6 Useful Reminders From Benjamin Graham

I have been reading Intelligent Investor by Benjamin Graham, as many of you have as well. Very often when we read something, we forget them if we do not take down notes. I found these 6 Principles from Benjamin Graham extremely applicable and timeless, thus the sharing!

1) Not just a ticker symbol

“A stock is not just a ticker symbol, it is an ownership interest in an actual business, with an underlying value that does not depend on its share price.”

Especially for traders, this would serve as a good reminder that it’s not just a symbol (eg. APPL, BABA, GOOG). Every listing on the stock exchange is a business and it has an underlying value to it. (Balance Sheet, Income Statements, etc.) I used to be an active trader and I too fell prey to this point. It didn’t matter to me what company it was, because my mindset was to grab my profits and run. What happens if your Technical Analysis was wrong and you lose instead of profiting then? While it works for some, it’s definitely not the best way to start out your investment journey because more often than not, you lose from capital loss and commissions unless you have a trade plan in place, and deep pockets for learning.

2) The market is a pendulum

“The market is a pendulum that forever swings between unsustainable optimism and unjustified pessimism. The Intelligent Investor is a realist who sells to optimists and buys from pessimists.”

Mr. Market will present to you the same stock at different prices. It’s up to you to selectively pick at what price you want to buy it at. If you knew the value of the stock was around $5, would you pay $10 for it or $1 for it? The price you buy it at typically reflects the amount of patience you have. You’ll never know how low a stock can go or how high it can get but if there’s something you can be somewhat certain. The fair value of the company. Use it to your advantage, as a benchmark to compare against the price you are paying! Is it justifiable?

3) Price is what you pay, value is what you get

“The future value of every investment is a function of its present price. The higher the price you pay, the lower your return will be.”

If you decide to sell a stock at $10 no matter what price you buy it at, your entry price will determine your return. If you bought at $1, your returns would be 1000%. If you bought it at $5, your returns will be 100%. Mr. Market doesn’t care at what price you buy his stocks, so buy it cheaply! Buy it below the true worth, and he still doesn’t even care! So don’t feel bad to buy a stock at a huge discount!

4) The one risk you can’t eliminate

“No matter how careful you are, the one risk no investor can ever eliminate is the risk of being wrong.”

Even the greatest investor himself, Warren Buffett, made mistakes. What makes you think you won’t? If you can’t eliminate the risk, mitigate it! Only by insisting on ‘margin of safety’, no matter how exciting an investment may be, can you reduce the damage of your error. Say you bought a stock at $0.60 thinking it was worth $1, but in fact it’s only worth $0.80 (40% margin of safety in this case). Even if you were wrong, when it goes to $0.80 you’ll still profit. Assume you bought at $1, and market decides to be perfectly efficient at it’s pricing, reflecting it’s true value of $0.80, you’ll be facing with a 20% loss.

5) Be a critical thinker

“Become a critical thinker who takes no Wall Street ‘facts’ by faith, and invest with patient confidence, you can take steady advantage of even the worst bear markets.”

The secret to your financial success is inside yourself. Don’t simply accept what is presented to you, spend the time to dig into the figures, to test the ‘facts’. Don’t be too gullible and take everything with a pinch of salt! Engage in your own study despite being bombarded with ‘facts’ or hot tips.

6) See what others can’t

“Obvious prospects for physical growth in a business do not translate into obvious profits for investors.”

While it seems easy to foresee which industry will grow the fastest, that foresight has no real value if most of the other investors are already expecting the same thing! The growth would have been priced in before the news is out! Therefore, it’s not simply choosing a growing industry. Can you see it before the majority sees it? (Think contrarian) It’s usually easier to find these industries when you approach the industries with a contrarian thinking, loving an industry that everyone seems to dislike. With patience, it could pay off handsomely because of the sell off!

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How does your behaviour sharpen your stock investment skills?

Investment books often urge readers to do extensive research to identify megatrends such as social and cultural shifts that could make a potentially big difference in investing decisions. However, the real answer is never simple. The ideal way to value anything, including company shares, would be to plug yourself entirely into the real world, which means shaping your daily behaviours such that it enables you to maximise your exposure and learning about almost everything.

Given the increasing connectedness of the world and the rapid explosion of information, learning is no longer confined to any one medium or source. Therefore, keeping an open heart and mind is in reality the best bet to a lucid understanding of the dynamic and complex interactions across companies, industries and countries.

The flowchart below illustrates the types of personal behaviours that may help individuals to hone their stock investment skills.

Click to enlarge:

investment

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Best Resources For Retirement Planning In Singapore (These Are Free Too)

In 2014, a survey by DBS bank showed that over 76% of the participants said that their key long-term financial goal is to have sufficient for retirement. Why are these people not ready? Perhaps time and awareness are the factors.

Majority of people think that saving for retirement can wait until you are more stable later on in life. Some may get caught up with their spending patterns and life events such as celebrating weddings and raising children.

There is never a “great” time to start planning for your retirement. But, there are good advantages if you started early. However, if you are starting late today then, you will have to work harder to grow your retirement fund. Moreover, you cannot afford to lose money anymore so; you must avoid investments with higher risks.

After shedding a light into the importance of retirement planning earlier on, here are the best yet free resources for retiring in Singapore (aside from the fantastic Money Digest) :

1. RETIREMENT CALCULATOR BY AVIVA

Aviva is a British multinational insurance company that provides services across 16 countries. Since they have a branch in Singapore, their website features a retirement calculator that tells you how much money you need to live comfortably in your golden years. Also, it takes expected inflation into account. Personally, I found Aviva’s Retirement Calculator as easy and user-friendly but I still want to get more information out of it.

Get it here.

2. CPF RETIREMENT SAVINGS INTERACTIVE CALCULATOR

As I said, I seek more functionality from the above retirement calculator. Which is why I continued my search. In my conquest I found a comprehensive retirement calculator that is validated and created by Central Provident Fund (CPF).

CPF is a social security savings plan that has provided the working Singaporeans with confidence and a sense of security for their retirement years. A part from this, they offer online guides and resources such as the Retirement Savings Interactive Calculator. This calculator allows you to assign values for your current age, desired retirement age, desired retirement income, return of investment, and so on. The results will show the number of years you need to save and the cumulative savings necessary to age gracefully. Furthermore, it provides charts and graphs to enable you to understand the numbers more.

Get it here.

3. VANGUARD RETIREMENT INSIGHTS

A premier international website for retirement information is owned by the Vanguard Group – an American investment company. Vanguard’s retirement resources are divided into three categories namely: saving for retirement, nearing retirement, and living in retirement. They provide tips, guidance, and advice using simple terms that would not require a genius to understand. Additionally, it offers retirement planning tools such as creating a realistic retirement budget.

Browse it here. 

4. HSBC SINGAPORE RETIREMENT PLANNING

Going local, you may browse through the articles by HSBC Singapore. These articles feature detailed information about the future retirees in Singapore, 8 steps to have a confident retirement, and a guide to retirement planning. Also, it includes localized researched statistics, charts, tables, and graphs. But, I cannot deny the fact that it advertises HSBC’s own retirement services too.

Browse it here.

 

Image Credits: pixabay.com (License: CC0 Public Domain)

Image Credits: pixabay.com (License: CC0 Public Domain)

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A Safer Way to Shop Online

MatchMove Featured

You can’t deny that shopping is one of Singapore’s favourite pastimes. With online retail giants setting up basecamp on our shores including the likes of Zalora, Lazada and Rakuten among others, consumers are spoiled for choice when it comes to the goods and services we can purchase from the comfort of our own homes.

But are you aware of the security risks involved when using your credit or debit card to shop online?

 

Getting the facts

MatchMove 1Singapore’s online shopping industry is projected to reach US$3.45 billion in 2015. While this is only a tiny fraction of the US$525 billion for the entire Asia Pacific region, the average Singaporean spends around US$1,800 annually. The yearly increase in online spending is also a healthy sign of the rapidly growing popularity of e-commerce in Singapore.

However, in tandem with the meteoric rise of online shopping in Asia over the last few years, authorities have also reported a surge in online scams and credit card fraud. Last year, the Monetary Authority of Singapore claimed that businesses lost an estimated US$1.6 billion due to cybercrimes, a marginal sum when compared to the global losses of over US$400 billion.

But it has never happened to me before.. so I’m safe, right?

Well, not exactly. Do you know whether the website you are buying from is compliant with the Payment Card Industry Data Security Standard (PCI DSS)? Have you ever let a website save your credit card information for the sake of convenience and a faster checkout?

In 2014, less than a third (28.6%) of online merchants managed to remain fully PCI compliant less than a year after getting their certification. This means that even though a website’s security may have been validated before, this doesn’t mean their current business processes or newly adopted systems are PCI compliant.

One of the largest global online retailers, eBay, fell victim to a security breach last year when a handful of their employee accounts were compromised and used to gain access to their customer database. Just last month, Google found a vulnerability in the Android operating system that allows hackers to access the phone’s data remotely via a multimedia message.

With the rise in cybercrime, consumers need to find a way to protect themselves when shopping online.

Preventing online fraud

MatchMove 2You can take precautionary measures to minimise the risk of fraud, but there is only one guaranteed way to prevent it – that is to stop using your credit or debit card to shop online altogether. Sounds impossible? Well, there are many other methods you can pay for goods online that don’t necessarily require you to use your credit card.

MatchMove Pay is one such solution that lets consumers shop online using a virtual MasterCard or American Express® Virtual Pay prepaid card. The concept of a prepaid credit card is commonplace in the USA but seldom talked about here in Singapore. MatchMove Pay takes it one step further by enabling anyone to get their own virtual prepaid card online or on mobile instantly.

How does it work?

Consumers top-up their MatchMove card only when they have something to buy. This can be done via secured top-up channels including the ATM, your bank’s online banking website and others. After adding funds, simply use the prepaid card to checkout your online purchases. It’s safer than a debit card because it is not linked to your bank account and works just like any credit card.

MatchMove 3

So even if a hacker manages to gain access to your MatchMove card details, they wouldn’t be able to use it without any funds. What’s more, MatchMove provides an additional layer of security through a dynamic card verification code (CVC) feature which generates a unique code every time you checkout a purchase.

There are also other benefits for using MatchMove Pay including monthly cash rebates of up to 50%, attractive lifestyle and travel offers, and a soon-to-be-launched loyalty rewards programme.

Is MatchMove reliable?

The company is invested in by Japan’s third largest credit card issuer, Credit Saison, an affiliate of the Mizuho Financial Group. MatchMove is also an official card issuer for MasterCard and American Express® and work closely with these financial institution to ensure the customer’s lifestyle needs and security are well taken care of. But don’t just take our word for it, find out what MatchMove users have to say:

MatchMove 4

Register Now to Receive Free $5 Credit!

Signup for a free MatchMove MasterCard wallet by clicking on this link to receive a $5 credit in your account. Limited to the first 100 Money Digest readers who register before 31 August 2015. All eligible signups will receive the $5 credit directly into your MatchMove wallet account by 7 September 2015.

(This article is brought to you by MatchMove Singapore)

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Things You Should Not Be Spending Too Much On

As all the expenses adult life throws at you outpour, it can be difficult to manage your finances regardless of how much you make. One of the best ways to improve your situation is to trim your daily costs. Figure out what exactly you are paying for by knowing which things you are spending too much on.

1. FOOD

If you have been eating restaurant food almost everyday because you do not cook much then, you really need to cutback on your food expenses. Here are some viable suggestions:

a. If eating out is unavoidable, you must eat smart by making healthier and cheaper choices in just 5 ways.

b. When you are shopping and cooking at home, think about these awesome veggies and fruit hacks that will help you to be healthy and to save more.

c. Just because the food is deemed or claimed as healthy – that does not mean it always is. For example, most diet often has enough protein intakes already but some people still add the protein powder. By doing so, the person is at risk of excess protein, which is actually bad for the health. When your normal eating diet is protein sufficient then, save on expensive medical bills by skipping the protein powder.

2. HANDPHONE INSURANCE

Yes! It is better safe than sorry but some of the Smartphone mishaps can be fixed or even prevented for less. Spare yourself some money and time by subtracting handphone insurance and Smartphone repair to your expenses. Here are some viable suggestions:

a. Instead of paying 3-4 months of handphone insurance because you are scared of water damage, a well-reviewed waterproof case will only cost you S$21.

b. With continued use; your charger may not fit as well into the port as it did before. The simple way to fix it is to use a sharp toothpick to remove the lint and dirt from the port. Clean the rest of your phone by using cotton swab/ cotton buds/ cotton tips with drops of distilled water on it.

c. Overtime, you may experience hearing an inferior sound when you plug the earphones into the “jack” (usually on the upper-right hand corner of the phone). To fix this audio quality, stick a cotton swab into the jack and use it to clear out any dirt.

3. GREETING CARDS

I know everyone would agree that those stores bought greeting cards are too pricey for its materials. A minimum of S$4 per card (i.e., price of a common brand) for every occasion and for every special someone can add to your expenses fast. Do not get me started with the price of famed Hallmark cards!

A frugal alternative is to print free greeting cards that are available online. I personally recommend the free printable cards, invitations, and envelopes from greetingsisland.com.

4. DIAMOND RINGS

Since wedding and engagement are events that happen once in a lifetime, people often rationalize their spending for the diamond rings. Jewelry, in general, is an expensive category in itself. Expensive jewelry plus an emotional event can result to overspending. If you try to spend less, you will feel guilty and cheap. Fortunately, you can negotiate with the prices by knowing the 4 C’s namely carat, clarity, color, and cut.

Image Credits: pixabay.com (License: CC0 Public Domain)

Image Credits: pixabay.com (License: CC0 Public Domain)

Now, you may ask the local jeweler if he or she is willing to change the setting of the ring for a discount or even for free. That will surely lower down the overall amount.

Sources: 1 & 2

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