That was close ... Part 2!

Just came back from Manila. It was a very pleasant, yet eventful trip.

Remember i blogged about how close it was to the bombing incident in Bangkok a while ago? This time, it got closer!

The infamous hostage incident on August 23th happened, right in front of my hotel! Will blog more later.

It was a very sad incident though. Aiks... rest in peace, for those who lost their lives in that rainy day...

My Testimony for a Training

Dear Sir,

The idea of Wheel of Life has a profound impact on me after my 5 weeks training. This is the first training course which I have attended that emphasizes on the need to work on every aspect in life, instead of just money or relationships alone.

I did Finance in both my undergraduate and postgraduate studies. Just like most of the young finance graduates, I have always wanted to be an investment banker. I was so fascinated by the sophistication of the job, the glamorous lifestyles and, of course, the handsome monetary compensation too.

To me back then, the definition of Success was the number of zeros you have in your bank account, the title of your job and the bank you are working at.

Lucky enough, I had the chance to work in a Swiss investment bank in Hong Kong a couple years later. I was literally working 7 days a week, an average of 90 hours a week. It was a very rewarding experience nonetheless and till today, I am still benefiting from the hours of hard work which I have put in. However, despite the increasing level of wealth, I realized that I do not feel happy at all.

Despite having a great career and being financially healthy, I realized that I do not have the balance in life – I did not exercise as much as I should be; nor did I spend enough time with my wife or my friends; worst of all, being miles apart from my parents, I did not spend enough time with them too.

Due to the fact that we are so busy with work, we often take the most important things in life for granted.

I was very grateful that I was presented with a wonderful opportunity to return to Malaysia, doing a job which gives me great sense of accomplishment. Furthermore, it enables me to live a more balance life now. I must admit that it was not an easy decision to be made, but with a clear vision of what I want in mind, I made the choice.

All these while, I always have the concept of “balance in life” but it was not very clear to me. I was very lazy when it comes to “sit down and write down your goals” because I thought, I know what I want in life, and they can be easily pulled out from my mind whenever I want to.

However, after attending the course, I was told to list down my 7-day goals, my master dream list, goal planning sheets and others, I suddenly realize, and appreciate the power of writing them down.

What I want in life and how I would like to achieve them are much clearer to me now.

“Personal leadership is the self-confident ability to crystallize your thinking and establish an exact direction for your own life, to commit yourself to moving in that direction, and then to take determined action to acquire, accomplish, or become whatever you identify as the ultimate goal for your life”

Writing what I want to achieve in life down on a paper enables me to crystallize my thinking, and guides me to the right direction. I believe, as long as I persevere, and determined enough, I will be Successful in life too.

Today, I can proudly say that, finally, I understand the true meaning of Success – It is the progressive realization of worthwhile predetermined personal goals, and they are my goals to make me a more complete and balanced human being.

Thank you

Yours Sincerely,

Some Brilliant Quotes

1. If an egg breaks from outside, a life ends; if an egg breaks from within, life begins: Great things always begin from within3:09 PM Jul 22nd via UberTwitter
2. If I fall and I fail to get up, then I will never get up - Nick Vujicic2:52 PM Jul 22nd via UberTwitter
3. You are allowed to make mistake, but not the same mistake twice2:14 PM Jul 22nd via UberTwitter
4. If you want something you have never had, you must do something you never have done" First you build the people, then the people build the Organization " - Brian Tracy10:03 AM Jul 22nd via UberTwitter

Thoughts: Money and Life

Read an interesting blog entry by famous blogger fourfeetnine.

It's an interesting entry about Wants, Needs and Money. In today's society, especially in Malaysia, it is quite a common scene to see everyone (nearly) drives to work. But yet, there are still a lot of "Car-Less" people out there.

It's nothing unusual to not own a car of your own in other parts of the world, but in our country, a place with poor public transportation system, it is quite a pain in the a$$ to rely on it on a daily basis.

Fresh grads these days could hardly earn enough to save or to live, let alone to finance their own vehicles. To make things worse, cars in Malaysia are rather expensive. Low pay, overpriced cars, overpriced property and high cost of living will only lead to one result. Instability.

We have imbalance here. Unfortunately, we don't live in a Perfect World as generally assumed by Economists. This imbalance does not revert to norm at all. When you have low income but high expenditure, you will see huge outflow of talents (well-known case for Malaysia), and for those who stay behind, you hear dissatisfaction day-in day-out.

Either way, it will do the country no good. So, as you can see, the problem of budget deficit or one government could be better than the other does not really solve the problem, if the root issues are not being addressed properly.

When I first graduated from Uni, I called for a family meeting. I told my dad that despite with my qualification, i will be doing a donkey job and earning peanut pay for the 1st few years. What that means is, though your son has great potential to achieve great things, he won't be able to bring back much money to support the family and buy his own property or car in the initial years of working life.

So i suggested to my old folks. You helped me with a car and a property to begin with, that, will help me to focus on making money and saving them up.

as you can see, though i am not from a well to do family, it's simple maths. With their years of savings, naturally the car they can afford would be better than what my peanut pay can afford. Similarly, they can afford to buy a nicer property with huge potential for appreciation, versus what i can do with my peanuts.

Think about it in long term: They have buffer now but i don't. Without the need to divert my savings into houses and cars, I can roll my savings into investments or businesses which can help my wealth accumulation. 10 years later, i should be able to build up my buffer, whilst they will be more or less use up theirs. So then, with a house and a car in hand (financed by Family Fund), i can use the money saved to take good care of them. So in the end, the whole family benefits.

But what if i do what most Gen Y do? At the start, parents' funds will most likely sitting in Fixed Deposits generating peanut interest. I as a freshie, making peanuts and have to save about 5 years before i can put down the down payment for my car or house (with a 30 year loan somemore). Then after another 5 year later, my cash flow remains super tight, as i don't have investment (all spent on financing the cars and house), nor i have much flexibility (because salary does not rise in tandem with inflation), whilst parents are using up their savings bits by bits (it will escalate to "chunks by chunks" if they don't have insurance plan and there's health issues). After 10 years, in scenario 2, the whole family will suffer.

With the way the economy is going, we know one thing for sure. Young people is going to suffer. And with them going down, i don't think the older generation can last any longer too.

Wants. Needs. Money. It's hard to juggle at times... but before you can talk about Wants and Needs, you will need to sort out the financial blueprint for your family first.

Investment 101 - Benchmark

Let’s talk about investment.

Rule #1 of investing, you must know your own benchmark.

i.e. when you get your return on investment (ROI), you must be able to see, whether has it been a profitable investment, or otherwise.

For instance, in Malaysia,
- The inflation rate is about 3% a year, whereas
- 12-months fixed deposits (FD) give you about 3.70% per annum.
-Unit trust A, with 100% equities exposure gives you 8% return a year.
- Direct investment in stock B listed on KLCI 15% p.a. (tell me if you can find one!)
- 1 banana is selling for RM1. (c’mon, tell me you do have some sense of humour!)

Ok, so what does all these numbers and facts mean?

Let’s start with a simple scenario. You’re 25 years old. Work your arse off for 2 years and manage to save up RM 5,000. What an achievement.
But you know for sure RM5k savings won’t bring you anywhere. So you have decided to take a bold move and ready for some investment.

Naturally, and traditionally, most of our “investments” are in Banks’ FD. Correct?
If, and only if, you keep your savings underneath your pillow, so what have you actually “lose”?

CASE 1:
Beginning of the year you have RM5k, in terms of purchasing power, you can afford to buy 5,000 bananas. Wow. Ok, then you decide to put 5k underneath your pillow.

After 1 year, you dig out your RM5k notes, go to Giant or Tesco and want to reward yourself with 5k bananas, only to find out that due to inflation, 1 banana now costs you RM 1.03.

So in terms of purchasing power, your RM 5k no longer can buy you 5k bananas, but only RM 5k / RM 1.03 = 4,854 bananas, 146 bananas less than one year before!

So in the end, you still have your money in hand, but, it has lost its value. Thanks to the erosion caused by Inflation!

CASE 2:
Same scenario as before, but you use the RM5k at the beginning of the year to buy RM5k worth of bananas, i.e. you have 5,000 bananas in store. Assume that you can store it in superb condition for a year (ignoring storage costs……); at the end of the year, you sell all the bananas at market price of RM 1.03. At the end of the year, you have RM 5,000 * RM 1.03 = RM 5,150.
Oh wait, have I made 150 bucks for trading bananas? Not bad eh! But wait a minute, something is not right here.

Actual return on investment = RM 150 / RM 5000 = 3% = inflation rate p.a.!

So you thought you made some, but in the end, you only manage to hedge your savings!

CASE 3:
So instead of buying bananas, you put your money into FD. Smart move.
After one year, you have RM 5,000 plus 3.70% interests = RM 5,185. Not bad.
You withdraw all the money from the bank and go get yourself some banana.

At the end of year banana price of RM 1.03, you can buy RM 5,185 / RM 1.03 = 5,034 bananas! Crikey! 180 more than case 1, 34 more than case 2!

That’s investment!

You want more bananas?

CASE 4 & 5:
Just lump the two investments together, basically they will tell the same story.

Instead of putting in the FD, you have decided to buy Unit Trust A or direct investment into stock B.

Maybe it’s pure luck or maybe you’re inspired by financial geeks, you get 8% return back from investment A and / or 15% back from investment B. Bravo!

So how much have I made? You asked yourself. Let’s get back to the real finance and stop playing so much with bananas.

You should know by now that inflation will eat into the amount of bananas that you can buy at the end of year. Good.

So now you have made 8% (15% for B). But which benchmark do you compare against?

Both the investments have beaten inflation rate of 3% like how Bruce Lee smashesfinancial_cicak. If you lose me here, it means that you can buy yourself a lot more bananas.

But is that your real benchmark? You should be smart enough to put your savings in FD.

Instead of putting your money with the bank which gives you 3.70%, now you’re investing in unit trusts or share.

So by not investing in FD has become an opportunity cost for you! Is it really worth it?

Absolutely. Investment A gives you an extra 5% return while investing in stock market gives you a handsome 12% return!

Thus your actual benchmark is … your next best investment opportunity! In this case, FD.

But hey, are we missing out something here? I am afraid so.

Rule #2 of investing – Risks vs Return

The above example has one major flaw. It has totally ignored one of the most important elements in terms of investing. RISK!

Basically the illustration here assume that all the investments, either in bananas, hide underneath pillow, FD, A or B have similar risks. Is this the case?

No no… so how do we measure risks? That's another story altogether that deserves a whole chapter to itself...

This is a story about ...

I was reading blogs online and i found this interesting entry by Paul. (well, not as entertaining as Joe's one since he's suffering in Pakistan right now...). Anyway, back to Paul's.

Written in Chinese, Paul mentioned about how his ancestor had to evacuate China and come all the way to Malaysia in the early days. Interestingly, apparently, his ancestor is a kung fu master. He was oppressed by some rich government officials and he accidentally hurt them. So he has to flee to save his life.

This story reminded me of the story my dad used to tell me. I think it would interesting for me to share this little history of my family on my blog here.

Once, i asked my dad, "Dad, can you tell me more about our ancestor? Any great war time hero story?"

Dad said,"well, let's see. During Ching dynasty, there were a few of our ancestors working as government official in Fujian province. We're not very rich, but decently well-known family there."

"Apparently one day, one of our ancestor had a quarrel with somebody. Then they fought. In the end he won, but he thought he accidentally killed him (he did not actually)"

"So the whole family fled Fujian, and traveled west to Guang Dong province."

"They walked for days, carrying all their luggages on their shoulders by bamboo sticks. They have no idea where to go, just hoped that they could travel far enough not to be caught by the police"

"One fine day, when they were still on the road, out of a sudden, one of the bamboo stick snapped and broken into half."

"So they stopped, and they looked around and found that, hey, this place ain't too shabby"

"Let's settle down here."

and the place is called Yellow Bamboo Yang, Mei Xian, Guang Dong (黄竹洋，广东梅县）

Looking at google map, think they had traveled over 500 kilometres before the bamboo stick snapped. Wonder how long did they take actually...

Though he does not sound like a kung fu master, but then, at least my ancestor was not on the losing end of a fight :)

and this is a small unrecorded history of my ancestors.