Stretch your Ringgit – investment & wealth management 101

Recently, i attended Yap Ming Hui talk on "Stretch your ringgit - investment & wealth management 101". He is one of Malaysia's foremost authorities on financial freedom. He is the author of five best-selling books. His latest book is Roadmap to Financial Freedom : The Ultimate Guide to Achieve Financial Freedom:

http://www.mphonline.com/books/nsearch.aspx?do=detail&pcode=9789834172442

Some of my friend able to capture few key point during his talk in Unit trust. And i would like to share with everyone who invested in Unit trust:

1) Time horizon provision

- make sure have holding power

                          Share   Property            Bond     Fix deposit

Potential return    H          H                       M          L

Volatility             H          L                        M          L

Liquidity              M          L                        M          H

The right money in the right bucket

Low risk assets – saving, current acc, fixed deposits(keep ~6months money) à liquidity (low risk low return)

Moderate risk assets – balanced investment, diversified, selected property à retirement, children’s education, wealth enhancement (consistent above average returns, limit downside risks)

High risk assets – direct stock, IPOs, single country, theme funds, lottery à high returns/thrill (high risk high return)

2) Target ROI return – align portfolio with target

Moderate risk investor targeting for 8-10% annual ROI

3) Asset allocation (diversify) avoid concentrated risk and reduce volatility

4) Best of breed funds (invest in good funds, avoid lousy funds) –choose quality investment

5) ROI optimization – optimize portfolio ROI

6) regular rebalancing – help you to buy low sell high

7) dollar cost averaging (DCA) – help you to buy more at low price

8) cost effective and efficient platform - minimize hassle and cost

one more reminder from Mr Yap: if you are not practicing 4 or 5 out of the 8 guideline, or you do not plan to practice more guideline, please do not invest in Unit trust and find other product. For sure you will lose $$.

7 Mistakes to Avoid???

Some good sharing on what i read. In a lot of ways investing is like badminton match in our recent Thomas Cup 2010. In badminton, having a killer serve or smash technique will win you a lot of points. But it does not mean you are the winner at the end of the day. It's often the player with the least mistakes who wins ;)

Below are some of the temptations:
1. Swinging for the fences - buy great company with economy moats. Do not load portfolio with risky and swinging for the fences on every pitch.
2. Believing that it's different this time - example year 2000 on semiconductor stocks.
3. Falling in love with products
4. Panicking when the market is down
5. Trying to time the market
6. Ignoring valuation
7. Relying on earning for the whole story

Know When to sell?

One of the investor asked this "what is your exit strategy?" I told him i got very good answer in one of the book i am reading. I think these are very true and i would like to share with the readers.

Ideally, we'd all hold our investments forever, but the reality is that few companies are worth holding for decades. The author point out when you shouldn't sell ;)

1. The Stock has dropped.
2. The stock has skyrocketed
3. Did you make a mistake?
4. Have the fundamentals deteriorated?
5. Has the stock risen too far above intrinsic value?
6. Is there something better you can do with the money?
7. Do you have too much money in one stock?

10 good habits for investing

China has been leading the global equity market run since March 2009. But in last month august, the Chinese market is technically leading to a correction. Should those who missed the rally stay out? or does the correction present an opportunity to buy?

Let me replay the 10 good habits for investing that i learnt in one of my trainning class a few months back.

Habit 1: Prepare to hold for long term

Habit 2: Diversify your portfolio

Habit 3: Willing to admit our mistakes

Habit 4: The Market is always wrong

Habit 5: Dare to take profits

Habit 6: When there's nothing to do, do nothing

Habit 7: Resist the temptation to speculate

Habit 8: Buy progresively

Habit 9: Willing to spend time to do research and monitor
Habit 10: Constantly upgrading our investing knowledge

i think i will continue to practise Habit 1, 2, 4 and 8. how about you? what is your strategy? are you in or out?