Sunday, October 31, 2010

Should I worry about retirement?

Have you every thought of how much money that is needed for your retirement? If no, probably you want to start thinking about it now. This is an interesting article I get from “thestar” newspaper: Is savings enough for retirement?

Apparently from the survey by AXA Retirement scope 2010, Malaysian seems pretty aware of the amount of money that they will get after retirement (i.e. 54%) as compared to the rest of the countries except India is ranked number one. This is a good sign as least you still know exactly how much you will earn or get after your retirement.

On the other hand, I’m not sure if this considered to be good news or it simply means other countries have taken care of their citizen’s retirement therefore they don’t really care about it? Countries such as UK and Australia, you can see that they don’t really care about it. I think this is mainly due to the fact that their governments have taken care of their retirement. That is also one of the reasons why people like to migrate to Australia. :)

Having said so, if you look at the data, majority of people around the world still do not really give a damn about retirement. Because more than half the population do not aware at all how much they will earn after retirement. “Who cares? There are still plenty of time!” - this is the most common reason why people still do not want to take it seriously. But I afraid by the time you start thinking about retirement, it is probably too late…

Let’s look at this another data for Malaysian’s perception on whether their retirement income is sufficient or not. As you can see, (35% + 2%) = 37% think their retirement income is sufficient. It used to 62% in 2007 and now this drops dramatically.

Looking for Solutions?
  • If you ever want to know the amount of retirement fund that you need for your retirement, you can look my previous example, how one can calculate the retirement fund: 10 Years Retirement Plan is Possible.
  • Once you know exactly how much is needed for your retirement, you have 2 solutions. First solution is to earn more and the second solution is to spend less. You can check out my previous post: 2 Solutions to Retire Rich.

Discussion: Since we’re now in the trend of getting more and more people neglecting retirement planning, how should we fix this? Should we increase the awareness of the people OR should the government take care of it so that we all do not need to worry about retirement (like what Australia and UK do)? What do you think?

Sunday, October 24, 2010

Understand Net Asset Value (NAV) in Mutual Fund

Although Net Asset Value (NAV) is a general term but it is commonly used in relation to unit trust or mutual fund. If you invest in stock, then you probably know the stock price for each single unit stock.

So, NAV is something similar to stock price but it is usually meant for unit trust or mutual funds or exchanged-traded funds(ETF). NAV per unit is the price or value of each single unit of the funds. Let’s look at the formula:

NAV per unit = (Total Asset of the Fund – Total Liability of the Fund) / Total Number of Units

Note: When people say NAV, it usually refers to NAV price per unit of the fund although the "per unit" is not explicitly mentioned.

For example, if the total net asset of the Fund A is $100 million and the number of unit issued to the public is 150 million units, the NAV would be ($100M/150M) = $0.67 which is 67 cents of each unit of Fund A.Well if you’re not finance people, this is probably too technical for you. Let's make it the simpler definition of NAV. NAV is the unit price of a mutual fund! Is this simple enough?

What does NAV mean for you?
It basically really means NOTHING to you. Okay, okay, perhaps something. It tells you the value of the unit price of a mutual fund. Just like stock, it tells you whether a fund is too expensive or is still cheap? Wait a minute! Can you really tell? No, you don’t because it is all about comparison. You need to compare at least 2 funds to tell whether the NAV is expensive or cheap. 

FUND N.A.V ($)
A 0.67
B 0.90

If Fund A is cheaper than Fund B, what does this mean? It means you can buy more units from Fund A with the same amount of money. E.g. with $1K, you can buy ($1K/$0.67) = 1492.54 units from Fund A and ($1K/$0.90) = 1111.11 units from Fund B. 

But does this mean you have more units and you will earn more? No, it does NOT tell you the performance of the funds because the value of your investment is always the same which is $1K. So eventually, it basically means NOTHING to you too. Unless Fund A and Fund B started out the same day with the same price, then you can only tell that the Fund B performance is better than Fund A or else you can’t conclude anything out of it.

In my opinion, the NAV of unit trust or mutual funds doesn’t really mean anything. It just tells you the current price of the unit trust but it doesn’t tell you the performance of the fund. You shouldn't buy a fund because of it's NAV is cheap. When choosing a unit trust or mutual fund, one should look at the fund’s financial objective, how good is the company management and does the fund has shown any good track record and etc.

On the other hand, don’t forget the investment is all about emotion too. Let’s look at the Fund A vs Fund B above. What do you think majority of people will buy? Fund A or Fund B? Fund A is cheaper right? So the chances for Fund A to go up is higher than the chances for Fund B to go up? So when everyone buy Fund A, the price of the Fund A will go up eventually?

So now back to you, will you buy fund because of the cheap NAV?

Saturday, October 16, 2010

Malaysia 2011 Budget – Personal Finance Highlights

If you’re Malaysian and you probably have already known about this Malaysia 2011 budget announcement. Well, what should you react from your personal finance perspective? Let’s see some of the highlights which I think may be important to you.

Note: You may also interested in Malaysia 2010 Budget and see what could do out of it if you’re not aware of it…

(1) Flat Toll Rate Until 2015 for PLUS owned highways

This is at least good news for me and also for those who travel often through the PLUS highways. Hopefully we’re all still here until 2015, I’m quite sure we’re. Hahaha…

(2) 50% Stamp Duty Discount and Full Loan for First-Time House Buyers

This is not applicable to me as I am no longer a first-time house buyers. :( Basically you will be entitled for this 50% stamp duty discount if you purchase house within RM350K.This is Eligible for S&P/SPA executed from 1 Jan 2011 to 31 Dec 2012. Also, if your family income is less than RM3K per month, you do not need to pay 10% down payment too. You can get 100% loan for the houses priced below RM220K. Well, this is not applicable to me again.

[Update:17 Oct 2010]
In case you do not aware, previously we already have this 50% exemption discount on stamp duty but only for your house that not exceeding RM250K. The discount is until 31 Dec 2010. Now it seems like they increase to RM350K but ONLY for first time house buyers.

[Update:19 Oct 2010]
 I don't recommend for those who can NOT afford to buy a house to take up the 100% loan. If you can't effort, don't buy. The reason is the total amount of loan interest you pay will be a lot and it is just not worth it. Unless you're really a property investment guru, I will recommend you to use this safest property investment strategy.

(3) Maternity Leave is now 90 Days

This is only for government servants and you will get fully-paid maternity leave for 90 days. So nice! It stated allow flexibility to self-determine maternity leave as long as it doesn’t exceed 90 days. But who doesn’t want to take up to max? Maybe if you’re female, you should consider to join the government sector. Being a school teacher seems like a good choice. :) I will go for it if I were a female. lol! :)

(4)  Increase Minimum Salary for Workers

Security guard salary will be increased to RM500 – RM 700. For those who are security guard, this will help. Anyway, I have no idea the salary for security guard is that low. The current average salary for a security guard in Malaysia is between RM 300 and RM 400 but I  think for those in private sector, it should be more than that. A wage council to be setup to decide the minumum salary for workers in Malaysia. I guess this doesn’t applicable to me again, this is mainly for those of you who have very low paid salary.

(5) Service Tax to be Increased from 5% to 6%

Huh, what’s up? I”m speechless… I think what you should react is to eat less in restaurant and cook more for yours

[Update:17 Oct 2010]
Based on the feedback & comment from Chong, I just realized that the scope of service tax has been extended to include subscribers of paid broadcasting services such as Astro. This is bad because now you want to pay the extra 6%. It used to without this charges. Perhaps you should consider to unsubscribe Astro if your Astro usage is really low.

This also affected the hospital bills too not just restaurant. Basically you will need to pay extra 1% for your hospital bill too. This may be a burden to certain people.

(6) Cheaper Mobile Phone

The will be removal of the 10% sales tax on ordinary mobile phones. Initially it is stated for all type of mobile phones and it actually means all type of ordinary phones. So iPhone or any smart phones are not included as long as your phone can access to internet. This move seems like target to those who do not afford to buy mobile phone. I hope this move doesn’t encourage people to change phone even more often! :)

[Update:23 Oct 2010]
Since many people asked me to clarify, it seems like all the while there is no sales tax for smartphones or those with Internet applications (which I"m not aware of it). So this 10% sales tax discount has no impact to smart phones at all. So you can go ahead to buy your iPhone now and don't need to wait for next year! :)

(7) Cheaper Branded Stuff

Import duty tax will be removed for 300 popular tourism items to promote Malaysia as Asia’s shopping haven. So you can now spend more especially for girls who like shopping a lot.  Yes, I know spending money is fun but please watch out your spending while shopping and further more this move is really meant for tourist.. :)

(8) Private Pension Fund for Self-Employed

This is good news for those self-employed as now they’re entitled the same benefit with employee. There will be RM6K tax exemption same as EPF too.


Well, what can I say more? Did I miss any important? You can share that with me. I hope at least you’re happy with some of them especially you’re the self-employed or first-time house buyer. This budget is really have no effect to me at all except for the 6% service tax. But that should be affecting everybody… :(

P/S: Remember to keep your broadband receipts for 2010 tax deduction.

Sunday, October 10, 2010

Gold Price Going Up Because of 2012 Prophecy???

You may have been noticing Gold price keep going up, but why? When do you think is the peak? What is your theory? This is an interesting theory that I heard from a friend and whether is truth or not…


Have you ever thought of the increasing of Gold price could be due to the 2012 doomsday prophecy? Not everyone will die and assuming if you’re somehow able to survive from it, what is the most valuable stuff at the time and moving forward? Yes, GOLD is the answer.  So, what will you do? Yes, buy Gold and when everyone buy Gold, what happen? Yes, Gold price goes up!

So now, back the fundamental to support this theory which is how many of us in this earth believe that the 2012 prophecy is real? If you did research on 2012 prophecy, you may realize there’re many coincidences that leads to a same conclusion and the more you do research on it, the more you think that is real.

Even if this is hoax, what is the purpose of this hoax? Who created it? Could driving the Gold price up be one of the reasons? Regardless of the truth and as long as:

“If you believe people are believing 2012 prophecy, Gold price will continue to rise!”

This sounds crap, huh? So, what does this mean? This means the Gold price will continue to rise until 2012. If you really believe in 2012 doomsday, you should buy physical Gold now and keep it (assuming you think you can survive). If you think 2012 prophecy is a hoax, you should buy Gold now until probably the beginning or the mid of 2012, you should sell them all. Alternatively if you’re a conservative investor, you can now sell all your Gold and keep your cash until the Gold prices drop badly after 2012. Later on, you can start buying back Gold…
What is your theory? This sounds stupid huh? Who knows this prediction could be real? Let’s see…
P/S: If you scare and don’t know what to do, you can apply DCA in buying Gold too. Good luck!

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