Wall Street: Money Never Sleeps – Lessons Learnt

Poster taken from: (http://www.wallstreetmoneyneversleeps.com/ )

Yesterday, I went to Mid Valley to watch this movie. This movie is a movie that I can really relate to because stock market trading is one of the fields that I am really passionate about. The story is about Jake, a Wall Street executive who faces a lot of challenges in his personal and working life (I won’t bother you with the details since I do not want to spoil it for those who want to watch this later) due to a few factors. From the storyline, I want to highlight a few lessons that investors and commoners can learn from in order to become better knowledgeable people:

1. Realize The Power Of Rumors Over A Stock: To those who are in the investing world, we always hear the phrase “Buy on rumors, sell on news”. Actually this fact is somewhat true. There are a lot of ways for companies to raise their stock prices, and one of them is to spread good rumors about their company (for example won a new project tender, white knight buying their stock). These rumors will then spread like a virus throughout the whole country and cause the company stock to either increase or drop depending on the nature of the rumor. Therefore it is possible for a stock to go from $1 to $15 in a few days just because of a rumor. However, the company which stock had climbed up will be queried by the Securities Commission and this company has to provide an answer to why its stock is surging up when there is no news. The lessons that we can take here is, be alert of the rumors that are spreading, because it might be about the stock that you are holding.

2. Money Never Sleeps: This sentence is meant especially to those out there who haven’t started any type of investment in their life. Money which is sitting in the bank or safe deposit is actually useless to us unless we need to use it in the short run. Therefore, this money is best left to work in investments where the money will generate more money. The least you can do is buy some stocks of a blue chip company that you really like and trust in. The money that we left in the market will then start working for us, although while we are sleeping, because this money will be invested in the business of the particular company which stock you bought. Therefore, I urge those who are still yet to start investing to start investing soon.

3. Choosing The Right Market For Your Investments: The world is evolving everyday. In the early 2000′s, it was the internet companies who made a fortune out of their rising stock prices (people investing more in one particular market means there will be more capital to do business in that market, hence meaning better returns on investment). At other times, other different types of markets are making a lot of profit out of the stock market. Therefore, it is really important for investors to always monitor the market movement and identify which market will be the next emerging one. Recently, a lot of nations have been focused on spending money in green technology so that our future grandchildren can live a healthy life. Who knows maybe this market might be the next hot one in a few years?

4. Investing Is Like A Roller Coaster Ride: There will be ups and downs in investing. One moment you might be up $1 million but the next you might be down $2 million. That is why the most successful investors are those who are really strong at heart, besides having a strong mind. Investing is a tough job, it requires a lot of patience, bravery and acceptance. To those who want to venture into high risk investment, make sure you are prepared to lose big and accept that kind of loss. If not, you will end up losing big and not having the heart to rebound from it. Different people have different risk appetites, therefore it is important when you start investing to identify how much risk are you willing to take and how much you are willing to lose if that investment fails. Need further advice you can contact me and we can talk.

That is all for now. These are just some of the many lessons that I can conclude from the movie. To those investors out there, I really recommend that you watch this movie because it was a blast for me!! I really loved it, and hope to see these types of movie in cinemas again in future :)

Do I Need A Personal Loan?

Being in the mid 20′s age bracket, I have a lot of friends who are just starting their career and have very low cash in hand. There are some who started saving in university, so they have ample cash in hand for personal spending but not enough to do other big things such as getting married. To those who are born with a silver spoon, they do not have any problem doing things that they want. People are born in different kinds of families, it is important that we accept where we come from and strive for a better tomorrow.

Therefore, somewhere sometime in our lives we will ask ourselves this question, “Do I need a personal loan so that I can do the things I couldn’t do without it?”.  I hear a lot of opinions from others saying that getting a personal loan is bad for your finances, so today I just want to share my humble opinion on whether or not you should apply for a personal loan to finance your activities.

1. A personal loan is OK for you if after all monthly commitments are taken into account (including those which are not taken into account when you apply for personal loan such as phone, internet, satellite tv, magazine bills etc), you have about 40% of your paycheck left. This is important especially if you’re taking the personal loan for spending, not investing. The number is relative depending on the amount of commitment that you have, but 40% is a general number that applies to most classes. You don’t want to get yourself into a tough spot where you do not have enough cash for your daily spending. If this happens, you will need to make more money to keep up with your lifestyle or apply cost saving initiatives.

2. A personal loan is OK for you if you have side income besides your monthly paycheck (or monthly income for business owners) to pay for the extra monthly commitment that will incur after your loan is approved. For example you might have side income from doing freelance work such as taking pictures for events, giving talks or maybe income from investments. This extra income ensures that your monthly loan payment is taken care of, thus reducing stress of thinking about lower monthly income.

3. A personal loan is OK for you if you have a steady job with a steady annual pay raise (steady annual incremental returns for business owners). This ensures that you can take other loans such as house or vehicle loans whenever your annual income has increased. If you don’t have an annual steady income raise, it is better for you to take the minimum amount of personal loan that you need to finance your activities rather than go for the maximum amount that you can take.

4. Finally, a personal loan is definitely OK if you are going to use it to enter a high potential investment. An investment with high returns will offset the amount of money that you need to pay monthly for your personal loan. Personally, if a friend or colleague introduced you to a high potential investment, I would advise that you go for it after you have investigated all the parameters involved and found out that it is a genuine investment. Make that loan and see your money grow after you have invested in it :) Of course make sure you also have all the 3 points above to ensure you have a positive monthly cashflow.

There you go people! If you need further advice on personal loan, do not hesitate to contact me and I will try my best to provide some advice on how to go about it. Cheers :)

Give More and You Shall Receive More!

Good day everyone! To all Muslims, it has been a fine fasting month and the festivities are going to come soon (tomorrow in fact!). Therefore, I would like to wish you all:


(picture taken from http://rivafauziah.wordpress.com/2007/09/26/lebaran-ketupat-cianjur-2007/)

Those of you who are in the KL area, do stop by my place to enjoy the available food and then we can catchup with each other as well.

Anyways, I want to write about the saying “Give and You Shall Receive”. I believe this expression holds true in most cases. The things that we give can be in any form, some of them being:

1. Money: To actually be a wealthy person, you must also have the spirit of giving back to the people in you. I learned this by observing a lot of wealthy people throughout the world, even in my own country, Malaysia. In the USA, we can see how the IT billionaire Bill Gates and his wife setup a foundation in order to give back to the community by doing research and innovation in the health, development and learning. (Refer to www.gatesfoundation.org/). In Malaysia for example, there is Tan Sry Jeffrey Cheah of the Sunway Group who is doing quite a lot in the education field to give back to the community. Therefore, no matter what our financial status may be, we can always give to the unfortunate to make their lives better. Ultimately, by doing this a lot, you will end up realizing that these small efforts that you put in into making other people’s lives better do make a difference to your life too.

2. Time: Some people just want you to spend time with them. When I did community service for a primary school with deaf students back in July 2009, what I realized at that time was that these unfortunate kids do not really want your money, instead they really desired the time and attention that you can spend with them. Therefore, whenever you have time to participate in any charitable events, do join in and try to enjoy and learn about how others’ live can be made happier by simply spending some time with them.

3. Knowledge: People say “Knowledge is Power”. Before this, I have always had the mindset that I cannot share my secrets or tips to others because it would jeopardize my own chance to succeed. Thanks to a few people who I have had discussion with, that mindset has now been more towards “I need to share more knowledge to gain more knowledge”. With sharing of knowledge to others, we actually are empowering them to do something that they otherwise couldn’t have done without the knowledge. When the knowledge is applied and positive results are obtained, people will actually appreciate where the knowledge came from, which is you. Indirectly, they will consider you as a person they trust to share their ideas and knowledge for your benefit. Of course there are people out there who are selfish and never appreciate others even after obviously using the knowledge that they have learned from you. Still though, some level of confidentiality needs to be practised when sharing knowledge and ideas. Maybe the top-of-the-pyramid strategy that you have needs to be kept to yourself until it has been proven successful, by then only can you share this knowledge.

4. Love: I don’t mean giving love to others (especially those who you don’t know) in an affectionate way! Rather, what I mean is you should show more love when you are treating others. This can as simple as saying thank you when the waitress sends you the food, or as complex as listening to your friend’s problems and identifying the solution for them. I really like the expression “Love Makes the World Go Round” because I believe it is strongly true. Try to smile more, say “thank you” and “please” more, to the married couples – say “sorry” more etc and you will notice that other people will also treat you better than before.

With the Raya holidays coming up, maybe we can practise giving to others in order to enhance our philanthropic traits. By writing this article, I am actually giving my idea towards this issue so that others can benefit from it. Once again, have a fantastic holiday guys and do drop any comments or add-ons if you feel like em :)

No Pain No Gain!

We always hear the expression “No Pain No Gain”, whether it be from friends, colleagues, family members etc. Actually, this statement is very true and it can be applied in any field. Let met take the investment field for example and share what I understand by this phrase.

The term “No Pain No Gain” can be associated with the term “High Risk, High Reward” in investment. Because in investment, the higher the risk that we bear, the higher the return that we can reap, but also do not forget higher loss that we will incur if the investment goes bad. How do we actually know that an investment is low risk or high risk? Let me share with you characteristics of a high risk investment, and from there you can take the opposite of it to be low risk investment characteristics.

Determining amount of risk riding on an investment can be done by investigating the following characteristics:

1. Amount of $$$ riding on it: Simply said, the higher proportion of your money invested in something, the higher the risk you are taking. It goes back to the saying “Don’t put all your eggs in one basket”. For example, if you had RM100k and invested it all in property, it something goes bad then you will lose all your money. But if the property appreciates really well, your return will be maximized since you invested all your money in it. If you had invested RM50k in property and RM50k in shares,  then should something happen to the property investment, you will still have the RM50k you invested in shares. Therefore, do diversify, but do not overdiversify so that you can manage all your investments.

2. Volatility: Volatility refers to how fast the value of investment can fluctuate. High volatility means the value of investment can fluctuate on very short notice and low volatility implies that the value of investment is stable and will not fluctuate on short timeframe. One example of a volatile investment is the stock market. In just a few minutes, the price of a stock can go from RM0.20 to RM0.30 or from RM0.50 to RM0.25. So, if you’re holding mass quantities of these stocks, you will have either made a great gain or suffered a great loss. For more stable investments, go for property, bonds, unit trusts and some others which your investment value will not fluctuate on very short notice.

3. Type of Industry: Different industries have different risks riding on them. Generally, we can identify which industries are low risk and which are high risk. But to be specific, an industry can be both low and high risk, depending on other affecting parameters. In general, low risk industries are industries like banking, agriculture and food because these industries always have significant demand. High risk industries include construction, transportation and IT because in these industries, competition is getting tougher and tougher and companies need to have cutting edge talent and resources to be able to make good profit.

4. Personal Touch: We are all humans, and to a certain extent we trust those that have personal touch with us more compared to total strangers. To me, having looked at all the other 3 characteristics above, I will also need to look at whether the person that I am in contact with for that particular investment has a personal touch with me or not. If there is person A who is a total stranger, and person B who I personally know, which both of them can offer the same risk and return on investment after looking at all 3 items above, I will prefer person B. This is because choosing a person I personally know means there is lower chance of being cheated and taken advantage of. Plus, when we personally know their background, family, financial status and resources, we will have more confident and trust in the person, therefore we will feel less worried about an investment although it is high risk.

This has been quite an elaborate post. Hopefully you will benefit from it.  There are other small parameters that are used to determine risk of an investment, but what I shared above is just the significant ones. For further clarification, do not hesitate to post a comment or you can even contact me for a drink.

Happy fasting to all Muslims and happy Merdeka Day to all Malaysians! :)