Most Cost Effective Insurance in zzzz

If you are buying insurance for the first time or considering topping up protection to your life, there are some facts you should know :

1. each product ( insurance, FD, Mutual Fund) has its own strength ( see this post )

2. a hybrid product may give the best of both worlds

  2a. some hybrid products are called "Link" products  ( read here for varies type of insurance )

  2b. if you build your own hybrid, its called Buy Term Invest The Rest 

Not by conincident, 2a is usually offered by insurnace companies while 2b is usually offered by mutual fund companies.  Its just a matter of approaching the same purpose from 2 different angles.

If you are in zzzz, I would like to share with you A number : 328 !!

You can 'buy' a life insurance of MYR 328 with MYR 1 only !!

Therefore a MYR 50,000 Life insurance would cost about MYR 150 / year !!

So whatever extra cost you are paying for your insurance, you should expect them to provide you extra services and / or provide a good investment return.  Else you will need to relook into your portfolio because you are paying too much for your own ignorance.

note : 328 is the number for group term life and TPD protection only, its the most fundamental and simplest element I can find in local insurance industry here.

Stock fee is cheaper than mutual fund

Quite frequently I heard that many people do not buy mutual fund because its 5.5% fee is too high comparing to stock investment where each transaction is charged at 0.42%.

( see old post what you should consider with mutual fund high fee )

It is no doubt a valid concern. When buying stock, there is only one broker who is earning your commission. While there is a huge team working in your mutual fund, hence cost much more.

However, there is a catch to that concept.

There is a minimum fee charged to each stock buy-sell transaction. Lets say its $40. And you have just purchased a low price stock of a total of $400. You have just paid 10% commission fee for that investment, not 0.42% !!

In order to really enjoy the low fee, you will need to have a larger capital. For example, if the minimum fee is $40 and the normal fee is 0.42%, then each of your buy-sell transaction should be more than $9,524 or else you are paying more than 0.42% charges.

So no matter if you are buying

a 1 cent stock or

a $100 stock,

your minimum buying price

shoud be at least $10,000 !!

So unless you are already transacting stocks above 10K in each transaction, you should still go back to your mutual funds ....

Currency turns evil - part 1

I shared before money is tighted to gold in an old post.  That was the good side of money, here comes the later part ...

... soon earth is seperated politically into countries.  Some countries grows stronger, 2 particular ones are E and U.  They used their strength to conquer other lands and take possess of the gold there.  More gold means they can print more money.  

However in reality you cann't simply conquer other people's land and take away the gold for no reason.  For example, U claims that country I is violating human's right and therefore U is acting as world police to take over country I in order to instill 'fair' human right policies there.  With that as official reason, U can slowly take over the golds they found behind the curtains.  However, it is still Not Easy to move the gold from I to U because the world is watching.  So instead of taking the gold out from I into U, U hide the gold in I but declare that U has more gold and start printing more money in U currency without devaluation.

So does U really "OWN" the gold to justify the extra currency they printed ?  Yes if they still own the land in I.  But when stories like U's gold in I has been stolen etc. would have cause U currency to drop.  When U finally leave I, U would have claimed that they have already 'transfer' the gold back to the land of U, but ofcourse I would claim that the gold is still in the land of I because I wanted to print more currency too.  As you may guess, the same gold has been used twice to justify printing more money.  While no one actually have seen the actual 'gold' ....  

Hence the value of money is NO Longer tighted to real existence of gold but the impression of having gold ...

.... this is only the history because the world No longer welcome war and would not accept the excuse of world police ... part 2 will show how U become even smarter to print more money without gold at all ...

Part 1 Part 2 Part 3

Low Risk High Return ?

Seems like still quite a number of people do not agree that Risk is dealing with something you don't know (read the post about risk here).

So I would like to repeat that yes while Low Risk Low Return and High Return High Risk are TRUE but if you think it that way, you may just settle for "whatever it is, it is !"

For example, you may think you are not a risk taker, therefore you will never get a high return !!

My 'additional' point made to above truth is that, you should still make effort to learn the next risk in your portfolio so that the more you know, the better you can manage that risk until it becomes insignificant compare to its potential return.

Property as an investment

Just a reminder that Car Loan interest rate is about 1.9X more than the House Loan.  Meaning a 3% car loan is almost as high as a 6% house loan.  Think again if you think car loan has a lower interest rate.  (click here to read more).

The fundamental of investing in property is not much different than buying a business to earn you passive income.  However, the nature of brick and mortal business is an Active Income generator, not a passive one.

VS

So you would need to be extra careful when using property as your finance tool to gain "Passive Income".

In simplest term, you HAVE TO make sure

1. you can rent your property out to fully pay for the monthly loan repayment
   
2. you budget in the fee you pay for professional to maintain your property including

Lawyer

Real Estate agents

Renovation

Interior Design if needed etc.

Without these 2, you cann't start property investment at all.  With this, there is no guarantee you can win big yet but at least you would at least pay less to learn the lessons.

The right way to lower down price

Generally it is a BAD idea in economy sense for a goverment to influence hypermarket to lower their price ( more on that here ).

Because the ultimate great thing that can happen in our market is FREEDOM to trade.  Whoever smarter will think of better ways to save cost and therefore lowering their sale price, those who are not will not survive.  Eventually all the creative ones remains and we will have 'smart' business men in our society.

Hypermarket doesn't really care about slashing prices.  Because it doesn't hurt them at all.  Its their suppliers who are affected.  First of all hypermarkets don't pay suppliers cash.  Second, hypermarkets don't pay suppliers in full.  Third hypermarkets don't hold responsible for lost and damage goods.  

Imagine a supplier barely survive getting pay check 3 months after the goods are sold and now due to price slashes, the supplier receive only part of the payment.  So at the end, the remaining ones are the ones who did not give discount ?  Or those who already monopoly the market remains stronger ...

However, out of all these smoke screen ... some lights do shed.  Air Asia slashing their fuel surcharge mainly to counter MAS recent 'Net Price' advertisement, not so much of  because minister said so.  Like wise, BAT who started cigarette price war are purely business competition oriented.  These 2 are great price reduction examples, compare to the terrible hypermarket price reduce.

Has your daily lunch price reduced yet ?

Stock selection - management

I have shared before how to calculate how much a stock is worth and therefore knowing when to buy at what price.

However, that is just one of the methods.  The one shared above is a quantification method using calculation.

In real world, when you buy a business that is NOT run by you, the ultimate Single Main Factor is

Who Is Running The Business ?

The company may did great or terrible in the past, what really matter is who is running the business now and what he or she is going to do about it.  So the more and closer you know about the management of the company you are buying, the better position you are in.

I have seen many times stock buyers simply buy in blue chips because the company was doing great.  Without realizing the successful CEO has left replaced by a half empty manager.  Needless to say, all things go downward since then.

So when you are ready to buy a particular stock, spend a little bit more time to find out who is running the company.  Check and see if there are any hanky panky stories came out from google.

If possible, try writting them a letter or email and see if you get any reply.  Try to meet and talk to them.  Usually the really great successful CEOs are friendly while those blood sucker CEOs will just slamp door on your nose.

With a Good management, 

a bad company has a chance 

to be great again !

Without one, 

the best company 

will eventually sink indefinitely ...