The measure of a great employer

Building your human assets(i)? The major factor in achieving a high income and distinguish career path, beside one's effort in continuous professional development, is working for a great employer. :-) (how easy to push the responsibility away...…)

On 27 October 2005, Alison Maitland of Financial Times listed down the criteria of a great employer.

• Trust their staff to make the right decisions
• Take customer service seriously
• Cut jobs only as a last resort
• Share rewards with everyone, not just senior management
• Tend to have loner-serving chief executives
• Offer benefits well beyond what is required by law
• Respond to emerging trends, such as demands for flexibility working, or networks for minorities
• Have been around long enough to establish a strong culture and sense of belonging

Four companies were ranked among the top 100 employers for the past 25 years. AG Edwards, Goldman Sachs and Nordstrom are all more than 100 years old. WL Gore will be soon 50 years old.

More about improving your credit rating

The idea on how to improve your credit rating comes from the September 2005 issue of Reader's Digest. We added our comments.

Read this.

Top 10 investing blogs (overseas)

Business Week listed down 10 most worth visiting investing blogs. This is not the interesting part; the interesting part is the comment on the selection from Ed Itor of Daily Dose of Optimism. Daily Dose of Optimism is a very unique investing blog.

Even though I do not follow the blog regularly, I noticed that Ed is very different from the rest of financial blogs. He covers economics, investing, government policies, movies and almost anything that caught his interest. He has his ways of explaining complicated and usually misunderstood situations to readers. Try this, a usually misunderstood issue on tax cut, and this.

Travelling information within Malaysia

I came across this amazing web site providing travelling fares comparison. Stating your destination and place of departure, you can find out the cheapest fare available

Here is the web site that provides travelling information for buses, trains and taxis, schedules, fares, map and photo within Malaysia.

Unit trust as an investing instruments

I told myself I must record down this in FPM blog. A reader, nicknamed "INVESTOR" commented on unit trust investment in today's The Star Comment column, Page 33. He wrote in response to the earlier two comments by K.K. Lee "Good returns from unit trust investment" (The Star Oct 13) and Ho's "Trust fund lost after investment started shrinking" (The Star, Oct 11).

He responded to K.K.Lee's touting of unit trust as mid to long term investment vehicle that bring higher return, "The contradiction is clear. Had Lee not redeemed his investment in early 2000, he would have suffered the same fate as Ho. Had his agent advised otherwise and had Lee held on to his investment, he would probably have also ended up poorer."

He wrote, "Unit trust investment is not the magical vehicle for long-term investment as most people have been led to believe. It is just another market instrument that is also subject to the ups and downs, as ultimately the collected funds are ploughed back into the equity or bond markets."

It is good to know there are still many people in Malaysia able to think sensibly, despite tremedous efforts and money was pour into mass media to make us believe unit trust is the magical pill to wealth and happy retirement. Working in an industry closely link to fund management and unit trust for many years, I have a lot to say about the fund management industry.

The slogan "Failing to Plan is Planning to Fail" is not entirely true. It is "Failing to Plan PROPERLY is planning to fail". In such a case, unit trust is only a tiny part of a bigger puzzle of wealth building.

Excerpt from A Way of Life

...Lifestyle THREE is a lifestyle where money doesn't stand in the way for us to enjoy the moment. It is the way to live for today yet to save for future. It is not about "“scrooge"” at the moment when you need to spend for gratification. It is about sensible choice for complete different price range of lifestyles and habitats so that you can fill your heart desires and gratifications instantly and financially comfortably. When you keep realising things are so affordable everywhere you go, the only feeling you can have is gratefulness which is the ultimate joy of life.

...more about A way of life: Spending, Saving and Living the Moment.

Saving for your retirement

There is an article on retirement planning in the Malaysian Investor (MIN)* entitled Saving For Your Retirement. It is a step-by-step guide to estimate how much one needs to save for retirement. We created a financial model for retirement planning based on the article. Users do not need to learn the calculation but need merely to key in the variables, in a simple step-by-step manner.

Get your free download on this financial model, MI's Retirement Planner, here.

The steps of the methodology involve
a. estimation of working years, retiring years and the amount to save for retirement
b. creation of a pool of reserve fund for retirement
c. estimation of the depletion of this retirement fund during your retirement years

The methodology involves the creation of retirement fund before your retirement and depletion of this retirement fund in your retirement years.

It is an interesting exercise even though we do not think the methodology of the article is logical. For instance, you need to estimate your date of demise (!), you need to plan to spend all you have saved and to leave nothing for others after your departure (!) and if you estimate wrongly and live longer than you thought you could end up on the street (!).

In FPM, we don't think depletion of retirement fund is acceptable. For instance,
a. if you own a shop, the rental will take care of your retirement, and the shop will not deplete in value just because you receive rent. However,
b. if you own an equivalent amount in unit trust funds, the value of the unit trust is most likely to reduce every time you withdraw money out during your retirement years.

We think item (a) is the way to go and item (b) is illogical and unacceptable.

Download the financial model here. However, read the more sensible guide on retirement planning here, on building assets that generate income and will not deplete in value.

* Malaysian Investor is a web site created by the Securities Industry Development Centre (SIDC), which is the training and education arm of the Securities Commission. It contains many interesting and useful guides and resources on financial education of investors.

Investing abroad: the channels

What are the channels available for “retail” investors to invest in overseas stock markets?

In general, there are four channels:

a. Online stockbrokers

Investing in overseas stock markets directly through an online stockbroker is probably the cheapest option available. However, the investors have to go through the hassle of transferring money overseas and keeping the money in the stockbrokers’ trust accounts before online trading is possible.

b. Local unit trust funds that invest overseas

Investing in overseas stock markets through a local unit trust fund is probably the easiest way. However, most of our local fund managers do not have enough experience in overseas investing. The hidden costs, i.e. brokerage, handling charges, foreign exchange cost, custodian fees, etc. could be high. Such high hidden costs will affect the performance of the funds.

c. Local stockbrokers

After the recent amendments of Securities Commission’s guidelines and liberalisation of Bank Negara Malaysia’s Foreign Exchange Administration Rules, local stockbrokers are allowed to help their clients to buy and sell overseas stocks directly from foreign stockbrokers in foreign stock exchanges. Once the local stockbrokers establish their infrastructure and connections with overseas brokers, we will be able to buy overseas shares through them. Since a transaction goes through two stockbrokers, i.e. one local and one foreign, the transaction costs can be high.

d. Private equity/ wealth management services

Many banks offer private wealth management or private equity services to high net worth individuals in investing locally and abroad. Again the costs can be high.

Lessons from the Winners of Investment Game

There was this investment game, Personal Money Investment Game, organized by Personal Money magazine and sponsored by Hwang-DBS Investment Management Bhd. Each participant was given virtual money worth RM100,000 for simulation of investment in local unit trust funds from August 2004 to July 2005.

There were more than 2,300 participants and the top 25 winners recorded annual returns ranging from 7.16% to 15.26%. The top four players registered returns of more than 10.00%. It is quite an impressive results for unit trust investments.

Question: how did they do it?
There was a good analysis of the games in the October 2005 issue of Personal Money. Generally,
Majority of the top 25 winners held index funds at one time or another. Index funds are the funds that track the performance of KLCI. In fact, all the top three winners were fully invested in index funds as at 29 July 2005, the game closing date. (The 1st, 2nd and 3rd winners, Mr Tan Leong Wah, Mr Teoh Yaw Meng and Mr Sia Jai Sung, each invested 100%, 99.3% and 100% of their portfolio in OSK-UOB KLCI Tracker Fund, respectively.)

Most of the winners realized a very important fact from the beginning: for a short investing period of one year, fees matter. Most of them invested in low fees fund like index funds and bond funds.

Mr Teoh Yaw Meng's story was interesting. He began with Bond funds and was at the 6th position in April 2005. He switched his entire portfolio in June2005 riding on the rise of KLCI and ended in 2nd place.

Most top winners adopted the strategies of buy and hold. They timed the market and seldom switch funds.

Coupled with right timing, low upfront fees and a little bit of luck (that their strategies work for the market conditions of the 12 months period of the investment game), they won.

The web site is still worth visiting even though the game was concluded. There is a full list of articles on investing in unit trust funds written by professionals.

Personal Financial Planning: An Overview

Personal Finance A plan for life Young, free & single Married couple Happily single Retiring	Issues in life Buying a home Buying a car Getting married Chilren's education
Assets Building Human assets Paper assets Real estates Businesses Assets strategies Savings & expenses	Financing Credit card Home loans Getting a loan Getting out of debts
Assets Protection Life insurance Trust Special vehicles	Leaving a Financial Legacy Trust Will Assets arrangement Giving