Inflation, OPR, BLR, Currency. These words seems to be hitting the financial news headlines lately. Besides inflation, what the other terms has to do with you?
Staying in city is not easy, the cost of financing a property is always double the ones in smaller towns. The cost of financing is directly affected by BLR(Based Lending Rates). So, if you are staying in the city and planning to purchase a property, inflation and BLR will be one of the major concerns for you.
Inflation creeps into our daily life, causing us to spent more for less goods. This is what we can feel directly when inflation hits us. How about our savings, trust funds and stocks? Our liquid assets will be less valuable. Imagine your FD rates is 3 % while the inflation rate is 7 %. Whatever you have today is worth lesser tomorrow.
One of the ways to fight inflation is to increase the OPR (Overnight Policy Rates or Interbank Lending Rates). Increasing OPR will slow down inflation as business activity will slow down due to tightening of banking facilities. Besides that, the OPR might be higher than inflation rate as a result, giving positive return rate for your liquid assets.
Bank Negara has recently decided not to raise the OPR. Therefore, BLR will not be raised as well. Most of the property owners hence felt relief about the decision. The stock market has also return to bullish state as cost of borrowing for business remains stable following this announcement. However, the retaining of rates might also signify that our economy is lethargic. We cannot to afford a setback in economy growth now by raising the rates. On the negative side, inflation might also be spiraling up in months to come as a result of the decision.
Now that Bank Negara maintained the OPR rates, we are also facing yet another crisis, the currency crisis. If you check on the BNM FOREX rates, you will notice that MYR has been depreciating since the announcement of Bank Negara on 25th July.
Currency devaluation is a scary phenomena. Imagine your hard-earned money accumulated since the past 10 years is depreciating by 5-10 % every year. Your EPF money will be eaten up by inflation and currency devaluation. We are experiencing the toughest time ever, in wealth management and economy management.
It's far too complicated to analyse the best solution to manage our current economy. It's a tough decision to make in deciding whether to raise the rates in order to maintain our economy's health. I have been admiring Zeti for her calmness and intelligence for a long time. I hope she had made a wise decision this time.
Showing posts with label economy. Show all posts
Showing posts with label economy. Show all posts
Wednesday, July 30, 2008
Tuesday, July 22, 2008
The New City Trend- Unit Trust: Should I Invest?
It's very hard not to bump into a unit trust agent while walking around the city. I still remember this agent who never fails to promote her unit trust when I bumped into her during lunchtime around KL Sentral.
Some of the promotion tag line are very creative, eg. "Young man, don't only wet in pubs la, save some money, buy unit trust and save for "lou po bun"(savings to get married)." Hey, do I look like someone who wet a lot? I have not been to pubs since 23 and I have already got married,:P.
Anyway, back to the unit trust topic. Most of my friends who are working in the city bought unit trust, a lot of them are selling too. Some also opted to leverage on their EPF savings to purchase unit trust, as they are worried about the way EPF manages our money. However, many asked me the same question these days, "Should I sell my trust fund?"
I sold all of mine back in 2007, anticipating a recession which didn't happen. Ever since then, I never bought in a single fund. I was one of the very first trust fund advocates and investor among my peers. I am still able to recall that we are able to count the number of trust funds available in the market back in 1996. Now, you just lost count.
My stand is still neutral now for trust fund. Reason being that a lot of people living in the city are lacked of financial knowledge. This is the reason for buying as well as not buying trust funds. If you do not know how to manage your money, probably investing in a trust fund might help you to fight against the rising inflation. However, many of the fund investors are investing based on the city "herd-mentality". Their favourite tag line is, "If you do not know how to manage your wealth, let the professionals do it".
People are working very hard to make extra money in the city but didn't have extra time to learn how to manage it. This is why when I asked my friends on funds they have invested, they couldn't even tell me the ratio of their funds distributions (ratio of cash, equities, bonds, properties etc). Many are unable to tell me which sector of equities their funds are focusing on and what is their funds' investment policy. When asked about the difference between Money Market Fund and Equity Fund, a typical answer would be "huh? got difference one meh?" I hope you are not asking yourself those questions now. Even if you are, it's never too late to learn,:).
My current view on trust funds: a long-term investment tool. If you do not know how to manage your wealth, keep everything in cash and gold now. Trust funds are not good for short-mid term investment in the current financial climate. One of the reason you lost count on the trust fund counters is because the number of trust fund investors is growing at an exponential rate due to overheated economy. Economy is extremely hot in countries such as China, India and Vietnam. The recent economic shocks has sent various equities market value back to more acceptable level, bringing down trust fund's NAV (Net Asset Value) significantly. The worse has yet to come.
What if you are still on a trust fund investment plan? Keep whatever that you have invested, unless those are junk trust funds. (I will write on analysing trust fund soon if possible) For future investment, IMHO, I would choose to divest into foreign currency or gold instead of trust funds.
Does your trust fund manager care about losing your money ? No, they don't. They still get their sales commission and professional fees annually. Life goes on. This is why I don't trust them.
My personal advice before investing in trust funds, always take note of these few things:
* the above advice are purely my personal opinion and I will not be responsible for any losses incurred based on advice given.
Some of the promotion tag line are very creative, eg. "Young man, don't only wet in pubs la, save some money, buy unit trust and save for "lou po bun"(savings to get married)." Hey, do I look like someone who wet a lot? I have not been to pubs since 23 and I have already got married,:P.
Anyway, back to the unit trust topic. Most of my friends who are working in the city bought unit trust, a lot of them are selling too. Some also opted to leverage on their EPF savings to purchase unit trust, as they are worried about the way EPF manages our money. However, many asked me the same question these days, "Should I sell my trust fund?"
I sold all of mine back in 2007, anticipating a recession which didn't happen. Ever since then, I never bought in a single fund. I was one of the very first trust fund advocates and investor among my peers. I am still able to recall that we are able to count the number of trust funds available in the market back in 1996. Now, you just lost count.
My stand is still neutral now for trust fund. Reason being that a lot of people living in the city are lacked of financial knowledge. This is the reason for buying as well as not buying trust funds. If you do not know how to manage your money, probably investing in a trust fund might help you to fight against the rising inflation. However, many of the fund investors are investing based on the city "herd-mentality". Their favourite tag line is, "If you do not know how to manage your wealth, let the professionals do it".
People are working very hard to make extra money in the city but didn't have extra time to learn how to manage it. This is why when I asked my friends on funds they have invested, they couldn't even tell me the ratio of their funds distributions (ratio of cash, equities, bonds, properties etc). Many are unable to tell me which sector of equities their funds are focusing on and what is their funds' investment policy. When asked about the difference between Money Market Fund and Equity Fund, a typical answer would be "huh? got difference one meh?" I hope you are not asking yourself those questions now. Even if you are, it's never too late to learn,:).
My current view on trust funds: a long-term investment tool. If you do not know how to manage your wealth, keep everything in cash and gold now. Trust funds are not good for short-mid term investment in the current financial climate. One of the reason you lost count on the trust fund counters is because the number of trust fund investors is growing at an exponential rate due to overheated economy. Economy is extremely hot in countries such as China, India and Vietnam. The recent economic shocks has sent various equities market value back to more acceptable level, bringing down trust fund's NAV (Net Asset Value) significantly. The worse has yet to come.
What if you are still on a trust fund investment plan? Keep whatever that you have invested, unless those are junk trust funds. (I will write on analysing trust fund soon if possible) For future investment, IMHO, I would choose to divest into foreign currency or gold instead of trust funds.
Does your trust fund manager care about losing your money ? No, they don't. They still get their sales commission and professional fees annually. Life goes on. This is why I don't trust them.
My personal advice before investing in trust funds, always take note of these few things:
- Fund Distribution (Ratio of Cash, Equities, Properties, Bonds)
- Risk (high growth high risk, stable growth low risk)
- Investment Policy
- Moral & Ethics (in case you don't invest in gaming or tobacco companies)
- Past dividend and bonus splits records
- Compounded Annual Growth Return (CAGR)
- Performance of other funds within the same financial group
* the above advice are purely my personal opinion and I will not be responsible for any losses incurred based on advice given.
Wednesday, July 2, 2008
How to thrive during tough times?
Depressing news is hitting business headlines more often nowadays. Nikko Electronics which is listed on Bursa Main board is closing down its factory, retrenching thousands of Penangnites. US is becoming Bear Country now with Dow Jones heading south for more than 20 % from the peak. During the 97 Asian Financial Crisis, I am still an undergrad without much wealth accumulated. Although I started some small business since 1996, my business was not too badly affected as my business is dealing mainly with cost savings. Volatile times can be melanchonic, but can be trivial too. How you can thrive during tough time?
Property Shopping Spree
On and off, I like to check on the latest property market price from Thestar Classifieds or iproperty.com.my, not really to purchase any property when I found one that is a steal but to checked out how many "steals" are available in the market. Lately, I found quite a few and it's getting more and more. A 20 x 70 double storey link house in USJ 3D normally cost about RM300-310K , but someone is letting go at RM270K. If you are planning to buy a property, hold on, you will be surprised with what you can get with just RM250K.
Blue Chips Shopping Spree
If you are feeling sad because you missed the 2006 Super Bull run for KLSE, this is a good time to shop for good blue chip counters. Down from peak of RM13.20, Maybank is now RM7 per share. The price can be much lower during a recession. General rule of thumb, when the blue chip counter cost only 30 % of it's peak price, it is normally a steal. (disclaimer, this is a personal view and I am not liable for any damages or losses of anyone taking the above advice)
Garage Sale
Huge amounts of expats vacated areas like Damansara Heights and Sri Hartamas during the 97 crisis. If you have spare cash, yes, you can purchase the properties in hose areas. However, for most of us who can't fork out 500K and above at any one time, forget about it, as banks will be very stringent on housing loans as well during bad times. What might be appealing to the general public would be the garage sales held by those expats. At times, you can get very good quality stuff at dirt cheap price in a garage sale. Check out classifieds for garage sales!
Business acquisition/Starting your own business
Are you nuts? Some people might say that. Why start or acquire a business during a recession? Plenty of reasons, among those, because your employer will freeze your pay anyway during a recession and you need extra income(even during 2001, many companies still freezes pay), because many businesses will collapse and you will have less competitors, because you might be able to acquire a business probably halved the price it use to be, because many people will choose to migrate and sell their business, because it cost lesser to operate during a recession, because .... . No matter what reason it is, starting a part time business during a recession gives you some flexibility to learn from failures. Freelancer are especially sought after as well during bad times to cut fixed operation cost.
Economic cycle is getting shorter. We will be experiencing longer stagnant economic conditions sandwiched by short boom times. So , grab your opportunity during this coming cycle and get the best out of it!
Property Shopping Spree
On and off, I like to check on the latest property market price from Thestar Classifieds or iproperty.com.my, not really to purchase any property when I found one that is a steal but to checked out how many "steals" are available in the market. Lately, I found quite a few and it's getting more and more. A 20 x 70 double storey link house in USJ 3D normally cost about RM300-310K , but someone is letting go at RM270K. If you are planning to buy a property, hold on, you will be surprised with what you can get with just RM250K.
Blue Chips Shopping Spree
If you are feeling sad because you missed the 2006 Super Bull run for KLSE, this is a good time to shop for good blue chip counters. Down from peak of RM13.20, Maybank is now RM7 per share. The price can be much lower during a recession. General rule of thumb, when the blue chip counter cost only 30 % of it's peak price, it is normally a steal. (disclaimer, this is a personal view and I am not liable for any damages or losses of anyone taking the above advice)
Garage Sale
Huge amounts of expats vacated areas like Damansara Heights and Sri Hartamas during the 97 crisis. If you have spare cash, yes, you can purchase the properties in hose areas. However, for most of us who can't fork out 500K and above at any one time, forget about it, as banks will be very stringent on housing loans as well during bad times. What might be appealing to the general public would be the garage sales held by those expats. At times, you can get very good quality stuff at dirt cheap price in a garage sale. Check out classifieds for garage sales!
Business acquisition/Starting your own business
Are you nuts? Some people might say that. Why start or acquire a business during a recession? Plenty of reasons, among those, because your employer will freeze your pay anyway during a recession and you need extra income(even during 2001, many companies still freezes pay), because many businesses will collapse and you will have less competitors, because you might be able to acquire a business probably halved the price it use to be, because many people will choose to migrate and sell their business, because it cost lesser to operate during a recession, because .... . No matter what reason it is, starting a part time business during a recession gives you some flexibility to learn from failures. Freelancer are especially sought after as well during bad times to cut fixed operation cost.
Economic cycle is getting shorter. We will be experiencing longer stagnant economic conditions sandwiched by short boom times. So , grab your opportunity during this coming cycle and get the best out of it!
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