Stock vs Gold vs Property

Below I share some historical trends for Stock Market, Gold and Property.  They are not directly correlated but each is good enough to represend some form of global historical trend.  So they are good enough as an overview and for layman entry level comparison.

Stock market

Property

Gold

Comparison 1 - 1975 to now

Gold has earned 3.5x

Stock market 8x

Property 10.7x

Comparison 2 - origin to now

Gold 28x ( since 1930 )

Stock 800x  ( since 1944 )

Property  16x ( since 1960 )

normalize above return by the difference in years become

Gold  35.9% 

Stock  1250%

Property   33.33% 

However, stock starts at 1 in 1929 and therefore give too large a gap in above comparison.  So I decide to use 1960 where stock index is at 20.  If I use this 20(1960) instead of 1 (1944 ) for stock, then I get

Gold  35.9% 

Stock  83.33%

Property   33.33% 

Gold Trend in Longer History

Comparison 3 - lowest valley to highest peak

Gold's peak at 1000 at 2007

Property peak at 181 at 1996

Stock dip to 1 in 1984

Gold  40x ( min 1923 max 2007 )

Stock  800x  ( min 1984 max 2008 )

Property  22.6x ( min 1960 max 1996 )

Gold  47.62% 

Stock  2352.94%

Property    62.85% 

Like wise stock's number is too crazy so I use 20 instead of 1 for stock and result this:

Gold  47.62% 

Stock  117.65%

Property    62.85% 

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I am not too excited about any of these return rate because past performance does not guarantee future profits.  However, after looking at these graph I am very excited because I think I see some repeated trends in stock market.  It seems QUITE predictable from this graph alone.  However, I cannot figure out any "Patterns" for Gold and Property.  Therefore I am quite sure what I need to do for stock investment, but not the others.

==================

so my final word on this comparison is you should only read this for 'fun' or at most a guide only.  Remember that global trend and all these 'overall' figure does NOT really affect you.  Because you will NEVER buy the whole world.  You will only buy a few stocks or just 1 or 2 properties.  The unique buys you make for yourself determine the REAL profit for your very self.  Global trend does NOT mean you have no chance to out beat it.  

Malaysia Stock Market - Foreign Fund

Everyone already knows but this data just to assure it - Foreign Fund already leave Malaysia share market, all you need to consider now is if the company you invest in can substain this crisis. 

EPF/KWSP/401K is causing you to lose money because of their own stupidity

sorry I hadn't posted much these few days and I need to earn some extra money to substain this upcoming school holidays :)

Anyway, I receive an email which I have personal experience with.  I think its important for all Malaysian to know too .... and I would guess USA goverment may have done the same.  Good luck with your obama votes :)

Subject: SCAM by KWSP / EPF / 401K


This is another method for KWSP to steal our money!

Remember during Budget 2008 announcement last yr, our Finance Minister (cum PM) announced that in order to assist KWSP members to reduce the burden in housing load repayment, KWSP will allow monthly withdrawal from members' A/C II for the purpose?
Sounds like a nice goodies!
When you apply for the monthly withdrawal, you only need to provide KWSP yr housing loan & instalment details
from yr bank and the bank a/c # you like KWSP to bank the monthly
withdrawal into it. KWSP will approve yr
application based on the available amt in yr A/C II and compute the withdrawal period by dividing the approved amt with the monthly instalment amt. Application process takes about a month and you will receive the monthly payout promptly into yr bank a/c!
Well everything appear to be nice and good. It was indeed a noble plan until you take to close look at yr KWSP Statement!

The withdrawal plan is actually a SCAM!

This is how the KWSP SCAM works.......

Assuming you have RM100,000 in yr A/C II and yr housing loan's monthly instalment is RM2000/mth.
KWSP will approve yr application of withdrawal from yr A/C II of RM100,000 and pay you RM2000/mth for the next 50mths.
Everything appears to be in order BUT.......

What KWSP didn't highlight to you is that when the application was approved, the TOTAL AMT (RM100,000) is removed from yr A/C II! It appears to be transfered to an unknown a/c to effect the monthly payment from therein.

The impact to the member are as follows :-
1. You just lost RM100,000 from yr A/C II. Assuming the KWSP Dividend is 5%, you will lose >RM4,000 in dividend during the 1st year. Based on the above example you will will lose >RM10,000 over the 50 mths period!
2. There is no statement to account for the amt approved vs amt paid, hence you would need to keep the monthly payment voucher to reconcile against the approved amt over the 50mths period to ensure there is no missing amt!

Assuming there are 100,000 members who innocently fell prey to this SCAM, based on the above example, KWSP would have cheated the members of 100,000 X RM10,000 = RM1,000,000,000 (that's RM1 BILLION) over the period!


Furthermore, if you discovered this SCAM early and intend to stop the plan, KWSP would not allow any cancellation of the plan until at least 1 year. That would mean, once the application is approved, based on the above example, you would have lost >RM4,000.
100,000 members would have lost 100,000 X RM4,000 = RM400,000,000 (RM400 MILLION) in One Year!!!

If you're a victim of this KWSP SCAM, would suggest you call yr MP to raise hell in Parliament! (BN MPs won't do it)
For others who have not fallen into this SCAM, pls continue to watch out and alert yr family & friends about this.

HOW COULD THE GOVERNMENT ALLOW ITS AGENCY TASKED WITH SAFEGUARDING ITS CITIZEN'S HARD EARNED MONEY TO CHEAT ITS MEMBERS IN THIS MANNER???

Pls spread this message around.

Case Study : middle income group

This morning I over heard a case study from radio station 988 :

A young man earning $4000-5000 a month. $1000+ pays to house loan, $500+ pays to car loan etc and every month he has a remaining of $500 for saving. His question is what he should do with all his loans. He also has some credit card debt.

The answer given by the expert on radio is :

Use the $500 to clear all credit card debt, then car loan and then only start talking about money earn money.

While the answer given is typical and 'correct' by the standard of Personal Finance Planning, but I would want to add a few points :

1. The way the guy asked the question has a flaw. He deducts all the payment and then only come up with a saving of $500. The correct mentality is to Save First Use Later ( see old post ) If he HAD the Right mentality at the first place, he would most probably not getting into the credit card debt he mentioned. A very small difference made in approach can bring a whole different result, and that is why all I want to emphasize ( and the only thing ) is to setup a System to Automatically do saving for yourself without you having any control over it.

2. The answer given shows one of the common limitations of Finance Consultants. He also said,

Credit card is charging one of the highest interest in the market, NO finance consultant CAN GUARANTEE you ANY FINANCE return of 15% or above. Therefore, you can NEVER get any tool to over take this Credit Card Charges, therefore you HAVE TO settle it ASAP.

Again, first of all above statement is correct and what I am going to say is only an addition to it. What he was referring is FD, Insurance and Mutual Fund would probably NOT ABLE to provide you a return of 15% Consistently. If you refer back my Finance Pyramid, there is a "Stock" or share market on top of the pyramid. I leave it there to break this 15% barrier.

Many finance consultant leaves Stocks out of their portfolio due to its speculative nature and leave those to the stock broker. But

we are in charge of our own life,

and we get any 'tool'

that we can handle

to achieve any target

we want to set,

else there is really no point planning if 15% is the 'proven' limit.

The 2nd thing the finance consultant missed is ... Income. Below is one of the VERY FIRST picture I posted in this blog. This same picture is actually printed on my name card too ( coz I think all the answers are all covered in this simple picture )

Credit Card Debt is something one shouldn't get into at the first place. If you do the ONLY first 2 things I stress everybody to do ( earn an income and save automatically ), you would have a much less chance to get into credit card debt.

If you already get into such debt ...

Actually Ah Long's Debt

is the SAME as Credit Card Debt,

both are charging at 18% a year

and calculated Daily !!

Ok, if you already get into such debt, you should very well realize its a Personal Finance MISTAKE. Most often, the mistake is made because you have a GREED to be satisfied - you wanted to own something first BEFORE you have the ability to own it -

a Personal Finance Mistake is not necessary a Personal Mistake

A mistake like this DOES NOT eat into the "Automatic Saving" system I setup. It actually eats into your income. Basically if you use your future income, then you will have less income in future. Therefore,

If you get into credit card debt,

you MUST increase your Future Income

IMMEDIATELY !!

So other than paying it up, these are the potential solutions too :

1. Dispose the item to reduce debt if appropriate

2. Get a Pay Raise ( if the credit card debt is initially to increase the chance of this, then its a good call isn't it ? )

3. work 2 or multiple jobs

4. Become creative and innovative to earn more ...

In short, don't forget Income is the ENTRY stage into Finance Planning. When all else IN your finance plan can't earn you the 15% to cover up the 18% credit card charges, then you will have to RETURN to your Income and work on IT !!

Like wise if you are one of those who can never increase income, then you should very well know what to do with your scissors and credit cards. And come borrow money from me please, you may as well be my finance slave than others ... isn't it ? :)

Buy Term Invest The Rest

In one of the old post I shared how to best use of your money among insurance, fix deposit and mutual fund ( click to see old post).

Basically it says if bad thing happens within the first 5 years, insurance is the better choice because you get $100,000+ while your FD/Mutual Fund saving is only starting to accumulate at $10,000+. However for the next 10-20 years FD and mutual fund are clearly better choices because they are more flexible and provides better returns, $300,000 and $600,000 respectively.

So the answer is to build your own portfolio !

I went back to insurance company P and asked for a Term Insurance quotation for $100,000 which costs only $313 a year for 5 years. So I minus out $313 from my yearly saving $17,920. On year 1-5, I would only save $17,607. And because I am greedy so I pick mutual fund over Fix Deposit as my saving vehicle.

Wa lah ! If I die within the first 5 years, I will get more than $100,000 which is slightly more than the insurance plan earlier - actual amount would be $ 119,016 even for the 1st year where $100,000 paid out by the Term Insurance, and the rest is from my own saving.

If I survive through the 10-20 years period, I will still have all my saving plus its earned interest !!

Best of BOTH WORLD !! Isn't it ?

This is called

Buy Term Invest The Rest

Capital Guaranteed Saving ...

Nowadays, more and more people complains about drop of their investment value.  This would be a good learning experience that you may not be able to take the risk you thought you could ...

A few days ago, I came across this Capital Guaranteed Saving Plan by Prudential called Pru-Retirement something.  May be this kind of plan is suitable for those who cann't stand recent market crashes ...

click on the image to view in bigger size

Basically this example is like this :

1.  You save $500 every month for 20 years.  So you have save a total of $120,000

A - if market drops

2a. If market crashes and your investment value is less than $120,000 then the Guaranteed value is $120,000

3a. This particular plan adds some extra value to the $120,000 so what you get is actually slightly more than what you have saved, ie. $139,200

4a.  As a result, the Minimum you will get back is $580 every month for 20 years !!

B - if market is good

2b. If market is good and your investment value worth more, ie. $230,000 or 6% increase every year.

3b. Calculation is the same except your capital is now higher.

4b. In this case, you will get $1,111 every month for the next 20 years - comparing to your initial saving of $500 only.

The good things about this kind of plan are :

. You will NEVER lose less than what you have put in !

. Better still, you will at least get back slightly more than what you put in !

. In good time, you still get to Earn More with the up trend !

Super Great and Perfect isn't it !?  Well, do your homework, future post will re-look into this kind plan with its pros and cons.

will Injection $ into stocks work ?

Frequently we heard people 'inject' money into stock market to 'support' it.  Sometimes they put in more flowery words like, "we will buy in good businesses at low price.  At one hand, we will earn in long run, and it also increases people confidence, so its double the benefits !"

Will it work ?

Well ... its quite simple really.  If the market turns out to be the bottom when you inject the fund and the market goes upward since then, then it works.

If the market continue to trend down  A F T E R  fund injection, then it doesn't work, does it ? 

The Thing Is ....

Day 4 :  Don't worry ... there is Nothing Wrong with the Market !!

Day 5 :  We will inject 5 billion to the Market !!  Don't worry ....

Day 6 :  People think 5 billion is not enough ...

Day 7 :  Don't worry ... we will inject 10 billions into the Market !!!

Will you worry ?  I wasn't worry initially.  But after hearing all these 'stage plays', now I worry ...

Doesn't Seems Like 

He Knows What The Hell

 He is Getting Into 

At ALL !!

Insurance vs Fix Deposit vs Mutual Fund

Insurance

I search around and found this, one of the best Endowment Insurance Policy I can find.  

Just a reminder that "Endowment Insurance" is a type of insurance you go for when you are aiming at SAVING !  ( read old post for more info )

Basically this plan says if you save $18,000 for 10 years, you will get $300,000 by the year 20th.

That is about D O U B L E your investment, not to mention the F R E E benefits you get from the insurance side.

There is a GUARANTEE payment of $100,000 to your loved ones should you not live through the period ...

Fix Deposit

If you save the same amount of money every year for 10 years .... you will have $18,547 by the end of 1st year ( assuming 3.5% Fix Deposit rate ).  That alone, is triple of what you get on above plan.  Like wise, every year onward is ALWAYS higher than the insurance plan above.  

Pink graph is Fix Deposit @ 3.5% and Blue graph shows the return from insurance return above (P).

By the end of year 20, both FD@3.5% and Endowment Insurance provide similar returns at $300,000

Mutual Fund

My personal past 15 years of mutual fund return is 8-12%.  So lets says my next 20 years of mutual fund return is at 8% ... 

Yellow graph (return M) shows the potential mutual fund return ...

A whopping of $600,000 return by end of year 20 !!!  That is D O U B L E again for the other $300,000 !!!  By Doing NOTHING but choosing a different finance tool !!

So from the perspective of saving, Mutual Fund and Fix Deposit are clearly better option ...

However ...

Should things don't go as planned and you are no longer able to save ( passed away ), the insurance will pay $100,000 immediately in year 1 comparing to $18,000-$20,000 on the other 2 options.

So from Unexpected Incident point of view, Insurance clearly win over Fix Deposit and Mutual Fund.

At the end, what should you do ?  Answer to be revealed soon but actually has been hinted before ...

Goal ? Just set one ... its better than None

Sometimes back I mentioned one should start saving even without a goal  (old post).  

However, having a goal is still better than having none.

Because the journey is easier

when you think you know

where you are going.

If you really cann't find yourself a compelling goal to pursue for, just set a generic one.  Like you are aiming for $1 million and that could get you ...

1) a good lengthy trip to Mount Himalaya ...

2) build your own winery farm ...

3) shop all over Asia ...

4) etc ...

if you still don't know

just pretend you do

(its called the NLP method)