to - as a safety net.

This way, the worst it could become is you earn less but you are almost guarantee a fail safe approach. Strategically it puts you in a very good position even to start with.

If you are one of those who asked, "Term insurance premium increases as age increases" then you should buy the Whole Life Plan instead. Because you didn't really understand BTITR where the 'Invest The Rest' part should have ironed out this problem.

If you asked, "Should I buy term insurance until age 50 ro 60" then BTITR is also not for you. the 'Invest The Rest' part should usually take over the 'insurance' part after 15-20 years. If you didn't see that in your thoughts, you should be better off with a simply assuring whole life plan, although slightly more expensive.

Today Investment Link policy can also be quoted as a whole life plan. The good thing of investment link whole life plan is the elimination of policy loan - taking money out from your own plan to pay your future premium does not cost too much extra than just the unit price calculation. However, a badly configured link policy can lapse by itself when the market price goes too low. So a traditional whole life plan is implicitly having more assurance than investment link whole life plan.

Another rule of thumb to make your life easier, if you can pay high premium for your first policy, take investment link whole life plan. If you plan to pay minimum premium, then go for a traditional whole life plan.

Lastly, if you know you haven't been discipline but you are sure that you can be and will be from now on, do me a favor, buy a whole life plan now and then do the BTITR thing a couple of years later. 20 years later if your BTITR really does better than your whole life plan, come claim the 2 years differences from me.

British Starts educating finance in Primary School

One of the nicer effects left over from Lehman's trigger on world finance crisis is that now British starts to teach finances even in primary school. All the kids are taught what finances are all about, how to start a business and the importance of accountings etc.

The timing couldn't be more right especially when Internet has changed the way business can be.

Although there will be doubts on who can be teaching all these and what syllabus are considered 'correct' ? Afterall it is still hard to say if the world greatest finance is evil or saint. There isn't exactly a blue print to be based on. Don't forget not too long ago, Lehman is the exact blue print for everyone else to follow ...

This is nevertheless an exciting start. If I were to have a say, I would just recommend they should focus on "personal" finance first rather than the big 'finance' subject. If a person can manage himself well, the risk of a failing like Lehman would be greatly reduced ...

Rich Dad : The Best 20th century Personal Finance

Just want to make sure that you know Robert has a site that teaches people all about personal finance for FREE, it is one of the most comprehensive resources as well ... its called RichDadWorld.

Even if you don't like this old type of personal finance concepts, you should still sign up and browse through the resources briefly. Its a good way to counter check if you have missed anything. Its almost a guarantee you can find some eye opener concepts there or some key concept you already knew but forgot.

Basically it says you record down how much you earn and spend then set a goal and achieve what you really want in life.

Some may ask why is this called last century's methods ? Well, lets look at some facts ...

1. Starting such an exercise is exhausting

2. Keep doing until it becomes a habit is even tougher

3. 90% or Most people WILL NOT be able to do it

4. The Rich didn't really do this before they become rich

Come on, lets face it, as much as I personally a great fan of Rob, his first book is all about his passion. Dying to share what he has done right especially in property investment. Since then, all other works he did are all about business. So for NOW, if you ever approach Rob hoping him to change your life, keep your fingers cross. His aim is in expanding his bussiness. With that note, it is still SUPERB to work something out with Rob if what you have in mind is 'business'.

Ok, I felt bad already making such a comment. So lets add another positive note. Among all the Riches in the world, Rob is the ONLY person I know who are willing to share his failure openly. May be you need to buy him a few more beers before he opened up but relatively he did open up so much more willingly than .... and the person who is so scare to share his faiulre - Mr. Trump.

With the above 4 points, I mark his site a 20th century personal finance. The only thing missing from 20th century personal finance to 21st century is psychology. Intuitively human are lazy, when not paying attention and close focus, we tends to always choose the easiest path. 21st century personal finance is all about securing a solid personal finance without trying too hard ... by using the right ways ( easiest and laziest path possible ).

Lastly I need to re-emphasize ... there is nothing wrong with 20th century personal finance. Here comes another fact ... if you can do all things mentioned in 20th century personal finance persistently, you are almost "guarantee" a success in your personal finance. However, statistically only 10% of the people would be able to make it. If you think you are the 10%, by all mean go do it! Another great point is ... there is really nothing to lose. Even if one day you found out you are not the 10%, its perfectl OK! You have gained a superb experience. Then it is still not too late to explore 21st century personal finance ... after all, there are 91 years for your to catch up ....

What you can do with mutual fund's high fee ?

It was mentioned that Mutual Fund is one of the few personal finance tools that can provide highest return passively. (A) There are a lot of other venues that can provide higher return but they require much more active effort than mutual fund. (B) There are also a lot of other tools that is more passive than mutual fund, but their returns are not high. (C) There are also some solutions that provide both high return passively but they are NOT personal tools.

However, even the best tool in the world can be a disaster when used wrongly. Mutual fund is no exception. The right way to use mutual fund in your personal finance is;

1. choose the right fund manager

2. choose the largest or most active fund ( In Malaysia, the only choice is Public Mutual )

3. apply Dollar Cost Averaging

4. adopt Buy and Keep, not Buy and Sell. Buy and Switch, however, is a good alternative between the two.

Any activities other than above may stop you from using mutual fund to

1. provide the highest return

2. passively

3. personal tools

With that in place, the only challenge left is its high fee. Although there are many justification on the fee, the future for mutual fund industry is actually the continous effort to streamline this service charge. There are 2 ways to do that;

1. Provide more values from the same high fee or

2. Cut to lower fee by streamlining distribution channels.

The good news in Malaysia is, there are already distinctive winners in both strategies. Public Mutual will continue to provide more values to its investors, the significant threshold is MYR 100,000 where you become a Mutual Gold member to rip those benefits out of the service charges you paid.

On the other hand, Fundsupermart is the winner in low fee funds. However, Fundsupermart is NOT a fund manager. They only provide a trading platform for fund managers to distribute their low fee funds. Buying and Selling funds in fundsupermart is a totally whole new concept comparing to traditional methods. Hence do take sometime to learn and realize what you have given away when paying the lower fee. Whatever result you get in future is the action you take now, its all you now and no one else to blame.

What else can you do if you want to invest with mutual fund but want to minimize the high fee impact ?

Join the industry to promote mutual fund as an agent. All agents get paid in commissions. If you buy from yourself, part of the service charges you paid goes back to yourself. It may not be easy as this actually require a lot more effort to get qualify etc. But the knowledge and experience stay with you.

So in contrast to mutual fund's service charges, you can;

1. rip more values from your fund managers - Public Mutual Gold

2. buy lower fee funds - Fundsupermart

3. buy from yourself - ...

Other related articles

One of the earliest mutual fund articles - an introduction

do you love or hate mutual fund ?

Stock fee vs mutual fund fee

Bad Fund Manager :Force invest or blindly follow rules

Bad Fund Manager: over or under diversify