Tuesday, March 20, 2012

The Ultimate Gangbang

During the 2008 - 2009 financial crisis, stock market crashed throughout the world and triggered the collapse of several big US banks. Back then, even the Singapore government had to make the unprecedent move of guaranteeing all bank deposits till end 2010 to prevent bank runs. There were mayhems and carnages everywhere. There were also opportunities. There was one point I was very tempted to purchase Citi's shares, which was trading at USD$1.00 through my Philips Securities POEMS account. Citi's shares was trading at rock bottom and anything below USD$1.00, chances of it being nationalised by the US government would be very high. I did not proceed ahead to buy the shares as I thought the risk would be too much for me to take. Of course Citi survived the crisis and its stock subsequently rised.

The "Great Recession" presented many good opportunities to make big bucks in the stock market but I was unable to fully utilize my Opportunity Fund back then as I was saving up for my wedding. On looking back, its as though I was invited to an orgy and unable to join in the party due to erectile dysfunctional. What a shame! The 2008-2009 financial crisis was truely the ultimate gangbang for smart investors to make their fortunes. Forget about making money during the bull runs, for wealth can most likely be made during market crashes.

Magically yours

Saturday, March 17, 2012

How to be rich in Singapore

While we may not have investment acumen like Warren Buffett, we can still become rich through buying distressed assets in Singapore. There are always bargain around us and its only a matter of patience for the right opportunity to come. As I mentioned in my previous posts, the best time to "strike" is when the economy takes its periodical dips.

Some of you might remember that during the mid-1980s when Singapore economy went through a very sharp downturn, some condominiums in the posh Balmoral areas were selling at $170 per square foot. In two years, the prices doubled and then in 2008, some units could command around $2000 psf. As the world financial market became so globalized, the sudden need for fund managers to sell institution's assets created good opportunity for those with financial means and knowledge to purchase assets at good bargain.

Many of us often hear stories of colleagues or friends who manage to pick up such good buys but if we make the conscientious effort to keep ourselves well informed and have the money to pump in when bargains present themselves, we can just be as successful. As the saying goes, the time to buy is when blood is on the streets!

Magically yours.

Monday, March 12, 2012

Importance of Emergency Fund

In my previous posts, I have written about the need for Opportunity Fund, which is meant for investing purposes. In life, we should also consider building up an Emergency Fund, which is a reasonable amount of money set aside for rainy days. Many people live their lives as if nothing bad will ever happen to them. Its as if buying a car and not buying an insurance, expecting no incidents or accidents. Such a thinking is so unrealistic as we know that life has its share of downturns. Without an emergency fund, any setback might potentially spiral into serious financial problem for you and your family.

An Emergency Fund is considered more important than Opportunity Fund as the former is a safety net and is the shock absorber of life. Without Emergency Fund as your cash cushion, you are taking a gamble. I believe we should build up an emergency fund as soon as possible because the fund gives us time to adjust without drastically altering our lifestyles.

Although many people are convinced that an emergency fund is necessary, many still procrastinate building up such fund. Common complaint is that the money would be sitting in the bank and not fully utilized. Majority of the people also think that they can borrow against credit cards or credit lines. If you are gainfully employed, there is no doubt that you can easily borrow money from the bank. However, if you are retrenched, getting access to credit is going to be difficult.

How much to save?
The perennial question most people ask is how much do we need to save for emergency fund in order to effectively see through a major emergency or crisis. My thinking is that if you are single and have no dependents, S$10,000 or 4 months of your salary is sufficient for a start. Of course the more you save, the more you are cushioned against the misfortunes of life. For those with families, $50,000 or a six-month buffer should be the minimum. This will provides a reasonable safety margin for you and your loved ones. However, if you have a lot of dependants (kids and parents) or if any of your dependants is in high risk health category, then of course you need to save more. Another aspect you need to consider is how quickly you can find alternative employment. For example if you are trained as a nurse and as nurse are in big demand in Singapore, then your financial safety margin requirement is low. On the other hand, if you have a specialist job such as an engineer in a wafer fabrication plant in Singapore, there may not be another similar job waiting for you if you are retrenched. The key benefit of a job safety margin is that it gives you time to look for a job without forcing you to settle for something less. My point is: if your job is really that specialized and you are the sole breadwinner, your emergency fund should be enough to last you for at least 9 months.

Safety and protection
Your concerns for your emergency fund should be on the access and safety net it provides. Don't worry about returns, inflation and exchange rates as you must remember the purpose of this fund is not for investment purposes. Its purpose is not to generate returns but to provide insurance to protect you against life uncertainties. Your ability to build up such fund depends on your discipline in adding to it on regular basis, and your ability to resist spending it for non-emergencies. There is no secret to saving and neither do you need special strategy. The key is to start saving right away and stick to it resolutely.

Magically yours

Sunday, March 11, 2012

Investment Notebook: Every crisis is an investment opportunity

Have you ever paused to wonder why Singapore has one of the highest concentration of millionaires in the world? There are so many cash-rich Singaporeans out there that even during the recent downturn,  many of them were seen snapping up private properties like hot cakes, despite the sky-high prices. The reason is simple: many of them made big money from the stock market during previous financial crisis. It may sound odd, but every crisis is an opportunity for retail investors to make big money because that is the time when stock values dropped below their intrinsic values.

Most investors, especially the novice ones, tend to panic sell during stock market crashes because of the crisis in confidence. This is a typical "herd mentality" mistake that most investors tend to make and because of this, they tend to "buy high, sell low", instead of "buy low, sell high". The reason why most investors committed such mistake is because many of them are not fully aware of how the market works.

The stock market consist of three groups of players, namely Institutional Investors, Rich Investors and Retail Investors. Institutional Investors are players who invest on behalf of investment/insurance companies. They are the ones who usually flow huge amount of "hot money" in/out of the financial markets. Rich Investors are the "big boys" and Retail Investors refer to the small fries. Usually at the first sign of economic problem, the Institutional Investors would pull out funds from the financial markets, resulting in the first wave of wealth destruction in the stock market. Rich Investors would tend to offload their investment holdings to take in profits, because they had bought the stocks cheaply in the previous crisis. Retail Investors are normally the last to react to the unfolding crisis and seeing their investment value free fall, they tend to panic sell irrationally, resulting in huge losses.

Not many people realizes that no crisis lasts forever and that every stock market crash is an invaluable window opportunity to make money. There are more and more Singaporeans who are aware of this and hence made big money during the last crisis. But there are also novice investors who always bought at the wrong times. Are you one of them?

Magically yours.

Friday, March 9, 2012

Who will work for the rich?

In my previous post, I advocated the teachings of financial, professional and general knowledge to our kids. One of my readers then questioned "who will work for the rich?"

I suppose there is a mistaken belief among Singaporeans that if we exposed our child to the financial world or encouraged them to be entrepreneurs when they are young, they will all become or aspire to become businessmen when they grew up. The truth is, not all of us have the attributes and aptitudes to be a successful entrepreneurs. Out of ten players, possibly only one will emerge as winner and went on to become successful entrepreneur. Its a cruel reality but then again this is the rule of the game. We have to accept the fact that entrepreneurship is a no-sure win venture and if you messed up royally, you could be financially defeated.

So the question now is whether is it right for us to instill financial, entrepreneurship and investment values in children when they are still kids. My answer is still yes. Why? Because financial ignorance is NOT bliss, it is a disaster. As Asian, when we were children, we were told we should not be involved in discussions about money and saving money is the most important thing you can do. Our parents or schools do not explain the concepts of managing debts, budgeting, investing, retirement planning, passive incomes and entrepreneurship. So in the end, most of us learnt these important life skills through the hard way.

Exposing our child to money lessons will give him a headstart in life and prepare him to make informed financial decisions. The era of getting a good degree and making good money as an employee in MNC companies is long gone. In this day and age, we have to make ensure our next generation is equipped with the right skill and knowledge to be a financial responsible person.

Magically yours.

Monday, March 5, 2012

The truth about money

Last month, our Education Minister commented that employers believe Singapore students lack drive and the willingness to try new things to succeed. I chuckled when I finished reading the article. Look, it doesn’t take a Singaporean genius to figure out that our education system has been result-driven and highly competitive for the past three decades. Everyone in Singapore knows for a long time that the education system is all about ranking, examination results and streaming. Obviously, to excel academically in such merciless system, one has to put in tremendous amount of effort and study real hard (unless of course if you are a genius). Henceforth, there is a lack of drive among our students to explore new ideas and new things.

So what is the point of telling Singaporean an obvious fact that has been happening for the past decades? What is the Ministry of Education going to do? Just like many Singaporean in their thirties, I went through the education system and was taught to get a job, buy a house and save money for my retirement fund. At the end of the day, I have been asking myself, has the Singapore education provided me adequate knowledge to succeed in life?

My answer to that is a definite no. The Singapore education is good at forcing students to memorize information and poor at imparting critical knowledge and skills that are of relevant to our present society. I studied at a SAP secondary school and graduated from a top 5 junior college. I remember having to memorize countless Chinese, Geography, Chemistry and History textbooks in order to achieve respectable results. After working for so many years, I didn’t even put any of what I learnt in school into practice and I realized they were not useful to me at all. Important life skills like how to budget, how to do financial planning, how to invest and how to do business plan were not taught at school. I was brought up to be a good employee destined to be trapped in a rat race. In a nutshell, schools train me to be an employee, not rich.

If I have my way, I would design the education system to impart Financial Knowledge, Professional Knowledge and General Knowledge to our students. Students are the future of our nation and they are never too young to learn the hard truth of money. The concept of saving and making money should be inculcated in them during secondary school. In this new economy, we have to train our youth to think innovatively, encourage them to start up their business and impart basic financial knowledge.

Magically yours.

Sunday, March 4, 2012

Learn how to sell

When I just started working as a manufacturing engineer in the aerospace sector, I always thought that my department (operations) was the most important department in my company. This was because I felt that without engineers solving problems in the production lines, the company would not be able to function as per normal. It was only years later that I realized that my thinking was flawed. The most important department in every private organization has to be the sales department. Every profit-driven company exists because of sales. Without sales, there will be no company.

The problem with sales is that most people view it in a derogatory context, like a pushy insurance salesman or a telemarketer who interrupts your meetings. Most of us do not want to appear like those people, so we either sell passively (inform family members and hope they spread the word) or skip the selling exercise entirely. The result is half-baked effort and wasted time and money put toward building a business concept that will not come to fruition.

It is extremely hard for an inventor or entrepreneur to succeed if you do not change this mind-set because every type of business requires sales. Whether its selling an insurance policy or pitching your business ideas to potential investors, you must be  able to talk confidently about what you are offering in order to get people interested in your product or ideas. So if you want to be successful in your business, you have to overcome the sales stigma and learn how to sell.

Magically yours.

Friday, March 2, 2012

The one million dollar question

If you were given a choice between having $1 million and gaining the ability to make multi-millions, which one would you choose? Many people, including me, would normally choose the former. After all, its human nature to dream of being rich, not having to work and to indulge ourselves. But look, how long can the million dollar lasts? Especially in Singapore, where the cost of living is so high. With a million dollar, you can probably pay off your car loan, housing loan and afford not to work for about 5 years. The million dollar probably would not be able to last you a lifetime. At least not in Singapore.

Many years ago, when I was studying in NUS, one of my school mate confided in me how much hated his father, who had struck the lottery big time TWICE. I wondered why and he told me that his father quitted his job, spent all his prize money within a couple of years and became a drunkard. His mother, who used to be a housewife, ironically has to look for a job to support the family. This lesson made me realized that even if you are blessed with a lot of money, if you don't have the financial discipline and knowledge, you will still be financially defeated at the end of the day.

So always make sure you have good financial discipline. Otherwise, even if you have lots of money, it will be gone in a matter of time.