Potato Investor

Real Property Gain Tax

2008-07-22T12:48:00.003+08:00

In Malaysia, the profit that you gain from selling off your properties will be taxed. This is known as real property gain tax (RPGT). However, the rate is different depending on the number of years you hold on to your property. See the chart below.
If you sell off your properties after 6 years, you will not be taxed at all.

Malaysians have the privilige of once a lifetime tax exemption from RPGT for only one residential property. So, make use of your privilege as a Malaysian.

Latest: RPGT has been abolished beginning from 1st April 2008.

Never time the market

2008-07-16T10:57:00.000+08:00

As I read TheStar newspaper today, there is one article that I find quite interesting. However, I will write it from my point of view.

The subtitle begins with ‘it (the market) exists to serve and not to instruct’. In the beginning of 2008, analyst predicts that KL Composite Index (KLCI) will go beyond 1500 points, however, the market can be very crazy, and within 6 months, KLCI drops about 350 points. That is a very drastic drop.

2 investment gurus had their view of this market situation. George Soros attributed these phenomena as the ‘reflexive process’. The price change is due to a change in the company fundamental.

I prefer the way Warren Buffett interpret the current market situation. He holds to his principle that the market is manic-depressive. (As a pharmacist, there is certainly treatment for this manic-depressive disorder, such use using lithium). The market can be very crazy at times, and also be normal at certain times. So, when the market is very bad now, it provides us investor the opportunity to buy undervalued companies, especially blue chips companies. We have to calculate the intrinsic values, check out the company profiles, and much more.

In conclusion, do your studies well on the potential company and buy it when the price is right. Never ever time the market.

Public Far East Telco & Infrastructure Fund (PFETIF)

2008-07-09T10:29:00.004+08:00

Fund Name: Public Far East Telco & Infrastructure Fund (PFETIF)

Fund Category: Equity Fund
Type of fund: Capital Growth

Fund Objective
To achieve capital growth over the medium to long term period by investing in securities, mainly equities, in the telecommunication, infrastructure & utilizes sectors in Far-East markets.

Asset Allocation
Equities: 75-90%
The balance will be invested in Fixed Income Securities and Money Market Instruments
(Min 2% in liquid assets).

Up to 98% of PFETIF’s NAV can be invested in selected foreign market which includes South Korea, China, Japan, Taiwan, Hong Kong, Philippines, Indonesia, Singapore, Thailand and other approved markets.

Benchmark
Dow Jones Asia Pacific Index & Dow Jones China Offshore Index.
Customized weight based on the following sectors:

40 % Telecommunication
30% Construction & Material
30% Utilities

This fund is more suitable for medium to long-term investor who has aggressive risk-reward temperament. Most important is, investor can withstand extended periods of market high & lows in pursuit of capital growth.

The initial investment amount is RM1,000. For offer period (8 Jul - 28 Jul 2008), they are offering service charge of 5% (usual is 5.5%).

My comment on this fund:
This is another fund that target the current undervalued telecommunication and infrastructure stock. It has been reported that Asia countries are expected to spend about US$1.8 trillion over the next 5 years, so there a good way to gain big profit there.

Bull and bear market

2008-07-08T11:56:00.002+08:00

I am sure you will come across the term 'bull market' and 'bear market' when you read the finance or business section of the newspaper. This two represent the market trends. Just like in our life, there is happiness and sadness. I did some research over the internet and found out from Investopedia.com that the terms come from they way animals attack their opponents.

A 'bull market' is simply a market that is going upwards. Investor usually will have higher confidence, and the market will be quite active. The economy will be good, as lots of people will be making money from their investment.

A 'bear market', on the other hand, is simply a market that is going downwards. There is a strong pessimism among investor, causing the market to be quite dull. There will not be much active trading, as investor keep their cash, waiting for suitable time to invest.

This 2 terms is very important, before I get into the discussion of buying in bull and bear market.

Good Investment Habits

2008-07-02T18:49:00.002+08:00

I would like to share some good investment habits in this post. Sorry for not posting for quite some time as I went to Kuala Lumpur for personal reason.

1. Invest with your own money

Always invest with your own money, and not from borrowed money. This also apply to margin account. In the event of losing money, you just lose your money.

2. Invest only in business that you know well

There are lots of company listed in the share market. Choose only those companies that you know well. The best is you are working in related industry as you will know the happening in the industry.

3. Have a portfolio or record of your investment

This can be a simple notebook or Microsoft Excel record of your investment. This record can be use to trace back all your transaction and the money you have earned/lost.

4. Buy when the price is right

I learnt this concept by reading Phil Town's Rule #1 book. This concept is actually used by Mr Warren Buffett. You need to do your homework by calculating all the key figures (P/E Ratio, EPS, intrinsic value, and much more) before deciding the value that is fair for you. I will touch on this in my later post.

5. Never let emotion rule over your conscious decision

Lots of investor out there let emotion rule their decision. If you are sure that the particular stock is definitely good, don't let the market rumour or big guys out there to change your decision.

Margin Account

2008-06-24T15:24:00.002+08:00

Investor can open margin account from the brokerage firm, which allow them to borrow money to invest in the share market. However, certain amount of interest (about 8-9%) will be charged towards the amount borrowed.

As for me, margin account is definitely a big NO.

If you target to a profit of 15% from your investment, you need to pay back the 9% interest, which left you with just 6% profit. With the 6% profit, I would suggest to put that money in Amanah Saham, which will yield interest within the same range (and it is capital guaranteed by the government).

My advise is to start to save money from this moment. Build up your cash reserve before you get into the stock market. Make sure the money that you want to invest is the extra cash that you would not want to keep in the turtle-rate of normal savings account. If you invest with your money, the worst scenario is you will lose all the money you invest. You will still have your house and car. That is the worst scenario.

Smart investor will know how to use internet and the all the available resources to minimize their risk of losing money.

Types of Stocks

2008-06-21T12:14:00.002+08:00

This article is to introduce the type of stocks that is available in the market.

Blue chips
These are companies with strong fundamentals. They have track record of high earnings and good dividends for years. Some even give good dividends (5-8%).

Second liners
These are companies that have performance in between blue chips and third liners.

Third liners
They are companies with poor fundamentals.

Growth stocks
These are companies that give high growth due to their high growth potential. They usually retain their earnings to further expand their businesses and therefore usually give low dividends.

Cyclical stocks
These type of stocks depend much on the economic cycles. They are companies whose earnings track the business cycle.

Income stocks
These type of stocks pay very high and generous dividends, for example, tobacco companies.

Defensive stocks
These stocks are least affected by the economic crisis or in the bearish market. Good exampls include those in the food and consumer businesses.

Calculate Petrol

2008-06-21T00:54:00.000+08:00

Recently, the government has announced to subsidise car owner below 2000cc. The amount is RM 625 per year. I received an email from my friend, that show the amount of fuel consumption that the RM 625 can help. See the calculation below:

Basically, if you are using less than RM 128.20 per month, then the rebate is very good for you. I believe most road user will use more than that amount each month.

Note: This calculation is meant for those driving vehicle below 2000cc. Those driving big cars, they don't really care about the petrol price hike.

Power of Compounding

2008-06-19T11:03:00.000+08:00

I was introduced to the Power of Compounding after I read AhYap's blog one year ago. I was marvelled by this word 'power of compounding'. This word has been used by famous people like Warren Buffett, Albert Einstein, etc..

Let the number show you the wonder, see the picture below (click it to zoom):
As you can see, we assume that you have $100,000 in your savings. You can see the effect of growing the money at 5%, 10%, 15%, and 20% annually. By Year 20, those who grow their money at 20% per year accumulate $3.8 millions.

Ah Yap keep on stressing that we must have $100,000 before the age of 30. Why? Because with the $100,000, even if you let it grows in the Amanah Saham 2020 account will yield you $386,968 after 20 years. If you think keeping it in the normal savings account (at about 3% annually), $100000 will yield just about $180000 after 20 years.

There are 2 main points that I want to stress here:

Start saving early
Compound you money smartly, don't just leave it in the normal savings account

Setting Objective

2008-06-18T14:22:00.000+08:00

In order to achieve financial freedom, I want to stress on the importance of setting objective (the amount of money you want to accumulate for certain years). Without a pre-determine objective, you will not know the limit.

Basically, there are 3 types of objectives:

short term
medium term
long term

I like to use the term 'discipline saver', meaning that you pay yourself first each month after receiving your salary. Set an amount to be transferred automatically into an untouchable saving account each month. Even a small amount of $100 each month will do the wonder for you.

So, start setting your short term, medium term, and long term objectives right now.

Potato Investor

2008-06-17T17:29:00.000+08:00

Welcome to http://potatoinvestor.blogspot.com.

I have to admit that I am new to the world of investment. Each day I am learning from other established investors, my friends, and by reading books.

Human have limited brain capacity and memory. That's the reason I create this blog, to share with all my readers the knowledge that I gain on investment.

The focus of this blog is mainly on:

insurance
mutual fund
bond
stock
property

Do share your opinion by leaving messages so that this blog can be improved in the future. Do check out this blog every now and then. Stay tune for more updates.