Did you queued for Sukuk Bonds?

Excerpts from TheStar report on 17th April:

KUALA LUMPUR: The RM2.5bil Sukuk Simpanan Rakyat government bond launched Tuesday is all snapped up.

The bond issue has been increased and Malaysians can continue to buy the bonds, the Ministry of Finance said in a statement Friday.

Go to www.treasury.gov.my or www.bnm.gov.my/sukuksimpanan for details or contact Bank Negara Malaysia TELELINK at 1300 88 5465.

http://thestar.com.my/news/story.asp?file=/2009/4/17/nation/20090417172535&sec=nation

It is never a surprise to see such news, especially with the current gloomy state of economy. In the past, people have been queuing outside the bank as early as 5 a.m just to get a share of Amanah Saham Wawasan and Amanah Saham Malaysia(ASM). However, how many people really know how Sukuk works ?

This is one of the problem with Malaysians, the "herd mentality" and "kiasu"(scared to lose) spirit. Many jumps into the bandwagon without even a single knowledge of what Sukuk uses as their investment vehicle. Malaysians seems to be very confident with the government when it comes to bonds and trust funds as compared to government policies. *grin*

Back to Sukuk. Since interest bearing bonds are not permissible in Islam, hence Sukuk are securities that comply with the Islamic law and its investment principles, which prohibits the charging, or paying of interest. Sukuk normally invests in HALAL assets by providing short term LOAN and revenue collected from these assets will be distributed as dividend to bond holders. A simple scenario would be investing (as a short term investor) in toll concessionaire or even real estates (by providing loan for development and expansion) which in turn generates steady fixed income.

Here comes the question many will ask when they make an investment.(but surprisingly not when they invest in Sukuk!) What happens if the investment loses money? Well, in Islamic finance, the risk is SHARED. However, when it comes to Sukuk bonds issued by Malaysian government, the risk will be guaranteed by the Malaysian government. (though I am not sure what is the level of guarantee, but I am sure that the coalition government does not want to lose their next election,:))

Sukuk bonds provides you with 5% annual return, to be distributed on quarterly basis. The bond will mature after 3 years. For those who didn't manage to grab a share of it, here's the good news from BNM. For more information on Sukuk, http://en.wikipedia.org/wiki/Sukuk

How to buy GOLD in Malaysia?

It has been a long long time I have not appeared in the blog space. So sorry my dear friends as I am busy lately.

I have been advocating on buying GOLD to safeguard your wealth. I am not saying that you should used up all your wealth to purchase gold. But rather, try to spend 5-10 % of your wealth to buy some GOLD to hedge against economic crisis.

A lot of people are new to GOLD investment and most of the are thinking that you should keep physical gold bars at home. Well, some people might be doing this but I am not. Let me introduce you a simpler and safer way to invest in GOLD.

There are 3 commercial banks in Malaysia that offers gold savings investment. All you need to do is to open an account with them and all your gold savings will be recorded on the savings passbook in gold units (grams). You can open an account with any of the following banks: Maybank, Public Bank or Ambank. Personally, I prefer Public Bank as their spread for buying and selling is much lower than the other 2.

Check out this page and get more information from here.
http://www.pbebank.com/en/en_content/personal/investments/gold.html

For latest GOLD rates, you can refer to
Public Bank Rates
Bank Negara Malaysia or
Gold.org for international gold rates

Have fun!

Getting Rich Quick in the city

If you are approaching 30 and still not belonging to the group of rich, powerful and famous, do not be disappointed, many are with you.

This is NOT an entry telling you about how to get rich quickly. It is an entry speaking out what most of the early twenties young working adults had in their mind when they started their working life in the city: to get rich quick.

There is no shortcut for success. I have joined at least 2 MLM companies before and I know how hard people work towards their success. I also know some of their "scam" tricks on how to attract more members. Fortunately, the products I bought from direct sales membership are usable and effective for me and my family (though I did not continue to use them now anymore, the products are really good, it's just too expensive).

It is not the case for many. Many loss their hard-earned savings by investing into scams and memberships. They will not tell you their story as it is not something to be proud of. Some of them chose to create "fact exposure" sites which are widely publicised as they felt that it's their obligation to warn others about some flawed investment scheme.

Some of the young entrepreneurs found themselves to to be in trouble by trying to slaughter the golden goose. So, how should you decide what's the best for you in order to live comfortably in the city?

1. Be Patient
I have been through the early 20s stage. I must admit, 20s is a very competitive stage in life, especially for young graduates who works in the city. You don't have much experience and yet try to prove yourself to be more successful than your peers. You want to own an Altis when your peers are driving Vios. Many who are impatient to make their first pot of gold eventually loss their "investments" to some "professional scams". I grew up in the era of dotcom bubble during my early 20s, where many young, successful entrepreneurs are featured by the media. I have too, been given the limelight by main stream media featuring my startups during the early 20s . However, I have learned to be patient and analytical throughout the years in order to move to the next level. My advice for the early 20s, analyse the "opportunities" offered to you carefully before investing your time and money. Yes, time and energy is all you have when you are young and use them smartly. They will translate to success and money if you make your decisions wisely. Learn from other's experiences and try to create opportunities for yourself rather than buying into one. I will blog more about creating opportunities for yourself in my future entries.

2. Be Focused
Many will try everything to get rich and famous. Most of the people in their 20s will have similar philosophy of life: "never try, never know, so try everything and you might hit the jackpot". Ask any of your friends working in the city, 8 out of 10 of them will tell you that they have joined an MLM, unit trust or insurance company as agents before. However, probably only 1 out of 10 of those who joined remains as active member now. It's hard to achieve what you want in life if you are not focused. Trying out everything is not the solution to get something out of your life. I have told myself that I would like to improve the quality of people's life through technology. I am still sticking to that goal.

3. Be Balanced
My ex-neighbour never gave up persuading me to join his MLM business. I have nothing against MLM companies, as long as they sell their products honestly. One of the factors I chose not to join is because of the imbalance workload in MLM working environment. He drives a C Class now, bought just after 6 months joining the MLM company. Frankly speaking, his C Class does not come in easy. I knew how hard he worked. Ever since he joined the MLM network, I hardly seen him at home. He came back at 3 or 4 am almost every night, even during the weekends. Though he claimed that his working hours are flexible, it's not flexible at all to me. Weekends has to be dedicated for work and you usually spent your time in talkshow events at night. You hardly have time for your family. Always strike a balance in whatever you do, maintain a healthy lifestyle, you will never regret doing that.

Though it is hard to make yourself rich quickly in the city, there are still ways to guarantee yourself a comfortable lifestyle in the city. I hope to share more about this in my future entries.

Buying vs Renting Property

This is a boring topic for most to go through, as you can find similar article in financial magazines or newspapers. However, I would like to share my experience from a more personal viewpoint rather than financial viewpoint. A viewpoint from someone who migrated from other states to Klang Valley for a living.

Almost 50% of the young working adults in Klang Valley do not grow up here. Many found a job in the city and made city their home after having a stable career. Many who came from foreign state rushed into buying properties during the first few years of their working life. A lot of them do not want to "service the loan" for their landlords, while some are worried about the quick-rising house price. It's really a tough decision to make, especially when your income is merely in the range of RM 3-4K. So , what are the factors you should consider before buying a property?

1. Do you really like city life?
Many of my friends went back to their hometown within 5 years after working in the city. Some of them find it hard to cope with working stress and the high living cost, while some find city a cold and boring place. I had a friend who constantly having gastro problems when she started working in the city. Doctors are unable to diagnose what's her problem exactly but she has recovered after going back to her hometown. Do you really like city life ? Are you ready to bite through the bullet and go through the city struggles? If not, renting a place is still the best option during the first 3 years of your working life.

2. Which city do your want to be exactly?
Many of my friends started to work in Penang and moved to Kuala Lumpur eventually, vice versa. I have also friends who worked in Kuala Lumpur and decided to move to Singapore after getting fed up with the rising crime rate. If you are not sure about the city that you plan to settle down with, be safe, rent a place.

3. Are you the only child?
Well, many will wonder why this is important. Think about this, what if your parents wants to stay with you? You need a bigger house ? Or you might need to move back to your hometown?

4. Do you have a stable relationship/ planning to get married ?
Sometimes your wife/husband might have different plans on whether to settle down in the current city. Be sure about it.

5. Where do you prefer to work at?
My neighbour is an interior designer. He just sold his house two weeks back. He works in Damansara Heights and interior design companies normally have their premises located at the city center. It's hectic for him to travel from house to work and he had realise that he had made a wrong decision buying a place far from his work place.

6. Are you paying more than 3 % of the total property value per annum for your rental?
If the property you have rented cost you RM 500 per month(RM 6,000 per annum), the average value of the property should be 6,000/3% = RM 200,000. If you are renting a property worth more than 200K at Rm 500 per month, you can slowly look for a property you like before rushing buying into one.

7. Can you afford a property which you don't mind staying in with a housing repayment as much as 25 % of your income?
If you are making RM 4000 a month, you can afford to repay RM1000 for your housing loan. Are you able to afford that and would you stay in the property after it is ready ? Many bought their properties without doing proper survey. They bought simply because it is cheap and affordable. Some chose to continue renting a place even after their properties are completed because they don't really like the place they bought. Why do you want to buy in the first place if you know you won't be staying in that property?

8. Are you looking for an investment or a place call home ?
Many do not have an idea what exactly they wanted, a property for investment or for own stay.
It is hard to satisfy both criteria unless you have gone through hundreds of property in town. Rule of thumb, if you are looking for a property for investment purpose, ensure that it generates positive cash flow.(Malaysia's property has very low capital appreciation, ranging from 2-4 %, which is lesser or same as FD) If you are looking for one for own stay, make sure you like the place, capital appreciation is secondary. Never force yourself to purchase a property just because of the capital appreciation potential. You might regret someday.

So, are you ready to buy one now?

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:

• 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

Talk to more people to find out their views on the economy direction and decide on funds which suits you the best. Happy investing!

* the above advice are purely my personal opinion and I will not be responsible for any losses incurred based on advice given.

Snippets: Malaysia Property Outlook

I have been checking out on different opinions on Malaysia's Property Outlook lately. Some of the interesting views and arguments I found.

http://malaysiafinance.blogspot.com/2008/07/frank-assessment-of-property.html

http://biz.sinchew-i.com/node/14940

http://biz.thestar.com.my/news/story.asp?file=/2008/7/14/business/21807128&sec=business

http://www.estate123.com/reviews_articles/article_review_detail.aspx?a_id=59

http://www.bnm.gov.my/files/publication/msb/2008/5/pdf/5.15.pdf