It seems that there is one small detail that I came to know recently that makes the SARA 1Malaysia scheme unattainable. You need to be married or a single parent to qualify to apply for the scheme. so that makes it out of the reach for most young, recently graduated PTPTN loan holders.

So much for helping the people. This makes it only look like a half-hearted attempt to help the people in need. Oh well, we’ll just have see what other schemes the government are scheming in the future

In my last post, I introduced to the readers about Skim Saraan 1Malaysia or SARA 1Malaysia. I mentioned that it was not a worthwhile investment if you are not in the low income bracket and how the banks would be the only ones profiting from the deal. However, after contemplating a bit, I came up with a use for the mere RM134, even if you are not in the lower income group. Read More

Yesterday, the government announced the establishment of a new trust fund scheme called Skim Amanah Rakyat 1Malaysia or SARA 1Malaysia. Basically, its a fund similar to ASB (Amanah Saham Bumiputera) where people with a household income of below RM3000 can purchase RM5000 worth of shares at RM1 per share and get a guaranteed return of RM134 per month. Read More

If you a bumiputera in Malaysia I’m sure you have heard of Amanah Saham Bumiputera or better known as ASB. In fact most of you might already have invested in this type of unit trust, afterall is there any reason for you not to invest in it? I don’t see any reason to say no. Lately there are some banks like CIMB,MAYBANK and RHB offering loans to invest in ASB and the frequent question ask is does it worth it to take a loan for your ASB investment? Well today I’m going to compare it for you so that it will help you to decide what is the best method to choose, the method that I want to show to you are:

1)      Bank Loan ( pay the whole installment tenure with your income)

2)      Bank Loan (pay only the 1^st year with your income and the year after by using the dividend generated from ASB)

3)      Regular investment (No loan taken)

Before we going further let set a few details, let set the dividend, installment and interest charge on the loan are same as below for the whole loan tenure:

Loan Amount              : RM 50 000

Loan Tenure                : 25 years

Interest rate                 : 4.95%

Monthly Installment   : RM 292

ASB Dividend            : 8%  annually

Now let proceed to the method that we are going to compare.

METHOD 1: BANK LOAN (pay the whole installment tenure with your income)

For this method your investment of RM 50 000 will become RM 342 423.76 after 25 years if you don’t disturb the dividend and let it compounded for the whole 25 years. The amount that you have pay for the whole 25 years is RM 87 600. So it means your net profit is RM 254 823.76 .

METHOD 2: BANK LOAN (pay only the 1^st year with your income and the year after by using the dividend generated from ASB)

For this method your investment of RM 50 000 will become RM 89 764.58 after 25 years. Since you only pay for the first year so the amount that you actually pay for your self is RM 3504. But by using this method RM 84 096.00 of your ASB dividend has been used to pay for the installment which also will effect the compounded effect on your net profit which is reduce to RM 86 260.58 compare to the first method where the net profit is RM 254 823.76

METHOD 3: REGULAR INVESTMENT (No Loan Taken)

Now let see if you decide not to take the loan but discipline yourself to invest regularly  RM 292 monthly for 25 years.  In 25 years your investment  will be RM 267 133.11 and the amount that you have invest is RM 87 600. Your net profit is RM 179 533.11

Currently the prices of property in Malaysia especially in areas like KL, JB and Penang have been rising at a record pace that has never been seen before. In some areas like Damansara for example the price can rise as high as 40 % in just a year. Therefore property is currently is the hottest investment trend nowadays. Read More

Have you ever heard of gold investment?

Sure you did right?

After all it is the most sorted out investment nowadays. But does it ever occur to you what gold investment really is and how can you start invest in it?

Is it true that gold investment is the safest and best investment for you?

Well, if that question is still stuck in your head then you are lucky as I am going to answer all the myth of gold investment that keep popping in your mind. Read More

Have you ever ask yourself how long does it takes for your investment to double or give you a 100% return? Calculating an investment involving compounded interest. It is not as easy as a simple arithmetic. Most unit trust consultant and financial planner use a financial calculator to determine the value of compounding interest on investment.

However there is simple way to calculate your investment and that is by using the rule of 72. The rule of 72 help you to roughly estimate the time for your investment to double (100% return) if compounded on certain rate. So by mastering the rule of 72 it can help you to determine how good a potential investment is likely to be.

Now let see at the example:

Situation 1;

If an investment consistently gives 8% return every year how long does it take for it to double?

Ok let use the rule of 72. What you need to do is simple just divide 72 with the interest rate.

72 / 8 = 9 years

So at 8% annually your investment will need 9 years to double.

Situation 2:

If an investment can give a 100% return on 6 years, what is the annual return of that investment?

Solution :  72 / 6 = 12 %

Yup it’s that easy. Now you can try it on your investment.

Sheyzal Azman
Financial Consultant
sheyzal@yahoo.com

a large amount in a single investment at the wrong time and also discipline investor to invest         regularly. Now let us see an example of how  dolar cost averaging work on rising, fallen and fluctuating market.

RISING MARKET (BULLISH)

Average cost per unit = RM 4.38

On a rising market when the unit price of the fund increase the amount of fund that you will get will become fewer but  it is still can give you an advantage. Normally when the market are low, most people will become afraid to invest because of the fear of the fund price will keep on falling. What even funnier is that when the market rise there are still  people who are afraid to invest because they think the price  is too high and over price.

Example:

Luke invested RM 6000 in shares at a price of RM 2 per unit. When the market went up he doesn’t make any additional investment because he think the price is too high. In the end when the price reached RM 12 he sold all his shares and take home a profit of RM 30 000. Compare this to Jenny, she consistenly invest the same amount of RM 6000 during the bullish market at the price of RM2, RM4, RM6, RM8 and RM10. When the market reached RM 12 she also decided to sell her shares and make a profit of RM 52 200 . Although in term of percentage Luke has make a remarkable return of 600% compare to Jenny of 274%, Jenny is still the true winner here because she make the higher amount of money then Luke. So ask your self who do you want to be ? Luke who enjoy the high percentage of money or Jenny who enjoy the most sum of money.

Sheyzal Azman
Financial Consultant
sheyzal@yahoo.com

FALLEN MARKET (BEARISH)

Average cost per unit = RM 4.38

Now let us see the benefits of unit cost averaging:

Let say Mr. Sam invest a lum sum amount of RM 30 000 at a price of RM 10 he will get 3000 units  therefore his average price per unit is RM 10. Suddenly the market fall , Mr Sam  got panic and sell all his investment for RM 4 per unit. Therefore he end up losing RM 18 000. Compare it to Mr. Gan who is planning to invest his capital of RM 30 000 by using the dolar cost averaging stratergy. He start with RM 6 000  at a price of RM 10 exactly like Mr. Sam, and as what happen to Mr. Sam the market become bearish. Knowing the benefit of dolar cost averaging Mr. Gan do not panic as Mr. Sam but instead he keep on investing the same amount of RM 6 000 when the price fall as what u can see on the example given on the fallen market situation. Because of the fallen price Mr. Gan manage to collect more unit and after he invest all RM 30 000 that he has, his average price per unit has drop to only RM 4.38 per unit. Now not only that Mr. Gan has manage to reduce his cost per unit for his investment he also will surely make a handsome amount of profit when the market recover

FLUCTUATING MARKET

Average cost per unit = RM 4.17

As you can see from the example when the price per unit or share rise in a rising market and you invest the same amount of money the number of unit or share that you will get will be fewer. On the other hand when the market is falling and you continue to invest the same amount of money gradually the number of share or unit that you will get will increase. A fluctuating market is actually a combination of a rising and falling market therefore the amount of unit or share you will get depend on the price that you invest. Most of the time your investment in unit trust and shares will be in this situation. As long as you keep on practicing the dollar cost averaging you can get both the benefit that you can get during a bullish (rising)and bearish(fallen) market.

1. START YOUNG & INVEST FOR LONG TERM
When you start investing at a young age, you can take more risk and invest on a fund that can generate more return and also because time are on your side it means you can maximize the power of compound effect on your investment. Long term investment is the best investment. Ask Warren Buffet if you don’t believe me .The phrase time is gold is truly a reality for young and long term investor.

2. INVEST REGULARLY
Discipline yourself to invest a certain amount of money regularly so that you can apply the Dollar cost averaging to minimize your risk and also slowly build up your investment capital. The easiest way is by changing your mind set by treating your investment as a compulsory monthly payment just like all your utility bills.

3. USE ONLY EXTRA MONEY
Invest only with your extra money and never use your emergency saving to invest because you never know when you might need the money. Since an investment usually need times to grow and give you a handsome return it is better to use only extra money so that you don’t need to worry when there is an emergency.

4. DIVERSIFY YOUR INVESTMENT
Have you ever heard of the phrase “Don’t put all the eggs on one basket”?
What the phrase means is that it is better to put all the eggs on several baskets so that if one basket of eggs falls you still have eggs on the other basket. This means you have reduced the risk of loosing all the eggs. Same strategy can be applied on your investment. Invest on several different types and risk of investment to reduce your risk. Diversification will surely make your less depress when the market is bearish (down trend) and also help you to get a good night sleep.

5. DON’T PROCRASTINATE YOUR INVESTMENT
Procrastinating (delaying) your investment will surely guarantee you loss an opportunity to make money. When it comes to investment time does play a magic role on your return. Albert Einstein once said the power of compound is the eight wonder of the world. Example if you are 25 years old and invest a lump sum of RM 10 000 now at an annual return of 8% a year, it will be come RM 100 626.57 when you reach 55. If you decide to procrastinate your investment by 5 years and only start to invest when you are 30 years old. The return will be RM 68 484.75 when you reach 55 years old. This mean you have already lost a chance to make an extra RM 32 141.82.

Related links :

• Compound Interest
• Procrastination
• Dollar Cost
• KWSP

Sheyzal Azman
Financial Consultant
sheyzal@yahoo.com

Warren Edward Buffett is an American investor, industrialist and philanthropist. He is widely regarded as one of the most successful investors in the world. Often called the “legendary investor” he is the primary shareholder, chairman and CEO of Berkshire Hathaway. He is consistently ranked among the world’s wealthiest people. He was ranked as the world’s wealthiest person in 2008 and is the third wealthiest person in the world as of 2011. Now let us look at his secret rules for success:

1. Ascertain the true quality of a company and its top management.
2. Stockholders are not managers. They should leave the running of a firm to competent managers with integrity.
3. Don’t invest in businesses you don’t understand.
4. Give help and advice if they want it, but let the managers make their own decisions.
5. Never, ever break the law.
6. Owners are owners and managers are managers – but they should work as partners.
7. Keep your distance from the market. You’ll understand the business better!

Sheyzal Azman
Financial Consultant
sheyzal@yahoo.com