Investment Archives | Page 19 of 19

The Greatest Investment Of Your Lifetime

When considering the topic of ‘Investment’, we almost always think about Equities, Bonds or Forex first. We hear questions like “What stock is good?” or “How should I begin investing?” The growing interest in investment here in Singapore is definitely growing and we can begin to see a new generation of investors who are more daring and knowledgeable than their parents. We all have heard of stories about how other people’s parents or even our parents had their hands burnt in the past due to buying stocks or mutual funds. This has left a bad impression on many of the kids of my generation and have grown to become interested, but afraid of the risk of losing their hard-earned money as well.

Every once in awhile, we hear people talking about how this stock is going to skyrocket or that stock is going the be the next big thing. Are these truly the investments worth chasing after, or is there an even bigger and more important investment that you can and might not have begun investing in? There are many proven cases even today that those who invest in this boasts of superior returns and is still experiencing compounded growth. I hope you’re interested in what this investment is, because you should. This investment has no barriers to entry, does not cost beyond what you can afford(possibly free) and can make you incredibly rich (both in monetary and non-monetary terms). However, this investment requires a lot of time, effort, and determination.

This investment is you.

Investment in yourself is the best and the most important investment everyone should make. Cliché as it might sound, it’s one investment that many people have overlooked. The younger you begin, the more time you have to compound this investment. The rewards can come in many form, depending on what you seek from this investment – Money, Happiness, Relationships, etc. You name it, you can have it!

You may not know where to begin, as it usually is the case. So here’s a simple step-by-step guide to get you started on your investment.

Step 1: Do a self-assessment of what you love doing or want to achieve 5-10 years down the road. This would create a purpose and a direction to work towards to in your life.

Step 2: Do an inventory check of what you have and what you are missing in your pursuit towards achieving an even higher returns on your investment. Knowing what you have (Tangible and intangible) and what you don’t have allows you to work more efficiently and purposefully since you can leverage on what you have and gather what you don’t have in your free time.

Step 3: Start off with baby steps. The idea is to keep things manageable instead of taking a leap of faith. Create habits that lasts rather than simply to achieve something at the spur of the moment and allow the flame to die off after minor achievements. This could range from borrowing a book from the library once a month to taking up classes on a regular basis.

Step 4: Along the way, find a higher purpose. Sometimes we are simply not focused enough to have the fuel to keep chasing after that one dream. While it is good to be focused, it can get tiresome at times to keep at it. When you continually find a higher purpose, you will find it more enjoyable to continue the journey! This could range from teaching others what you have learnt to having the current purpose fit into an even bigger purpose! The key to it is to make slight deviations instead of totally pursuing something new. It would have been wasted effort.

I hope this article has helped you to realise that the biggest investment of your lifetime is waiting for you to invest in it. Stop looking elsewhere because it begins with you. If you have time on your side, even better! Allow time to compound the knowledge and skills that you have gathered.

Some practical tips:
If you are an investor in the stock market, you would have experienced times when you are already fully invested in the market and there seem to be nothing else you can do except to wait. It’s easy to convince yourself that it is time to take a back seat and relax. However, I urge that you keep looking out for the next investment opportunity and sharpen your skills and knowledge by reading! Books are a great source of knowledge and inspiration for trade ideas. Just don’t stop investing in yourself and you’ll see the compounded fruits of labour in years to come. Make it a point that when others have yet to begin, you’re already leaps and bounds ahead of them by the time they begin!

How a Singaporean Grew $112K to $1 Million in 7 Years

Eighteen years ago, Lady (not her real name) entered the workforce like many fresh graduates and earns a humble salary of $2,200 per month.

A sole breadwinner of a family of 4, she need to desperately figure out how to survive and get by should a day she loses her job without sufficient savings.

In 2005, during her career transition, she came across her Central Depository statements and noticed that some of the stocks she bought during the early years has yielded some dividends. That was when it struck her that she could actually work towards generating passive income through dividends.

Back then, she did not have any background knowledge in finance and investment but her determination of working towards her goal of financial freedom has spurred her to learn investing by herself.

Like many young investors, she spent her free time reading investment books, finance blogs, watches CNBC and analyse companies on SGX’s website. Her curiosity has allowed her to equip herself with valuable knowledge in investing which is still relevant today.

In 2012, she made her first million dollar and an annual dividend income of $41K.

Q. Are you a spender or saver?

I am a saver although i have a soft spot for travel

Q. You have grew your portfolio to a million dollar from 2005 to 2012. That’s an incredible feat considering that the collapse of the Lehman Brothers happened in 2008 and the Eurozone crisis in 2009. How do you overcome your loss in 2008 and still hit your million dollar goal?

I didn’t see 2008/2009 as a crisis or a loss although some of my counters were in red. In fact, i felt just like my girlfriends during the Great Singapore Sale, but in this case, instead of buying bags, shoes and clothes, i was buying stocks.

Q. You have not looked back since then and continue growing your portfolio and passive income. Did you suffer any setbacks during this period besides the financial crisis?

I have been fortunate. I did not suffer any major setbacks so far. Although i wished i hadn’t sold away Allergen and Citibank too early.

Q. What’s your best and worst investment? And how’s your current portfolio looks like?

My best investment is Apple (+71%), Facebook (+145%) and Starhub (+85%). Both Apple and Starhub are giving me good returns on dividends yearly. My worst investment of late is Sabana Reit. I share an update of my portfolio every month. You can check out my latest portfolio here: http://ladyyoucanbefree.com/2014/12/23/my-stock-report-card-for-dec-2014/

Q. Are you currently employed or have you retired? If you have retired, what is your current passive income/dividend?

I am currently employed. My current passive income is $59.072.58.

Q. Does your spending habits change as your portfolio grows? Do you spend more than your passive income and how do you manage your personal finance?

I do not spend more than my passive income. I am still learning to improve my spending habits and I learnt that little indulgence do add up a lot. (For example, my indulgence in my favourite iced milk tea) As i said earlier, i also have a soft spot for travel.

Check out my spending habits here: http://ladyyoucanbefree.com/2013/11/30/retirement-planning-project/

Q. What financial planning have you done for yourself? And what’s your retirement plan?

I have just bought myself a retirement home, medical insurance for myself and my family. Moving forward, i will be continuing my journey in accumulating and exploring passive incomes that allows me the freedom to chase after things that i am passionate about and to checkoff my bucket list at http://ladyyoucanbefree.com/2014/05/31/bucket-list/

Q. What is your advice to young adults who have just started embarking on their career journey?

Love what you do and money will follow. Stay Hungry, Stay Foolish. Check out Steve Job’s Stanford Commencement Speech and be inspired!

Q. What about advice to other investors?

I don’t think i am qualified to provide advice to other investors. I would love for them to drop by my blog at http://www.ladyyoucanbefree.com and share notes with me. Let’s learn from one another.

* Lady’s portfolio has now grow to more than $1.6 million and her passive dividend income currently stands at $59,072.58. She is currently aiming for a passive income of $65K.

This is how her December’s portfolio looks like:

(Source: ladyyoucanbefree.com)

(Source: ladyyoucanbefree.com)

To get updates on her future portfolio, please visit her website at http://ladyyoucanbefree.com

* Edited to include US’s portfolio that was left out

3 Tips to Performing Fundamental Analysis

You may have already known that there are two ways to analyse a company, fundamental and technical. In this post, I will be focusing on fundamental analysis and zoom into the things that are commonly looked out for when performing such analysis.

For a start, it would be good to have a foundation on basic accounting and financial accounting since you will be looking into Income Statements and Balance Sheets. Fundamental analysis is all about making sense of the numbers to give you meaningful information that can profit you.

Compare Against Past Data

When I first begin my analysis, I look at the latest financial statements released by the company. I simply look at their financial highlights to see what happened in the recent quarter if it’s a company that I’ve never researched on before. These numbers alone are not enough to tell you about the performance of the company. Always compare your numbers, quarter-on-quarter or year-on-year as some company businesses are cyclical in nature and what may seem to be a spike from the previous quarter may actually be normal or underperforming. This is one of the reasons why sometimes you may see companies report that their profits rise, but share price still falls. When you compare against past datas, you can also see trends which might help you to forecast the upcoming results and what you can expect will happen. These datas can be obtained from SGX’s website, which makes obtaining data or information really easy!

Look Out For Unusual Spikes Or Abnormalities

The numbers won’t lie. Thanks to FRS regulations and many other accounting regulations, companies must be transparent when reporting their results. You will notice that some numbers experience tremendous growth and these could be important or significant figures. This could be a spike in net profit margin, etc. It is then when you should open up your eyes and find out what is going on. There should be some questions that go through your mind as you see spikes. “Is it a one-off spike? If so, what is the impact?” Always question the numbers because this is where you can draw meaningful information out of it. Being able to discern what the information means can help you to gain a deeper understanding of the company and possibly give you a glimpse into the future of the company such as new projects, acquisitions, etc.

Financial Ratios

This is where your financial accounting will help you out. However even if you don’t have a financial accounting background, not to worry because these days the ratios are given to you already. Knowing how to calculate the different ratios and understanding the impact of a high or low ratio will give you that extra edge against other investors who do not know what the ratios mean. The few ratios that I like to look out for are Debt Ratio, Return (Efficiency) Ratio and Liquidity Ratio. These ratios are a way to make a better sense of the numbers that you see on the income statement or balance sheet. This is drawing out meaningful information from face value information. Do remember that these ratios are not one-size-fits-all. Different industries have different norms and you will have to take account of that. Always do a cross-comparison with other companies in the similar industry to get a rough gauge of what the norm is.

In A Nutshell..

There are a lot of information flowing around that we have access to. Simply put, it is how we make sense out of the information and taking the right steps to profit from the information given to us. All of this takes time to learn and it’s a never-ending journey of learning. Do not be too overwhelmed by the things that you have not learnt yet if you are just starting out, and take things one step at a time. Over the weekends, pick up a book in the library and expand your knowledge on the subject. Or you could also simply google the questions you have in mind. Even better, ask your friends who are already in the know. Investing is a journey to requires one to keep learning and improving. This is a long journey that will be worth it at the end!

Singapore: What does deflation means to us?

Singapore experiences its first deflation in 5 years when consumer prices fell 0.3% in November on a year-to-year basis. Deflation, in economics is defined the decrease in average price level of good and services.

While it may be good news to the consumers as their purchasing power increases with more money in their pocket for other things, investors and the government get cautious over a sustained decrease in the price level.

‘Decrease? I am still paying the same for my food, public transport and medical bills.’

Prices of food, healthcare and education amongst other items has in fact, avoided the drop and in fact rise by 2.9%, 1.8% and 2.7% respectively. For the average consumers, there is nothing to cheer about besides a drop of 2.1% in clothing and footwear.

What led to the overall fell in prices is mainly due to the fall in the price of private road transport – a decline of 7% as compared to last year. This is attributed to the decrease in the price of COE premiums from almost $100,000 in January 2013 to around $76,094 for Cat E in the first round of bidding in December 2014. With over 100,000 cars hitting 10 years old next year, these decade old cars is due for de-registration and thus expect an influx of COE supply and prices to fall further.

The fall in Brent crude oil from US$115 a barrel in June to the current price of US$61 a barrel has caused downward pressure to the average price level of good and services. With the advent of better technology such as hydraulic drilling in the US and the use of alternative fuel, coupled with a slow growth in China and OPEC’s price war, it is unlikely that prices will hit the US$100 mark in the near future.

The housing sector is also affected as the property and rental market start to slow down.

What does it means to the consumers?

If there is sustained deflation, there will be a downward deflationary spiral where aggregate demands will fall and companies to cut down on production. Consumers will put off spending knowing that future prices will be cheaper and this hurts the economy and increases unemployment. With lower wage, the problem exacerbates and price declines further – something you witness in Japan over two decades.

Fortunately, Singapore seems poised to be able to resist the deflationary pressure due to a tight labour market and increasing population. The fall in the general price level is unlikely to be passed on to the consumers as companies face high rental cost and sticky wages. So don’t expect the price of your groceries, MRT and Bus fares and other necessities to fall.

What about investors?

Investors should remain cautious if the prices of Brent continues to decline to inflection point. The slide will cause concerns for companies in the offshore and marine industry such as Sembcorp, Keppel and COSCO as profits dwindled with declining global demands.

The roubles crisis may further inject uncertainties to the market and may often lead to spillover effects on countries that are exposed to Russia such as the US, Germany and eastern Europe that relied heavily on Russian economy. For example, Germany’s company Siemens lost 14% of the revenue, Volkswagen has lost 20% in the same period and Adidas has shut down stores in Russia. American companies like McDonalds, FordMotors and ExxonMobil were also hurt by the fallout due to sanctions and decline in sales.

While there are mixed results from the falling prices, there is no cause of concern for Singapore, for now. Core inflation is expected to average between 2 to 3 per cent in 2015.

Investing like Warren Buffett

The ‘Oracle of Omaha’ invests like no other – successfully. He isn’t a fierce and aggressive investor though, rather a calculative and risk-free businessmen. One might question the kind of companies he invests in, but his methods are clean, careful and even somewhat conservative. Warren Buffett ranks with currently 71.6 billion US dollar among the wealthiest individuals in the world. Born to a Congressman in Nebraska, he made his first money selling chewing gum. More than half a century later he is the CEO of Berkshire Hathaway, an American multinational conglomerate holding company.

Many young businessmen continuously seek advice and answers to how he made such a large amount of money. The answers are rather simple and surprising. Unlike the risky investors one has increasingly encountered in the last decades, he hardly ever makes a rush and not-thought-through investment. Furthermore, he isn’t bothered by the market or other investors, which is probably one of his biggest strengths.

Although he reads up to five different newspapers everyday, the daily fluctuations of the stock exchange don’t influence his decisions. His attitude towards investments is different compared to most modern investors. The daily numbers on Wall Street can often cause a frenzy of hasty buying and selling of shares. Warren Buffett considers his investments to be long-term. Romanticising his approach, one could say he is ‘old school’. When Buffet bought his first shares half a century ago, the average time for holding a share was more than a month. Nowadays, this average has dropped to scary 22 seconds. Considering that a share represents a part of company, one could say 22 seconds isn’t really an investment in anything.

He credo is to invest in what he knows. There isn’t a chance he buys shares worth millions of dollars from a company that he doesn’t entirely understand. He does his homework and buys shares as if he was buying the entire business. This investment is not based on the fluctuation of the share, but rather on long-term interests in the company. One could actually argue that Buffett’s categories are extremely conservative. When considering an investment, he questions whether the company is simple and understandable, has a positive operational history and if there is a favourable future for the business.

This strategy isn’t flexible at all, but safe and sound. Warren Buffett is known for not being irritable by the market. His holding company for example owns significant parts of Coca Cola, American Express and IBM – companies that are consistently successful.

Another strength of his is his sense of realism. He knows that it is impossible to predict the day-to-day movements of the market and therefore the direction of the economy. Most investors try to form a package of shares and investments that will be beneficial with their predicted direction of the market. However, this always includes a risk. If the prediction isn’t entirely correct, not all shares will be profitable. Buffett’s investments are outside of these predictions. He understands that he cannot, despite his vast influence and financial power, control and continuously predict the economy. He therefore only invests in businesses that are superior to these fluctuations. There are certain businesses that always will prosper and generate revenue – such as Coca Cola and IBM.

The simple principle behind Buffett’s strategies isn’t to minimise risk, but to eliminate risk in the first place. He was famously quoted saying that the stock market doesn’t really exist for him. It is only there to see if anyone offers anything foolish, he said. This exemplifies his attitude towards the daily swings of the market that most investors are influenced by – he ignores them completely.

It isn’t intelligible for him to invest in a company that he doesn’t understand and whose business isn’t transparent. Modern day trading on the stock market is mainly based on sudden impulses and spontaneous movements of the shares. Investors, buyers and traders, for the most part, no longer look at the company and its values, but rather at their day-to-day performance. As Warren Buffett tends to do long-term investments, he does exactly the opposite.

He is convinced that taking a risk with certain shares is never a good idea, as he equals a risk with not knowing. Why invest in something that you are not sure off? That is exactly his credo. No investment should be made, unless there is certainty. Once the latter is guaranteed, one can even make a heavy investment. Modern day trading is often compared to gambling at the casino. Surely, it often seems that way. False investments cannot only cause a heavy damage, but can create a ripple effect if the investment was made with borrowed money.

Warren Buffett chooses not to gamble, but place his money on the safe side. Why would you bet on black, if you know it is going to be red? Buffett might invest conservatively, but therefore only does so whenever he is sure of profit and convinced of the company itself.

One might ask, how he knows which shares and companies will be prosperous and safe. Buffett does he research. He might not be influenced by the daily fluctuations, but he does his homework concerning financial news and business developments. Once he makes an investment in a company, he usually buys a huge quantity of shares and keeps it. Many investors don’t keep shares, as the cash flow might stagnate. Warren Buffett has a certain funding, which he can easily invest without having to worry about accessibility of funds. However, also he has started small. His earnings on the market did not instantly rocket into the millions.

Warren Buffett might posses 71.7 Billion US Dollar, but also he has started small. He has made his first billion only in 1990. Considering he has then already been trading for over thirty years, one understands that consistency and persistency are part of his success. It is, however, difficult to apply all his tactics. Around 60 Billion US Dollar of cash pool allow him and his company to move quickly like no other investor, if necessary. Hence, his principles and attitude are admirable, but if one aspires to be the next Warren Buffett, one should make some time.

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