Financial Planning Talk (7): Is Insurance Important?

Earlier, I have mentioned that before we start to invest, we need to have sufficient emergency fund. Actually, beside this emergency fund, we still need to protect our wealth before we start to invest. Saving money and invest is to accumulate our wealth and gain more wealth. In order to make sure we are able to accumulate and gain more wealth, we need to protect our wealth in the first place.

Why do we need to protect our wealth? During our wealth accumulation, if there is any accident or we are so unfortunate and get illnesses, we may spend all our wealth for our living expenses or medical fees after the accident or illnesses. If we have no any wealth protection, all the money which are accumulated over few tens year may be spent finish in a short while.

How to protect our wealth? When we talk about wealth protection, it is insurances. Insurances can pay for us when we need to be admitted into hospital. Insurances can provide some money when we get serious sicknesses. Insurances can leave some money for our family when we are not around anymore. So, insurance is the tool for us to protect our wealth.

When we are considering buying insurance, we need to understand our ability. There are a lot of insurance plans. We need to understand the coverage, premiums, terms and conditions when we decide to buy a particular plan. We need to consider our ability, do not buy a high premium policy which makes us stress when saving money to pay the premium.

Besides, buying insurance does not need to buy much. Just buy whatever you need, just buy whatever you can, then it is good enough. Personally, I prefer to buy traditional policy instead of investment-linked policy or some saving plans. Life insurance, medical card, 36 critical illnesses, and personal accident policies should be sufficient for normal individuals. Insurance is to protect our wealth, it is not to earn money. It is advisable that we invest in other investment tools to gain return instead of signing up investment-linked policy.

Maybe you can look for a good agent to explain to you in details about all these policies and try to figure out the best combination of policies you should buy. I feel that most of the policies out there are almost same, so I would choose a good agent and buy from him or her. A good insurance agent is very important, as he or she can always review the policy together with you according to your dependants and income. When you need some advice about insurance, he or she can be always available to help you. Try to emphasize more on the quality of the agent, but not only the premium and policy.

Financial Planning Talk (6): Is Emergency Fund Important?

After we assess our financial situation and set our financial goals, we will come out with a financial plan or investment plan. Earlier, I have stated that paying off all the debts should be the first step in our financial plan. So, if we have paid off all the high interest debts, then we should save money and invest to gain more money with money.

Many people neglect the first step before they invest, they do not have any cash for emergency case, so when they need some cash urgently, they need to cash out their investment even their investment is facing paper loss. This is not the right way, as investment need to be long term.

An emergency fund is very important for us before we start to invest. The objective of investment is to earn money comfortably and make our future life better. So, when we invest, we should make sure we are comfortable with the investment and we will not worry about the investment everyday until cannot sleep or cannot eat. By having a sufficient emergency fund, we should not be worry about our investment and let the investment grow over the time.

Then, how much is sufficient for an emergency fund? This depends on our expenses. Normally, financial advisors will advice us to prepare an emergency equivalent to our 6-month expenses. This can make sure we still can survive for 6 months if we lose our job suddenly. For those who are still single and not the main source of income for the family, you can consider preparing an emergency fund equivalent to 3-month expenses. It is not easy for career newbie to accumulate 6-month expenses as emergency fund.

How we can prepare the emergency funds? We should save a portion of our salary, maybe 10% or 20% every month to accumulate this emergency fund. The best way to put this emergency fund is Fixed Deposits (FD) which we can cash out money immediately (if it is business day) if we need the money urgently. If your job is extremely safe and your income is not the only income for the family, you can consider putting 70% of it into FD, and 30% of it into some low risk funds, such as bond funds.

The last thing to remember, while our expenses increase along the way, our emergency fund should increase as well. Review our expenses regularly and add more into the emergency fund to maintain our emergency funds to be always equivalent to our 3-month / 6-month expenses.

Batu Kawan announces 3Q FY2008 Report

Batu Kawan (BKAWAN) has announced the financial report of 3Q FY2008. These are the few key points of the report.

- The group achieved a substantially higher pre-tax profit of RM124.8 million against RM77.9 million reported in the corresponding quarter last year, mainly due to higher profit contribution from KLK.

- The group’s pre-tax profit for the current 9 months under review of RM387.0 million was 69.9% higher than the RM227.8 million achieved in the corresponding period last year.

- The EPS of current quarter is 28.01 sen against 17.15 sen in the corresponding quarter last year. The EPS for the current 9 months is 86.99 sen while the EPS for the corresponding period last year is 50.29 sen.

- Total assets of the group is 2,879.58 million while the total liabilities of the group is 88.63 million.

- The net assets per share is RM 6.34

Historical Performance of Malaysia Equity Funds (31 July 2008)

(Bracket indicates negative value)

1 Year Return Ranking:

1. MAA Capital Guaranteed 1 – 9.52%
2. PRUlink Guaranteed Account – 8.05%
3. MAA Capital Guaranteed 2 – 7.49%
4. MAA Capital Guaranteed 3 – 6.92%
5. MAA Platinum – 6.10%
6. HLG Industrial and Tech Sector – 2.78%
7. HLG Consumer Products Sector – 2.27%
8. MAA Technology – 1.85%
9. OSK-UOB Resources – 1.51%
10. AmGlobal Agribusiness – 1.47%
11. PRUGlobal Basics – 1.26%
12. HwangDBS Glo Emerging Markets – 0.90%
13. AMB Value Trust – 0.13%
14. Property Plus CG – (0.06%)
15. AmNew Frontier – (0.16%)
16. MAAKL Dividend – (0.42%)
17. ASM Dana Al-Aiman – (0.45%)
18. AmDividend Income – (0.49%)
19. ASM Dana Bestari – (0.88%)
20. AMB Ethical Trust – (0.91%)

3 Year Return Ranking: (Annualized Return)

1. OSK-UOB Smart Treasure – 31.28%
2. HLG Industrial and Tech Sector – 29.08%
3. AMB Value Trust – 27.08%
4. OSK-UOB Emerg Oppty – 27.02%
5. Uni Aggressive – 25.50%
6. Public SmallCap – 25.29%
7. Manulife Equity – 25.08%
8. AMB Ethical Trust – 25.01%
9. PB Growth – 24.76%
10. Public Aggressive Growth – 23.51%
11. MAAKL Progress – 22.88%
12. CIMB Principal Equity – 22.70%
13. Public Islamic Opportunities – 22.61%
14. OSK-UOB Small Cap Opportunity – 22.34%
15. Uni Strategic – 22.13%
16. CIMB Islamic DALI Equity – 21.29%
17. MAAKL Value – 21.25%
18. TA High Growth – 20.68%
19. ING OA Inv- ING Ekuiti Islam – 20.42%
20. MAAKL Growth – 20.05%

5 Year Return Ranking: (Annualized Return)

1. PB Growth – 22.98%
2. Manulife Equity – 21.33%
3. AMB Value Trust – 20.74%
4. Public SmallCap – 20.11%
5. Public Aggressive Growth – 19.40%
6. CMS Islamic – 18.88%
7. AMB Ethical Trust – 18.58%
8. ING Dana Suria Ekuiti – 18.31%
9. OSK-UOB KLCI Tracker – 18.13%
10. Public Ittikal – 17.91%
11. Public Equity – 17.58%
12. Public Industry – 17.55%
13. MAAKL Al-Faid – 17.55%
14. CMS Premier – 17.34%
15. Public Islamic Equity – 17.22%
16. Public Savings – 16.96%
17. Public Growth – 16.96%
18. ING Equity – 16.79%
19. Public Regular Savings – 16.79%
20. Lion Progressive – 16.62%


Source: Lipper

6 Tips to Get Out from Debts

Recently I read an article at Money Compass magazine, feel that these 6 tips should be beneficial to those who have credit cards debts currently. So, I just translate it to english and post here.

Tips 1: Face the debt honestly
There are many people not clear how much debt actually they have. Normally, they just pay the minimum payment after they receive the bill. If you have any debt, take out all the bills immediately and calculate how much debt you have now. Face your debt honestly.

Tips 2: Plan for a budget, compare the interest rate, and repay the debts as soon as possible
Everybody should plan for own budget and spend wisely. When expenditure is higher than income, we will take loans and get credit card debts. Try to avoid instalment when doing purchase, thus can save some interest. We should manage to calculate the interest for each type of loans or debts, and find the best way to save the interest. If we know that we have not enough money to spend, we must spend wisely, spend on needs, but not spend on wants. Beside, we also need to increase our income by getting part time jobs.

Tips 3: DO NOT use credit cards if you are not self-discipline
To enjoy in a short while may cause you into financial trouble for a long time. Do not think to enjoy first and pay later. When you want to swipe your credit card, you must justify if you are able to pay the bill. Make sure to clear all the credit cards bills before the due date. Reminder: credit card is a payment tool which provides us convenience. If we are not self-discipline enough, DO NOT use credit cards.

Tips 4: Restructure the debts and manage the debts
While settling the debts, we should settle the high interest debts first. Meanwhile, we can discuss with banks to restructure the debts, trying to get the plan with best interest rate, and manage the debts properly. Beside, we also can look for assistance from AKPK consultants, get out from debts by managing the debts effectively.

Tips 5: Record all the expenditure
We should record down all the expenditure according to different types of expenditure, such as meal, purchase daily necessary, phone bills, etc. With this record, we understand where we spend our money to. By adjusting our expenditure, we can allocate a portion of the money as emergency fund or for investment.

Tips 6: Forced Saving
If we have no saving at all, it is useless we mention about investment or financial management. It is very important we have savings. According to our expected standard of livings, set appropriate financial goals, force ourselves to save money regularly. It does not matter on the amount, even it is just small amount, it helps to achieve our financial goals. When there is economic crisis, this is very important, we should prepare 3 to 6 month expenditure as emergency fund. If you plan your financial early, there is no worry even during economic crisis.