Financial Planning

It is only in a crisis that real pearls and diamonds emerged.  Companies that can stand the slow down in the economy, will be able to take advantage of the impending recovery.  During this economic crisis, companies that are diamonds and pearls are selling at a bargain.  It is for the serious investors to take advantage of the value by investing into these companies.  As they say, every cloud has its silver lining.  Once the storm is over, these jewels will be revalue upwards and investor with patience and courage to take action now will benefit most from it.  This is how smart investors make the most money from every crisis.  For those who do not have the knowledge to pick these diamonds and pearls, let the professional handle them.  Just invest in top unit trust funds with a good record and let the fund managers do the job.   I am sure in three years time you shall be happily rewarded.

Do not let this opportunity slip away.  Do not be like those who are so ignorant that they do not even know what happened when smart investors are laughing to the bank.  The time is now! Happy investing!

To be able to make money in stock, one has to be educated.  Financial knowledge in terms of fundamental analysis and technical analysis is a must.  I am a strong believer of both.  One without the other would increase the chances of failure in this game.

90% of the investors make money investing in stock.  Wrong!  It is 90% of the investors lost money in stock investment.  Most of the investors put money in a stock without doing the proper due diligence.  A proper due diligence requires knowledge, time and money.  Knowledge to analyze the stocks.  Time and effort must be put in for detail analysis.  Money is required to acquire information and facts.  So to be a winning investor is not easy.  If you are not ready to put in these three ingredients into selecting a stock to invest, I would advise you to leave the money in the bank.

Definitely, Hope is not the answer.

The stock market has been up for the last few months and have created a lot of excitement.  I was told even the people using PTPTN loans to buys cheap stocks in the market.  Pity them, cheap do not equate to value.  They are likely to get burn.  We learning from experience would be a painful lesson.  I hope they can be much wiser and leave the investments in the hands of tried and tested fund managers in unit trust companies.  Remember this one.  ‘Tiger woods only plays golf’.  Only a small percentage of ppl are very successful in what they do. i always remember this phrase.  So think twice before putting your money in stock at this time.  Market is over-valued.

What is wealth?  Some define it as having a lot of money, a big house, many big cars, etc.  Robert Kiyosaki define wealth as “The number of days that you can survive forward if you stop work today”.  With this in mind, wealth would means different things to different people.  If we have more cash inflow as compared to cash outflow, we will be considered wealthy.  So in order to be wealthy, we should make sure our cash inflow exceed our cash outflow by being realistic about things.  Giving in to our needs while controlling our wants.  We should also practice delayed gratification.  Delaying our wants until we can have the cash to pay for it.

Some people work very hard, get promoted and compensated by big salary.  As they say, ‘the bigger the salary the bigger the bucket’.  However they forget to control their cash outflow.  They start to buy big house, big cars, buy expensive clothes, live a lifestyle of the rich and famous.  Their cash outflow also goes up.  Spending tomorrow’s money today is the common theme.  Credit cards and personal loan are their best friends.  So some of them ended up being in debts and their money is depleted by their lifestyle.  Worst still if their income is derive from an exchange of their time, a limited resource.  We should take care of our health because we are exchanging our time for money.  If our health is affected, our job will be at stake and our cash inflow would be in question.  This is the reason why 5% of us have started creating multiple sources of income (MSI), mainly using our earned money to make more money.  Not working for money but making money work for us.  We use the money to invest in business, stocks and properties.  If we are not doing this, we are not doing justice to our hard earn money.

Once we are not stressed up on the need for more cash inflow, we will automatically live a happier life.

This is an excerpt of  YM Tunku Dato’ Yaacob Tunku Tan Sri Abdullah, President of FMUTM speech on 31 October 2008.  This article is interesting as our action normally goes against logic.

Warren Buffet, the investment guru has a wonderful way of explaining this simple strategy.  Everyone knows the golden rule of making money and that is to “Buy Low and Sell High”.  But how many people know the true secret of investing and that is to answer the key question of “WHEN?- When to buy and when to sell?”  Warren Buffet addresses this “when” question by asking investors to identify their long-term goals.  Depending on your stage in life Warren Buffet identifies two type of people-people whose long-term goal should be to Invest and people whose long-term goal should be to “Dis-invest” (which is the opposite of invest-that is to sell).  Deciding what your long-term goal should be, can in a simplistic way be determined by your age.

For example if I am still reasonably young and earning an income from my job or profession my long-term goal should be as a net Investor.  I should be regularly and steadily investing the money that I have earned from work so that money can work for me to earn more money.

However if I am much older and retired and no longer earning an income from work I will be surviving on my savings or investments. I should be steadily selling down my investments and using the proceeds to enjoy my golden years.  At that stage in life I will enter my Dis-investor mode of my life cycle.

When my  long-term goal is as a Dis-investor I should be happy when stock markets are high for I will be selling high.  Short-term market weakness should not be a concern for me for my Dis-investment mode is a long-term strategy and I know in the long-term market always go up again and I can continue to Dis-invest into a rising market.

Unfortunately most people who have not learn the investment secret of Warren Buffet react the other way.  When they are supposed to be Investors they get excited and happy when markets go up.  They are happy to buy expensive.  Crazy! And that’s because they have been conditioned to have a short-term mentality.  Long-term investors should be happy when markets are DOWN …. Not UP!

But we have to realise that our strategy is long-term.  When we are in our forties and in our Investor-mode short-term markets will go up and down.  We should invest regularly during this period and be happy when markets are down for we will be investing cheaply.  We might even be tempted to buy a little more.

When we are in our seventies and in our Dis-investor mode short-term markets will still be going up and down.  You can be sure of that.  We should Dis-invest regularly during this period and be happy when markets are up for we will be Dis-investing expensively.  We might even want to sell a little more.

This market slump is the ideal way for investors to buy cheap.  In this market Investors hsould invest more and Dis-investors should sell less.  When the markets turn around and go up Investors should buy less and Dis-investors should sell more.