October 8, 2010

Seven steps to a sound retirement

There are seven keys to a lot of things in life. There are seven steps to heaven and seven types of intelligence and seven habits of effective leaders.

Now we have seven steps to retirement planning courtesy of the Society of Actuaries, which just released a 64-page report with the not-so-consumer friendly title “Segmenting the Middle Market: Retirement Risks and Solutions Phase II Report.”

“Retirement financial planning requires a methodical approach that identifies and quantifies each important component that affects the asset accumulation, income management and product selection/investment decision processes,” according to the report, which was sponsored by the society’s committee on post-retirement needs and risk and written by Noel Abkemeier of Milliman.

Not surprisingly Abkemeier says this approach is especially important for middle income Americans who likely have less than $100,000 set aside for retirement. So what are those steps?

September 30, 2010

Five hidden costs of gold

There’s a lot of talk right now about how gold is booming, and how gold bugs who have been stashing bullion under their mattresses over the last decade or so have made a killing.

That may be true if you look at the price of the yellow stuff per ounce. The price of an ounce of gold is up about 30% in the last year, or over 400% in the last 10 years. How does that relate to actual returns for investors?

Higher Taxes

The affinity for gold investing and a dislike of the government seem to go hand in hand, from predictions that massive government debt will render the dollar worthless to conspiracy theories that there will be another Executive Order 6102 in which Uncle Sam loots your safe deposit box and seizes your gold.

But the biggest reason for gold investors to get mad at the feds is their tax bracket. The IRS taxes precious metal investments — including gold ETFs like the SPDR Gold Trust and iShares Silver Trust — as collectibles. That means a long-term capital gains tax of 28% compared with 15% for equities (20% if and when the Bush tax cuts expire next year).

While you may see your gold as a bunker investment, the IRS will treat you the same as if you were hoarding Hummel figurines. And that means a bigger portion of your gold profits go to the tax man.

September 23, 2010

Amanah Saham 1Malaysia Maiden Dividend Payout

Permodalan Nasional Berhad (PNB) today declared the maiden dividend of 6.38 cents per unit for Amanah Saham 1Malaysia for financial year 2010. The dividends will be reinvested as units and investors may update their passbook at PNB agent's network from the beginning of next month.

August 18, 2010

Bursa Malaysia e-share payment service

Bursa Malaysia has launched e-share payment service today that allows the share buyer to transmit money electronically to the stockbroker when they purchase shares/make payments or allow the stockbroker to auto-debit from the bank account. It also allows the stockbroker deposit share proceeds/profits into the buyer's bank account directly when the buyer sells the shares.

The service is provided FOC by the stockbrokers and you need to apply at the individual stockbroker. Basically, you need to fill in the form, and provide photocopy of NRIC and your bank statement/passbook. Original copies of NRIC and bank statement/passbook are required for verification purpose.

For more details about this new service, please visit here.

August 14, 2010

What not to tell your insurer after an accident

Everyone knows, or should know, that you should never lie to your insurance company -- that would be fraud -- but what you say and what you do does matter.
Moreover, it could mean the difference between how much of, say, an automobile accident, is covered and what impact it will have on your premium.

"People use the wrong words unknowingly all the time," said Mark Holihan of Mark Holihan Farmer's Insurance Agency. "I just keep asking questions to find out what really happened."

Here are some things to keep in mind when dealing with your insurance company:

August 9, 2010

Amanah Saham Wawasan 2020 (ASW 2020) Declares Dividend 6.35 cents per unit

Amanah Saham Malaysia Berhad has declared a dividend of 6.35 cents per unit for Amanah Saham Wawasan 2020 (ASW 2020) for the current financial year. The income distribution will be reinvested in the form of new units and will automatically be credited into the unitholders' accounts on September 1.

As a comparison, last year's dividend declared was 6.3 cents.

July 21, 2010

First Foray into Stock Investment

Recently, I've made some investments into stock market, in particular Sunway REIT (SUNREIT) and Capitamalls Malaysia Trust (CMMT). SUNREIT IPO-ed at RM0.88 for retail investors while CMMT IPO-ed at RM0.98.

While the price movement has been very mild since the IPO, I do not expect such stocks to have high appreciation as these stocks are mainly dividend stocks.

Why do i invest in REITs:
  1. Exposure to REIT sector, apart from existing investments in equity and bond unit trust funds.
  2. High Yield: the expected dividend from these stocks of around 7% is much higher than prevailing annual fixed deposit rates.
  3. Low volatility: Since i do not have much time to monitor the stock movements, these stocks are suitable for me due to its lower volatility.
I recommend our investors to have a good look at REIT since they are high yielding investments with potential of capital appreciation. In fact, the yield for M-REIT (Malaysian REIT) is one of the highest in the region.

June 24, 2010

Five common investing mistakes to avoid

Russell Investments recently posted a list of companies joining and leaving the Russell 3000 index on June 25. In anticipation of this event, many investors have either bought the stocks of companies being added to the index or sold those being deleted from it. Big mistake.

In fact, it might be better to do the exact opposite, because stocks deleted from an index tend to have significantly higher factor-adjusted returns than index additions, and stocks added to an index have "poor long-term returns," according to a study published in the Financial Analysts Journal in 2008 by Jie Cai, an assistant professor of finance at Drexel University, and Todd Houge, a chartered financial analyst and professor of finance at the University of Iowa.

1. Don't sell stocks deleted from an index, or buy stocks added to an index

The Russell 3000 index represents about 98% of the investable U.S. equity universe, and on June 25 about 261 companies will be added to the index and about 205 companies will be deleted from it.

That fact alone shouldn't prompt investors to make buy or sell decisions, said David Zuckerman, a certified investment management analyst and chief investment officer of Zuckerman Capital Management LLC.
"For investors who own stocks that will be deleted from an index, the empirical data indicates that they should not sell their holdings," he said.

"Buying stocks that will be added to an index ahead of reconstitution is not a viable investment strategy, and the data suggest that returns may suffer if such a strategy is followed," he said. "Ultimately, decisions to buy and sell stock should be based on fundamentals and not on index reconstitution."

Buying companies based on an index's reconstitution is just one of four common mistakes investors make.

May 28, 2010

Five-star mutual funds don't live up to their past

Tim Courtney decided he'd had enough. In meeting after meeting earlier this year, he and his colleagues at Burns Advisory Group had recommended mutual funds to prospective clients, only to be hit with the same response almost every time: Why are you telling me to invest in a three-star rated fund?

That sums up the way many investors allocate money to funds -- look at products that have four- or five-star ratings from investment researcher Morningstar Inc., take that as a seal of quality, and hope for the best. Such decisions are perhaps even more common in volatile markets, when anxious investors view top-ranked funds as somehow better-equipped to handle adversity.

The trouble is that investors seem to forget that star ratings are backward-looking, based on a fund's past performance, and studies have shown the ratings have no predictive value.

"Having to get over that hurdle [of explaining that star-ratings shouldn't influence choices], every time we recommended a fund that wasn't five-star, is something we have to do time and time again," said Courtney, chief investment officer of Burns Advisory, which manages about $300 million and advises about $150 million of 401(k) assets.

May 21, 2010

Sukuk 1Malaysia

Bank Negara Malaysia has launched a government savings plan, Sukuk 1Malaysia, for Malaysians above 21 years old. This is a 3-year syariah-compliant savings plan which guarantees tax free 5% profit rate per annum, to be paid quarterly. The minimum and maximum subscription is RM1,000 and RM50,000 respectively. There will be a 0.1% admin charge payable to the agent banks when you buy the sukuk.

The key features of this savings plan is available here and the extensive FAQ is available here.

From my personal observation, Sukuk 1Malaysia is good because:
  1. Provides much higher profit rate than fixed deposit/cash fund
  2. Government guaranteed returns
  3. Can sell/transfer easily without any cost.

May 20, 2010

An antidote to volatility

Would you be interested in an all-weather portfolio that, despite hardly ever changing its composition, performs creditably in almost all market environments?
I thought so -- especially after yet another day of incredible volatility, with the Dow Jones Industrial Average reversing from a nearly 100-point gain early in the session to finish down by 115 points.

Well, consider the so-called "Permanent Portfolio" that Harry Browne recommended to his clients in the late 1970s. At the time, of course, Browne was editor of an investment newsletter called "Harry Browne's Special Reports." Several decades later, he became the Libertarian Party's candidate for president. He died in 2006.

Several of the investment books that Browne wrote during the 1970s and 1980s became bestsellers. One, "Why the Best-Laid Investment Plans Usually Go Wrong," published in 1987, was devoted in large part to introducing investors to the virtues of a diversified portfolio whose composition would stay constant year in and year out -- permanent, in other words, except for annual rebalancing.

Though Browne's idea is not new, the markets of late have led to a renewed interest on the part of many investors. First, it was the worst bear market since the Great Depression, being quickly followed by one of the strongest 12-month rallies in history. And then came the "Flash Crash" in which nearly a thousand Dow points vanished in a period of minutes.

May 18, 2010

How to profit from the sovereign debt crisis

Skidding currencies, plunging stock markets, soaring government bond yields -- if the type of debt crisis that just hit Greece heads to U.S. or other shores, investors may think the safest place for their savings is the mattress.

Yet plenty of strategists say there's a way to make money off the next phase of the sovereign debt crisis.

Strategies range from the obvious -- trimming holdings of long-term U.S. Treasurys and buying gold -- to the esoteric -- buying Brazilian reals while shorting the Czech koruna.

But the concept behind all of the approaches is that the current turmoil will last a long time.For the debt crisis, "we're in the middle innings of that game," said Max Bublitz, chief investment strategist at SCM Advisors.

Investors should prepare to wait and perhaps suffer some pain along the way, money managers say. Many suspect the U.S. economy could suffer low growth and bouts with deflation before high debt levels give rise to an upturn in interest rates.

"If you put these trades on, you have to be in it for the long term," added Russ Koesterich, head of investment strategy for scientific equities at BlackRock.

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