Jean’s

Upon reading my last article on effective interest rate , a close friend of mine asks me a question: -

If Mr. A has RM 100,000 cash, should he: -

a)    Pay off his car loan of RM 100,000, with interest rate of 2% p.a. for 5 years; or

b)   Continue with his car loan, and save the RM100,000 in Fixed Deposit (FD), with interest of 3.75% p.a.,

This is a common question when one reaches a stage in which they have some money left over and wondering whether they should use the money now earmarked for savings to pay off their debt faster. 

More →

A friend of mine received a call from a banker last week, offering him a low interest personal loan of RM 34,000 at 5.99% per year, with 5 years repayment terms.  The idea put forth to him was that he could use this RM 34,000 to repay part of his current RM 200,000 home loan, which had a 20 year tenure, which ultimately should help in saving his home loan interest. The reasoning was that the RM 34k if settled with the personal loan, would save substantial interests if it were continued to be paid over 20 years. 

With his current home loan interest of 6.5% p.a., he was quite moved by the offer, as from the initial sound of it, the personal loan of 5.99% might very well help to reduce the interest expenses by 0.59% p.a. for the next 5 years. 

Is that so?  

He came to me for an advice and I told him that he would not be saving any interest, but in fact would be paying much higher interest than he thought!!!

More →

Ok. Here come another common misconception of Unit Trust Investments, or perhaps I can say a commonly used selling line of fellow consultants – ‘invest in this fund because it is distributing dividend by month end’.

In fact, I just met up with a potential Public Mutual Gold investor whom is well pleased with his existing consultant mainly because the consultant offers the service of advising him on which fund to invest in based on the dividend distributing timing. I must mention that this investor’s investment objective is to withdraw the dividend as his pocket money.

So, is this a good idea?  

Well, it surely is a good selling line - “Hey, you put in RM 10k today, you will make RM1k from dividend distribution (assuming a 10% distribution declared) by month end. “ Sound great!

But the point is, is it financially beneficial to the investors by advising them to invest into a fund just days before the distribution declared? 

More →

Often we hear investors favoring one fund over the other simply because of its cheaper price. They think that a cheaper fund has a greater potential for capital appreciation.

Unfortunately, this is a misconception.

One should not confuse its actual value based only on the price of shares and unit trust.  For shares investment, the price of a particular share may reflect it value, especially when considering certain other factors like its PE ratio, etc. For e.g., for Genting shares, investing at RM 5 is of better value than at RM 8.  However, for unit trust investment, the price of a unit trust at a particular time does not indicate relative value in the same way as stocks.

Perhaps we should start off with looking at how the price of a unit trust is derived. The price of a unit trust is normally known as NAV (Net Asset Value). Technically speaking, it is defined as the market value of the unit trust’s total assets, minus liability/expenses, and divided by the number of units issued. We can see how NAV is calculated using a simple example: -

More →

I was reading a fellow blogger’s concern on his falling unit trust investment value.

I can understand how disappointed he would have felt.

Last year, while the market was vibrant and at her all time high, was a great year for investments. Due to most bourses hitting all time highs, unit trust companies delivered very good results which boosted the excitement levels of investors. Many investors may have made quick money from unit trust investments last year. The side effect? - a great level of optimism brings forth a greater level of disappointment.

More so, such optimism and excitement has caused many investors to lose sight on the underlying principal of unit trust investments.

So, why not stay calm and re-look the objective of us choosing unit trust investment in the first place: - More →

I was reading a report from Singapore, dated 5 June 08: -

“ Malaysia’s inflation is expected to rise to 10- year high of 4.7 percent in 2008, after the government sharply raised fuel prices. 

Economists expect Malaysia’s central bank to raise its benchmark interest rate to 4 percent from 3.5 percent currently, by end of the year.

Central bank Governor, Zeti Akhtar Aziz, said on Thursday that energy price rises meant inflation would average 4.2% in 2008 and Prime Minister Abdullar Ahmad Badawi had estimated inflation in a range of 4 and 5 percent this year. An inflation rate of between 4 and 5 percent would be the highest since 5.3 registered in 1998.

Bank of America expects the central bank to start its tightening campaign in July, when it is likely to raise rates by 25 basis points, follow by more rate rises later this year. “

(Further reading can be obtained from http://uk.reuters.com/article/oilRpt/idUKSP16227220080605) More →

Well, I have been in “saving mood” lately. How could I not? We just had a petrol hike of 41% on 5 June 08, and now am preparing to have our electricity tariff up by 25% wef 1 July 08. To fill in the gap, I was just informed days ago that Hire Purchase interest will be adjusted upward wef 23 June 08. 

While I am trying to save, here come my two lovely kids’ endless requests   of toys whenever we step foot in shopping malls. Can’t blame them, they are not told that money does not fall from the sky!

So this thought struck me – hey, perhaps I should teach them what money is all about and instill the principles of good money management in them. I am sure one of the greatest gifts parents can give their children is the protection of sound financial habits for life – learning how to manage money, instead of just getting it and spending it all at once without a thought for tomorrow.

I still remember the day when my parents hand over to me my savings account book. I can’t remember how much I had then, but I do remember I have all of them spent in a short period of time, in things that were not required. So if I were to look back now, I wished I had started investing earlier? If I had put the money in Unit Trust then, I would have the money returned over 10 fold now.

Ok, this is my plan to educate my kids, so that they won’t be as “silly” as I was

More →

Today is Father’s day.

My dad has always been a role model to me, in many ways. His learning spirit; the way he treats his family and friends. His positive spirit even when he almost lost his life due to a critical illness in year 2006. I am blessed to have a dad like him and I have much to thank to him for all that he has taught me, not by words, but by his life..

The following article reminded me the way my dad has always taught us …

More →

Came across this article and thought it makes perfect sense and would like to share with you..

The Test Results Are In…

A good friend of ours recently told us a true story that made us laugh, but also made us think.

She started off by telling us about a friend of hers—who we’ll call Nate. Nate could never find the motivation to finish what he started. He also struggled to start new tasks. He was constantly complaining about his lack of effort and he was convinced that there was something physically wrong with him.

Finally, our friend became so frustrated she told him to get check-up with a doctor. After some arguing, Nate finally agreed to book an appointment.

During the check-up, the doctor drilled question after question trying to dig deep and discover what this “problem” was. Nate underwent a thorough examination and a series of tests including some blood work. Remember, this is a true story.

More →

We had the price of our petrol hike up as high as 40% yesterday, and we will expect an increase of electricity tariff around 25%. Many more cost rises to come.

Malaysian Trade Union Congress is urging that private sector employers to give their workers a salary increase up to 15% or cost of living allowance in view of the higher price of petrol and diesel. The point is can the private sector afford it? They too are looking at ever-rising

Instead of looking at your employers to save you from this ever rising cost of living, perhaps we have to learn how to “save” ourselves:-

More →