Where To Invest ? - Hedge Funds

Before I begin, I just want to manage your expectation, ie., investing in hedge funds is only for the RICH! So if you are not in this category, you better seek other investment options.

So what is a hedge fund? In simple terms it is about wealthy investors pool their money together, and whoever runs the pool decides how and where to invest it. Most hedge funds operate as limited partnerships, with the fund manager being the general partner with controlling interest, and investors serving as limited partners. Conceptually, they can invest in anything that makes money, including various non-traditional investment strategies, risky vehicles and derivatives that mutual funds cannot invest in. In essence, hedge funds target to profit even when the market doesn't move or falls. To illustrate how big they are, it is reported that they have controlled assets worth up to USD1.3 trillion at the end of 2006! It is also noteworthy that even some mutual fund companies have invested their money with hedge funds in order to increase their returns! If you read my recent article on global stockmarket selloff, hedge funds was in fact one of the culprits! Their sheer funds size is certainly in a position to influence the market!

Some of the major Hedge Funds include notable names like Goldman Sachs, Morgan Stanley, HSBC Private Bank, etc.

No doubt investors can potentially make huge returns from hedge funds, however, given its risky profile, the reverse (huge losses) could also happen! eg., Amaranth Advisors, who suffered financial collapse after losing USD6billion in a month!! In addition, hedge funds generally are not well regulated. So, even if you have the money, would you dare to put your money in such risky business? This will depend on your risk appetite.

Are Malaysia Real Estate Properties Expensive?

If you ask the local Malaysians, most of them will definitely reply to you that they think Malaysia properties are expensive and becoming less affordable. This is certainly what my friends have often told me when I asked them this question. Following the abolishment of Real Property Gains Tax (RPGT), what do you think the likely scenario will be? Prices will likely rise further (due to speculation) and property becoming less and less affordable! So depending on which perspective you are coming from, the reaction is certainly mixed. If you are a home buyer, you will probably end up more debt or can't afford one. If you are an investor, it is certainly money to be made if only you act swiftly.

As I mentioned in my earlier post, it is likely that the benefits will be across the board for all property segments. Nevertheless, it is likely that the high-end property segment will be the biggest beneficiary as in the eye of foreign investors, Malaysia has been a laggard to other major Asian cities in terms of valuation. Indeed, I have been told that many foreign investors are looking for high-end residential properties as well as shop-offices that offer good investment value, and this trend will definitely make the Malaysian property more vibrant! In most countries, such as Malaysia's neighbouring country Singapore, high-end property transactions were primarily foreign driven. I believe the same trend will happen in Malaysia too.

As per record, certain high-end residential condominiums surrounding Kuala Lumpur City Center (Twin Tower) have already priced beyond RM1,000 per square feet. If you think this price is crazy, wait until you hear this! A Singapore based property developer is understood to be close to launching another high-end property at possibly RM2,000 per square feet!!

Although many local Malaysians may not have the financial muscle to purchase such high-end properties, don't be dispirited! I believe there are still ample opportunities out there in the other property segments. The key is to act first before it happens! Good properties are always there to be hunted, so get ready for the action!

Is Malaysia Making A Return to The Investment Radar? (Part 1)

In 1997, Malaysia Government imposed capital controls during the height of Asian financial crisis, in order to save the country from potential financial bankruptcies. In doing so, the Government had effectively "separated" Malaysia from the outside world, for instance, making its currency (Ringgit) non-tradable internationally, limiting the amount of funds that can be expatriated overseas, fixing the currency relative to USD at 3.80, etc. Since then, foreign investors had gradually shunned Malaysia for other better investment options, and the emergence of China and India as the emerging market investment destination of choice have not helped the course for Malaysia.

The results were clearly shown in year 2005 whereby Malaysia's relatively declining statistics on Foreign Direct Investments (FDI) compared to other ASEAN countries has truly worsened. It was also the first time in history FDI for Indonesia overtook Malaysia's and it was truly a bitter pill to swallow! On the other hand, while other countries continue to liberalise their markets and making it easier for foreigners to invest in their respective countries, Malaysia's reform were relatively slow although the Government did lift the capital controls back in 2005, and started to liberalize trade. In addition, Malaysia continued to stumble upon and continued to rely upon policies that were either outdated or non-investors friendly! By the end of 2006, Malaysian Government, led by Prime Minister, Datuk Seri Abdullah Badawi, finally vouched that Malaysia need a drastic transformation, in order to prevent the country from sliding further down the competitiveness charter!

In my next post, I shall look at some of the key reforms made recently by the Malaysian Government.

Investment and Financial Freedom

If you have noticed, I have started off sharing a number of post in my blog pertaining to investments, where to invest and emphasized the importance of understanding investment risks before making the decision to invest. You probably noticed I have not mentioned much on financial freedom and what is the connection between the two. Well, I am sure a number of you have figured this out but let me go back to the raw basics.

To start off with, "financial freedom" simply means a state where a person is able to live a desired lifestyle without having to worry about his or her financial situation. Wouldn't it be like a dream comes true if this happens to you? Most people dream of achieving financial freedom but remains a distant dream in reality. In truth, it is not easy to achieve financial freedom unless you are very disciplined to maintain a set of financial goals, a comprehensive financial planning, TAKE ACTIONS and NEVER GIVE UP! Of course alternatively you could still do it if you were born with a silver spoon....unfortunately most people like myself probably have no such luck or at best, a "plastic" spoon may be! So stop dreaming and be REAL!

Let just say you manage to set the goals (has to be realistic!) and a comprehensive plan, there is still a big missing jigsaw, i.e., how do you achieve it? Invest in a business is a great way to gain wealth and to achieve financial freedom. However, you must have a sound business plan and the sheer persistence to execute the plan, not to forget you are also faced with fierce competition. Essentially what you should look for is an investment that generates at least twice the return of your local bank's fixed or time deposits. More importantly, the returns must be sufficient to meet your financial goals and ultimately achieve financial freedom.

What happens to those who are not so business-savvy, do not have the desire to run their own business or do not have the necessary capital? You can opt for investments in capital markets such as stocks, bonds and mutual funds (unit trust). These investments not only offer potential capital gain, but also dividend and/or interest income. e.g, invest in stocks that generates 6 to 8% annual dividend yield is by itself much better than putting your money into Time Deposits that offer 3% interest. Alternatively you can go for property investment, as properties generally offers the best hedged against inflation, and offers stable potential for capital gains and rental yield.

Most people think that you need a huge capital to invest in order to make money, especially lots of money! To a certain degree, I agree eveyone does need some form of capital to invest, just like starting a business. But do you necessary need huge capital to start off with? The answer is no as the reason being you can always start small, and make your way UP. At the same time, keep a discipline to encourage more savings, and cut down on your expenses.

In my later post i shall explore in more depth some latest ideas achieve financial freedom.

Global Stockmarket Recovery

Global Stockmarkets have climbed steadily for the past few days and yesterday, Wall Street rose significantly by 1.3%, following US Central Bank's decision to keep interest rates unchanged amidst a potential weakening economy. On the other hand, US Federal Reserve remained concerned about inflation, but appeared to have removed language about additional rate increases in its post-meeting statement. In fact, some analyst found "light at the end of tunnel" in a sense they found Fed's statement may even suggest that there may be an interest rate cut by as early as middle of this year and they appear less than concern about the economy! This certainly augurs well for the long term direction of the stockmarket.

From my observations, reading into Federal Reserve's messages is almost like interpreting the Bible...different people may interpret the words differently. So some analysts see positiveness while others may see more negativity! So judge by yourself and let's not be too carried away too soon. I would prefer to wait for more reinforcing fundamentals or signals before declaring that the market turbulence is truly over. Thereagain, if it (the turbulence) does not happen, i won't be the one to complaint either! Happy Investing!

Malaysia To Abolish Real Property Gains Tax!

It is confirmed! Prime Minister of Malaysia, Datuk Seri Abdullah Badawi made the official announcement today at the Invest Malaysia 2007 Conference. This will spur growth of property market across all segments. Earlier in the year, the Government had also announced foreign purchasers will be allowed to buy residential properties priced above RM250,000 (USD71,429) per unit without the approval from the Foreign Investment Committee, and without limits on the number of units. The State Government has also been instructed likewise to adhere to this new policy and extend the co-orperation to foreigners.

This is indeed a welcoming news for Malaysia, where the property market has remained sluggish for the past 2 years. Let's hope that the Government's new policy is a permanent move instead of a temporary gesture. Investors certainly do not like fickle-minded policies! Nevertheless, such policy may also potentially attract excessive property speculation, driving prices to an unsustainable level (if that happens, of course). I would prefer to see a long-term sustainable growth rather than a short-term bubble! What happens in US property market is certainly undesirable!

Malaysia To Abolish Real Property Gains Tax?

The past few days there were a spate of rumours in Malayaia on speculation that the Government may abolish Malaysia's Real Property Gains Tax (RPGT) in order to strengthen Malaysia's present soft property market and the situation of property supply overhang. My unconfirmed sources indeed revealed that the Prime Minister of Malaysia, Datuk Seri Abdullah Badawi, has agreed to abolish Real Property Gains Tax effective 1st April this year! If this source of information is true, this will be a major boost for property markets in Malaysia, long seen as a laggard in property prices in the Asia region. Indeed, Malaysia's capital, Kuala Lumpur offers one of the cheapest properties in terms of valuation among the major cities in Asia, including Bangkok and Singapore. In addition, Malaysia is also heavily promoting a new economic zone (named as Iskandar Development Region) located in the southern part of Malaysia, i.e., the state of Johor, which is located just above Singapore, as the next center of economic and property growth, very much like the Shenzhen of China.

Which segment of the property market stands to benefit the most? I believe this will be the mid to high-end property segment. So for those who are on the lookout for good investment, watch out this segment of the market or alternatively (especially for those who do not have so much capital on hand), you may invest in fundamentally sound property stocks in the Kuala Lumpur Stock Exchange or invest in Real Estates Invest Trust (REIT). The trading nature of REIT behaves the same way as stocks and best of all, it allows you the chance to own not just one property but a portfolio of high investment yield properties without having to break your Bank Account or subject yourself heavily in debt! In another post, I shall discuss more about the benefits of REITs. Stay tuned!

Why Invest in Mutual Funds?

So why invest in mutual funds? Some of the advantages are:

1. Diversification - By owning shares in a group of stocks or bonds instead of owning individual stocks or bonds, your risk is spread out.
2. Economies of Scale - Because a mutual fund buys and sells large amounts of securities at a time, its transaction costs are lower than what an individual would pay for securities transactions.
   
3. Professionally managed - basically, leave it to the experts!
   
4. Highly liquid - You can buy and sell mutual funds anytime and recover the funds quickly
5. Simplicity - Funds can be easily purchased from banks or mutual fund agents
6. Security - The interests of unit holders are protected by the appointment of an independent trustee to hold the fund's assets on behalf of the unit holders

However, despite the above advantages, there are also common pitfalls which you need to be aware of, such as:

1. Don't always assume the funds are professionally run! Some fund manager has the tendency to deviate from the funds objectives and invest in unappropriate stocks. So always check out the level of experience of their fund managers, their investment portfolio(whether matches the fund's objectives) and their historical track record before buying!
2. Costs are often factored into the fund's price, it may not be transparent for investors! Some funds come with high sales charges or management fees that render positive investment return very difficult! So always check out the cost of charges! It may be worthwhile to buy funds that offer free units or lower sales charges.
   
3. For most funds e.g, equity funds, their investment objectives are often to outperform the equity index. So during market downturn, it is often "acceptable" for fund managers to make a loss or negative return as long as the fund's performance outperforms the equity index! To me, this is not acceptable as this is not acting in the best interest of investors.
   

As always, analyze the fund first before making the decision to buy!

Where To Invest? - Mutual Funds (Unit Trust Funds)

For those who are interested to invest in stocks but don't know what to buy, do not have the necessary knowledge to trade or have no time to monitor their stocks, where else can you go and what can you do? The best option is probably to leave your money with the professional experts, i.e, qualified fund managers. In other words, you can invest your money with mutual funds (or also known as unit trusts). Mutual funds are simply a collection of stocks and/or bonds, managed by qualified fund managers. You can also think of a mutual fund as a company that brings together a group of people and invests their money in stocks, bonds, and other securities.

There are 3 ways you can make money from mutual funds:

1. Income is earned from dividends on stocks and/or interest on bonds.
   
2. If the fund sells securities that have increased in price, the fund has a capital gain
3. If fund holdings increase in price but are not sold by the fund manager, the fund's shares increase in price. You can then sell your mutual fund shares for a profit.

The general types of funds in the market are:

1. Equity fund: primarily invested in stocks

2. Fixed income fund: a fund that invests primarily in bonds
   

3. Balanced fund: invests in a balanced mix of stocks and bonds
   

4. Money market fund - invests in short-term debt instruments, mostly treasury bills

5. Real estate investment trust (REIT): a fund that invests only in real estates.

Equity funds can be further categorized into various categories, such as index-linked funds, growth funds, large capitalization funds, small capitalization funds, etc. The key for investors before buying into any mutual funds is to study the fund's risk and projected returns which can be found in the Prospectus (for new funds). It is also important to understand the fund's investment objectives and principles of investment. Select the one that fits your risk profile.

Most mutual funds come with a one-time sales charge and annual management fee. Both of these charges vary from fund to fund. It is important for you to be aware of these charges and the percentage of charges as often, these charges will consume any profit that you may gain from the fund.

Invest At Your "Own Risks"! (Part 2)

When you know your risks, the fear of investing and losing money is lessen. In fact, your chances of making money will likely increase. Following my last article on knowing your risk profile, we should also be aware of the types of investment risks:

• Market Risk: Your carefully selected "can't be wrong" investment has actually gone down in value. Such is the case in stocks presently as market downturn could be driven by external event or events such as political instability, terrorism or war. However, most losses are sustained over the short term. As long as you hold onto a fundamentally sound investment, your investment will have the chance to recover and earn you a greater profit.

• Inflation Risk: The risk that the rising costs of inflation will outpace the growth of your investment over time.

• Company Risk: This is the risk that the individual company in which you invest fails to perform as expected.

• Maturity Risk: Also specific to bonds, this is the risk that the value of a bond may change from the time it is issued to when it matures. The longer the period to maturity, the greater the potential for price fluctuation. That is why long-term bonds generally offer a higher interest rate--to compensate for this greater risk.

• Legislative Risk: Government regulations can change. eg., Thailand recently imposed capital controls on their currency. This has severely affected foreign investments and the country's investing rating.
  

• Global Risk: It's always a bigger risk to invest overseas than at home due to possible unfamiliarity of the market condition. However, a purely domestic strategic can also backfire as every country will experience economic upturn and downturn. Your long term earning potential may be at risk if just restricted to local market.
  

• Timing Risk: If only you have the "crystal ball" to predict the future accurately but the fact is nobody has it! There is no such thing as timing "perfection". There is no single chart or tool that can predict 100% of the trend or patterns.
  

• Longevity Risk: This is the risk that you'll actually live longer than your income can support you!

Invest At Your "Own Risks"!

When it comes to investing, we all have different attitudes towards risk. So, get to know yourself! Regardless of which investment type, you should carefully consider the level of risk involved in each investment and how you feel about that risk. For instance, you should consider how comfortable you are with the possibility of losing money or that the returns on your investments could fluctuate widely from year to year. Most people are comfortable upon gaining (who is not!) but they just can't bear with the sight of losing, to the extent they can't sleep or eat well! In that scenario, perhaps it would be wiser not to invest your money into volatile investments such as stocks.

There are generally 3 categories of risk profile, i.e., conservative, aggressive, speculative. Is it possible then that a person may expose his or her investment in a combination of these risk profile at any one time? Yes, definitely. We need to take into account a person's attitude towards risk may change over time, due to various circumstances. Besides, a person may want to diversify his or her risk by spreading the investment portfolio into more than one or all of these categories. That way you will not succumb to burning all your hard earned money in case your higher risk investments do not work out! I shall discuss about investment portfolio allocation in a later post.

In identifying your risk profile, it is also important you need to know what you want to achieve and when you want to achieve it. This is what we term as Financial Goals. eg., Are you saving for your children's education? Or is it for retirement? Perhaps you want to buy your own house? The answer to these questions will help you determine which risk to take. Alternatively, you can seek professional advice (eg., a qualified Financial Planner) for guidance, using a Risk Profiler tool.

For me, I am a moderate risk taker and I certainly do not belong to the conservative group. Trading in high risk instruments such as commodities and foreign exchange is not my cup of tea! I also don't believe in "Get-Rich-Quick-Scheme", having observed so many of these "high-return" promises turn out to be scams or unsustainable! There is really no short-cut to success...so be prepared to work hard and work smart for it!

Market Shaken but not Stirred?

As per my previous comment on market turbulence is not over, global markets have indeed reacted at the slightest signs of negative data triggered by a weak retail (consumer) data in the US, and concern on the impact of sub-prime mortgage defaults by sub-prime mortgage lenders on major US banks. These concerns had triggered a 2% overnight fall in Wall Street and a global sell-down in stockmarkets!

So what are sub-prime mortgages? Sub-prime mortgages are home loans given to borrowers with weak credit that have been bought over by investment banks, who repackage them and sell to investors around the world, including pension funds and hedge funds. Some of these sub-prime mortgage lenders have in fact, borrowed funds from major investment and commercial banks, including Morgan Stanley, Citigroup, Bank of America and the mortgage division of Goldman Sachs. That casts a spotlight on how much the problems in the subprime mortgage business will hurt the big banks that have helped bankroll subprime lending. The upcoming quarterly results announcements will provide a clearer indication the impact of such scenario.

In the meantime, sit tight and watch whether the market will undergo any further "stirring" effect or just a shake.

Where To Invest? - Bonds

Today I shall look at Bonds. Bonds are typically underappreciated as typically, the first thing that comes to most people's minds when they think of investing is the stock market. After all, stocks are exciting. The swings in the market are very well covered in the daily newspaper and TV broadcasts such as CNN and Bloomberg. In contrast, Bonds, do not have the same sex appeal. Most people do not even know what they are and how it works. The Return On Investment on Bonds tends to work opposite of the stock market, i.e., when stocks are doing well during raging bull market, bonds tend to do badly! However, when it is bear market, bonds act as the safeheaven for investors on a more conservative scale.

So what are Bonds? Basically, a company needs funds to expand into new markets, while governments need money for everything from infrastructure to social projects. Typically they need far more money than the average bank can provide. The solution is to raise money by issuing bonds (or other debt instruments) to the public. Investors who subscribed to the bond are in fact the lenders, whereas the borrower becomes the issuer. You can think of a bond as an IOU given by a borrower (the issuer) to a lender (the investor). The return for the investor is in the form of interest payment (termed as coupon), which is fixed at a predetermined rate over a fixed duration. The issuer has to repay the amount borrowed (known as face value) upon the maturity date. e.g, you buy a bond with a face value of $10,000, a coupon of 8%, and a maturity of 10 years. This means you'll receive a total of $800 ($10,000*8%) of interest per year for the next 10 years. When the bond matures after a decade, you'll get your $10,000 back.

Bonds normally have a negative correlation with interest rates. When interest rate goes up, bond yield goes down, and vice-versa. So you should start buying bonds if you spot a downtrend in interest rates and vice-versa.

Bond is different from equity (stocks) in the sense that a bond holder is treated as a creditor of the issuer, whereas equity holder is a shareholder. A bond holder stands a better chance of claiming the assets than a shareholder upon filing of bankruptcy by the company. In another words, a bondholder gets paid before a shareholder.

As the return on investment for bond is predictable, the potential return for bond is generally less exciting than equity stocks. Thereagain, bond is less risky compared to equity. Most investors invest in bonds as a form of asset allocation, i.e., instead of putting all their money in one basket (eg., equity), they allocate some percentage of investment in bonds...therefore leveraging the effects of both bull and bear markets.

Where To Invest? (The Stockmarket)

Yesterday I brought up the common types of investments available in the market. Today I shall start off with a brief introduction of the most common of all, the Stockmarket, which is also my favourite of all investments! I am not going to explain in detail what stockmarket is because i believe everyone knows what it is by now. Essentially it is a trading place where you can trade the shares of a listed company with the objective of making a positive return in capital. Basically, you make money when you sell the shares at a higher price than your original purchase price. In some markets, you can also short sell the shares, i.e, you make profit from the decline in price of a share. However, short-selling is generally not recommended for retail investors as it is risky and heavily regulated.

So why is stockmarket so popular? Following are some of the reasons:

1. anyone above 18 years old are eligible to trade;
2. trading (buy or sell) is made simple. All you need is a trading account, a phone line (to contact your broker for instruction) or trade online;
3. highly liquid, i.e., you can get your money back any time (within settlement period normally within 3 working days)
4. buying tips are everywhere!! You hear it from your friends, relatives, peers, workers, and even the tea lady!
5. The prospect of making fast money and exciting return by trading in hot stocks! So and so told you how easy it is to make tons of money! (But they forgot to tell you how much they lost!)

Now I don't suggest you invest in stockmarket for reason #4 and #5, but stockmarket is indeed a place where it can potentially bring lots of wealth and fortune as long as you know how to do it properly. Sadly, by applying the generic rule of thumb, 80% of retail investors will lose money, whereas only 20% will make most of the fortune! This is a sad fact as most retail investors do not possess the right attitude and approach with trade.

Later i shall explore the types of stocks and what to look for in stockmarket investment.

Should I Take A Loan To Buy Property - Part 2

Assuming you are now renting a property for your own stay. You came across one property that you like in terms of its design and comfort. Now a major decision looms whether you should continue to rent or part with your hard earned savings to purchase the property. Your savings are probably sufficient to pay the down payment, remainder to be financed by taking a housing loan from a commercial bank. Assuming property value = $250k, loan amount = $200k, lending rates = 7%p.a., loan tenure = 30 years. Your installment amount would work out to be $1,330.60 monthly. Interest calculation is based on reducing balance method. Based on the loan repayment schedule, you would have paid a staggering amount of $279,018.02 representing only interests portion by the end of the loan tenure! That is more than what you would have paid for the property itself by today's valuation! So many people would have deterred from buying and financing such a property based on the above simple calculations! So you decided that you should continue to rent and put off the plan to own a piece of property. Is this a wise decision? Not really. Although it appears that you are paying the Bank a lot of interests, you should consider the following factors:

1. Property valuation tends to appreciate over time, as property is the best hedge against inflation. Assuming the property appreciates by 5% annually, the property will be valued at $1,080,486 after 30 years. Your capital gains = $830,486, which is a staggering 332%! You would not have been able to own such a property at the first place if you do not purchase through financing.
   
2. Assuming if you have the cash to finance the full purchase price of the property, would it be wise to settle the entire purchase by cash? The answer is no! This is because the excess cash could have been invested in other high yielding assets or investments that exceeds the bank's lending rates. eg. You invested your money in stocks and mutual funds, the average returns of your investment say equates to 12% per annum. You would have gained 5% Net Return on a yearly basis assuming bank lending rates is 7%! In another words, you should learn to invest the money otherwise used to settle the property amount in a higher yield assets or instruments.

The same prinple applies to corporations seeking a commercial loan to part finance their investments or factory expansion. You could often see that big corporations often still borrow even though they have sufficient cash pile to finance the deal, using the same theory of higher yield investments to more than offset the loan. Effectively this is how you could make more money by leveraging on 3rd party's funds! It is also the reason why you should learn how to invest wisely!

What To Do With Your Extra Money?

Do you think money is the most important thing in life? Personally I do not think so but I am sure this is arguable for many! Let me put it another way, can we live without money? I believe the answer is a definite "NO"! Without question we all deal with money everyday and this tends to be one of our key driving forces in our lives! So what to do with your money when you finally receive your salary or dues from service rendered? For some, it's about time to "pamper" or reward yourself with something to spend but for others, they may be thinking about keeping the money for savings or a partial of both savings and spending. So, how do you save and what to do with the extra money? The easiest and simplest way is to keep it in a bank's saving account to earn interest or a Time Deposit account for higher interest amount (but subject to a fixed duration and is non-withdrawable). However, if you do so, you are effectively losing money as most savings or Time Deposit account only give you between 1% to 3% interests in general! Compare this with the average inflation rate of 3 to 5% and you know what i mean! So the real worth of your money actually reduces over time, also known as "time-value decay". So what are the options? Grow your money by investing in instruments that could give you a return of more than the inflation rate at the very least!

Let's explore the common types of investments...we have:

1. equity investment (stocks)
2. hedge funds (futures, swaps, options and other derivate instruments)
3. bonds (both private and Government held)
   
4. mutual funds (unit trust)
5. properties

and many other more complex money market instruments and some other "unorthodox" instruments. What I have listed above are the more common ones found.

So what's next? Basically, you need to understand what these different instruments are, how they work, and their respective potential returns and risks elements. Select the appropriate investment type that fits your risk profile. Oh yes, proper identification of your risk profile is very important! A person who is risk averse may not want to park their money in a high growth stock in which the share price of such growth but immature companies may likely be more volatile albeit potentially more rewarding! Volatility here refers to the share price being subject to major swings in both directions (ups and downs)! A faint-hearted investor definitely can't take this kind of pressure and an investment mismatch!

In my upcoming post i shall explore each type of investments and their relative strength and weaknesses. Personally my favourites are equity and property investments. Majority of my investments are with these two types of instrument.

Should I Take A Loan To Buy Property?

As I was speaking to a friend earlier, she has expressed her desire to buy a piece of property for her own stay as she is currently renting a place. However, she was in a major doubt whether such move was a wise one after "consulting" some of her friends. The rationale given by her friends was that she should not buy a property by taking a loan from a bank because she would end up probably paying more than double the property value in the form of interests! On the other hand, there is no way she could purchase the property entirely with cash! So she was left with a major dilemma...

I will offer my views in my next post. What's your view?

Is US Heading Into Recession?

As global investors watches the global stockmarket development in a cautionary mode, I recalled former US Fed's chief Alan Greenspan's comment that there is a possibility of US heading into recession by the end of the year. The current Fed Chief Ben Bernanke had subsequently clarified that this will not be the case. So the big question that we all would like to seek an answer quickly is whether US is indeed heading into a recession? The weakening housing market and increasing number of bad loans seem to be the leading indicators to support such claim but latest development appears to have given us a ray of light. Let's explore further.

On Friday, US Commerce Department declared that the US trade deficit has narrowed 3.8% in January to USD$59.1 billion thanks to record-breaking export growth. It was indeed a bigger drop than expected on Wall Street, and marked the biggest change in the trade data since October 2006. It is widely expected that the trade deficit will continue to fall in the next couple of years. This is indeed a welcoming news to further boosting US economy. The view seems to be further reinforced by a stronger than expected US Job data released Friday, suggesting continued growth, albeit slower. Combining the above two factors forms a pretty consistent scenario with the theory of Goldilocks economy, which is a phrase used to connote a desirable level of economic growth without inflation, in other words, not too hot (inflation) and not too cold (recession). In the U.S. economy, this is when GDP growth is around 3% and inflation is around 2%. As we speak, the Fed is predicting US GDP growth in a range of 2.5 to 3.0% for 2007.

In my view, as long as the above scenarios hold, we are probably seeing the US heading into a softlanding instead of hard landing. So for investors, we could probably sleep better at least for now...

Is Global Stockmarket Turbulence Over?

Global Stockmarket has somewhat stabilised and even recovered significantly for the past few days. Is this a signal of the end of the turbulence that was caused by the series of events unfold recently, particularly so for the winding up position of Yen carry trade? A carry trade is when an investor borrows one currency and invest in another high yielding currency or assets. For the last decade or so, the Yen has become the ideal target for carry trade because of Japan's zero interest rate policy to move its economy out of a deflationary mode. This has fueled the huge liquidity that has poured into emerging markets like China and India, and to a certain degree enable US to fund its large current account deficits. According to estimates, yen carry trade could be as much as USD$1 trillion! Late last year, the scenario has somewhat changed as Japan decided to end its decade-long zero-rate policy in view of it's improved economy by raising its interest rates. Japan is widely expected to further increase interest rates as its economy continue to recover. Coupled with the fact that US is expected to reduce interest rates before the end of the year due to reduced threat of inflationary pressure, the narrowing of valuation gap will potentially cause more unwinding of yen carry trade. When this happens, funds will be withdrawn from worldwide markets, thereby further causing instability.

In conclusion, while global markets have somewhat stabilised and recovered for the past few days, the impending turbulence may not be over as yet. So do watch out for such events to potentially unfold again!

Have you done your best?

How often do you hear people giving up on a challenge despite telling everyone that they would do their "best"? In truth, the real issue here is most people don't actually give it their all, they will say they do...or did...maybe even they really feel that they gave everything?

Today I come across an interesting video that I find very inspiring. It's called "Facing the Giants". I hope this could help you to drive your motivational level to the max whenever you are faced with challenges! I am convinced that anyone can make it if they truly give "it" their "all", albeit the journey of reaching the goal often could be extremely difficult!

Lifestyle: Live in Style!

These days everything is about enriching lifestyle, and the world has so much to offer, ranging from virtually anything to everything! eg., shopping for new clothes, buying the latest and most sophisticated mobile phone, buying a gift for someone's birthday, going for spa treatment for stress relief and relaxation, buying or upgrading your car, go vacationing in a 5-star holiday resort, buying and furnishing your home, upgrading to a bigger house with gated and guarded security...the list can go on and on, and anyone can always find a good "reason" to buy. Some of these wish list could be absolute "necessity" but in truth, many of them are often "wants" rather than "needs"! How many times have you come across a situation where you realized you spent on something that you do not need or does not fit you altogether? The outcome is some people run into cash flow problem, or carrying too much debt! Another interesting scenario is that people quite often spend a considerable amount of time planning how they want to spend and what to buy but give very little or even no consideration to the other side of the spectrum, e.g., planning how much to save, managing cash flow, planning for retirement, growing their wealth, etc. Let's be honest, when it comes to planning for the future needs, most people do not have a plan and often take this for granted! In the coming days, I will share with you some ideas and my personal experience on some of these important aspects and why they are significant milestone in life. Perhaps this may be relevant for people who could be looking for a change in their "lifestyle"....

Global Uncertainties Ahead

The Asian Stockmarket started off this week on again a jittery losing ground as all major Asian bourses fell significantly! This was following Dow Jones near 1% drop last Friday. Back home our Kuala Lumpur Stock Exchange had not been spared either. In fact it was the worst performer among all the major Asian bourses on Monday, falling by 4.64%! It is apparent that most people including myself have underestimated the impact of this global market collapse for the past one week! Monday's Asia downfall was again believed to be attribuable to the exits of yen carry trade funds though program selling. The same cause was mentioned in my posting dated 1st march. Carry trade is a strategy where investors finance purchases of assets by borrowing a low yield currency such as the yen. Now that the Yen is seen appreciating, these investors need to liquidate their holdings in order to close out their currency positions.

Despite the current prolonged market downturn, I still maintain my view that the stockmarket in Malaysia is bullish in the long run and the current undesirable situation will soon reversed, in view of the strong fundamental indicators in Malaysia and the fact that key emerging markets in Asia still offer one of the best growth rates globally amidst the slowing economy expected in US and potentially China (due to Chinese Government's efforts to avoid overheating economy). The current situation has in fact in my view provided great opportunity for long term investors to bottom fish and bargain hunt for fundamentally sound companies that are under-valuated, has great potential for growth and has outperform expectations! What is needed is a little bit of patience to weather the current STORM...thereafter Blue sky will come!!

A Tiny Expression of Patriotism

This year is a symbolic year for my country as this is the 50th Anniversary of our nation's independence. In conjunction with this special occasion, this year has also been designated as "Visit Malaysia Year" as a special way to welcome foreign visitors to our country. There will be a host of events organized throughout the year to celebrate the occasion. For the list of events organized, you can find out more from this website http://202.157.188.226/consumer/events/

As i was browsing through my friend's blog, I found a very nice Slide Show included in her website, showing the splendor of Kuala Lumpur City Center (KLCC) with the Twin Tower as the main focal attraction in a circular mode. I shall ask my friend Vas if she could pass me a copy of the slide show. You can check it out at http://exceldream50.blogspot.com/ In the meantime, I can't help it but included a stale picture of the KLCC at the bottom of my Blog. I hope you will like it as much as I do.