Financial roadmap(I)

I am sure most of us when we looked back at our financial journey, we wished that when we first started there is some form of a do's and don't list to guide us. Most of us learned the hard way, either by lots of reading and attending seminars(which you are not sure if they even practice what they teach) or by trial and error through making investments mistakes. And some of these mistakes can be costly. Fortunately, there are few blogs(here and overseas) which are worth reading and thanks to the effort that they have put into the writing. Hope this one will help as a guide to the start of your financial journey as well.

For the 20s to 30 - This is where most of us would have just started working. 

Savings, savings and savings. This is the phase where one needs to save and save hard. Unfortunately, to grow money, you need to have first pot of money first. And there is no way other than saving. It is important to start early as most professionals preached, otherwise, your later part of life will be harder.

Most of the fresh graduates starts with around $3000, and if you are able to save 30% of the salary which is $900, in 5 years time, you will have accumulated $54,000. At the age of 26, you will be able to start your investment using this pot of money, part of it into ETFs and the rest as opportunity fund when the next crash(like in 2008) happens. There are other blogs which talked about the merits of investing into a permanent portfolio using ETFs, which I will not repeat here.

Debts, debts, and debts. During this phase, and in fact at every stage of life, there will be financial temptations. Is it necessary for that expensive trip to Europe or US, do we need a new mobile phone or a car, must we own an expensive condo in the city fringe. Whatever it is, keep debt low, remember leverage can go both ways.

Insurance. While you are still healthy, remember to upgrade your medical plan such as the shield plan. Keep it simple by just getting a life insurance since your parents might depend on you now. There has been alot of debates on ILP, personally, I would avoid as mine is still under water even after 12 years. And if you are investing using ETFs, then, there is no need for ILP.

In the next post, I will talk about 'for the 30s to 40'.

Stock watch: Global Investments Ltd

Technically, chart is trending up although 50MA is still below 200MA. It has also tested the support level twice(arrows), and today the candlestick closed strongly with good volume. Will there be a breakout soon?

Below is the analysis from the research report. I have extracted some of the key data from the report, low PE, low P/Book ratio and high dividend.

Market watch: STI 22/9

After the meeting last week, Fed reserve will continue its bond-buying and did not taper the QE as market has expected. The "good" news send most global markets up and Dow Jones hitting new high again. 

As for our STI, it has also reacted positively and last week it has crossed the pivot value of 3130, the falling rate has slowed down as per the monthly chart below. However, long term, it is still bearish as 50MA is still trending below 200MA.

In CNBC last week, Warren Buffet said that he is having a hard time finding things to buy, does that mean anything?

 

Stock watch: Keppel Corp

Technically, long term Keppel Corp is still bearish as the 50MA is trending below 200MA. However, for mid term, looking at the weekly chart below, the downtrend has slowed down and there is a possibility that it might turn up if it is able to stay above $10.7. Daily chart for 5/10/20 MA have all trend up.

Given that US economy is recovering, KepCorp has been mentioned in many articles to be able to benefit from it. Fundamentally(simplistically), KepCorp is trading at around 11 PE, has quite high ROE of around 20 and it's dividend yields around over 4%. For more detail analysis, click here for a report by Seeking Alpha.

Why I am not buying REITS now ...

Market has recovered last week and continue to sustain today. Most of the counters are back in the run and especially the REITS which have been beaten for a while, has made some gains. At the current price, it seems attractive to invest as passive income given that most will give about 5 to 6% dividend.

However, after thinking through, I have stopped my itchy finger from pressing the 'BUY' button. 

And here are the reasons:

1. Based on the broad index(chart below), there seem to be a reversal looking at past week candle stick but 10MA is still pointing down. Would it be a case of rebound after deep correction and then continue downtrend again?
2. How much of the QE will Fed withdraw, no one knows. Will there be a shock?
3. And when interest rate increases, how will it impact REITS, especially those who's debt is on the high side.
4. 10 yr SGS bond yield is close to 3%, is 5% from REITS attractive then?

As much as I want to collect them for passive income, I dont want to caught myself losing, due to capital loss.

Abe's 4th arrow - 2020 Olympics

Tokyo, the Japanese capital, has beaten Istanbul and Madrid, to host the 2020 Olympics. Japan's economy has been on the recovery since Abe's 3 arrows to revive it's economy. The Japanese stock market has responded strongly to these initiatives. Now by winning the 2020 Olympics, there has been market talk that this is the 4th arrow which has further boosted the Japanese confidence. In many news article today, there has been reports on the further uplift of Japan's GDP till 2020 and how the win has also raised business leaders' confidence towards the economy.

All of us know that for a stock market to be able to rally up, it has to have both Confidence and Funds, now it seems that the Japanese economy has both. How can we join the party?

There are a couple of Japanese funds that is listed in the NYSE, below is a list;

1. Japan Equity Fund(JEQ)
2. Japan Smaller Cap(JOF)
3. iShares MSCI Japan Index(EWJ)
4. WisdomTree Japan Hedge Equity(DXJ)

Click on here for a research article by Fidelity, you will find information on the annualised returns and the expense ratios for each fund.

War and the stock market

Just this week, world leaders have arrived at Saint Petersburg for the G20 summit. One of the agenda is to discuss on the Syria crisis. Global markets have corrected since the Syria crisis due to the uncertainty of whether is there going to be a war. 

While surfing aimlessly, I came across this interesting article from seeking alpha on how Mr market reacts before and after US launched the Iraqi war. One of the interesting observations in the article and also by a number of experts, market rallied when war is started. Looking at the chart below, it is quite true for the Iraqi war during 1991 and 2003.

How about our STI? Let's us look at how our STI reacts to the 2 Iraq wars, dated Jan 1991 and Mar 2003.

If you look at the first Iraq war(red oval on left), the index rallied from about 1200 to more than 2300(in 1994), more than 1000 points.

The next Iraq war, the index rallied from about 1300 to 3650(2007), more than 2300 points.

What is the similarity here?  Both started off from a low base of below 1500. Looking at where STI is today, do you think history will repeat itself? If what the experts said in theory is true and history were to repeat itself, does that mean that STI will hit at least 4000 in the next few years ???

How do you handle a recession

Last night, I was catching up on the short documentary show 'Recession Heros' which I had missed the last couple of weeks. Fortunately, thanks to technology and XINMSN, you can actually watch it online, which is cool. After watching, it sets me thinking, are we ready for one?

Dow Jones and S&P 500 have not been able to hit new high and have been in  consolidating phase recently. It can go either way in coming months. Due to the recent correction, all regional indexes have also been down by more than 20%, and if it stays down with no signs of reversal, then the market might actually be in Bear zone. Thailand was also the first country in this region to have gone into recession since the major financial meltdown. Currencies have been behaving abnormally, most of the regional currencies(such as ringgit, baht, rupiah, rupees) have weakened alot against the USD.

With recessions, many jobs will be lost and how do you prepare for one if it comes. Actually the sad part is that most of us are not prepared for one until it hits us.

Honesty. Be honest about your layoff. Tell your closed ones, spouse, families including your children. By telling them, at least, you do not have to face the pressure of why not going to work after your layoff.

Severance package. For the lucky ones, if you have a severance package, do not spent it on an expensive vacation or buying an expensive gadget for yourself. Plan and use it carefully cause you do not know when the next job will come.

Budgeting. Discuss with your spouse on the family expense. Cut back on spending, determine what is need and what is want. The toughest part about this is telling your kids to cut back, no more eating in restaurants, visit to ice-cream cafe, buying of toys, etc.

Insurance. Ensure that your family(including your elderly parents) and yourself is covered with a comprehensive medishield plan. When one is down on luck, alot of other unfortunate things can come along. With medical covered, at least you dont have to worry about huge medical expense.

Reduce your debts. If it's so unfortunate that it is a prolong one, then look into cutting your debts, such as credit cards, property, car, etc.

Invest. Ideally, one should already have an investment portfolio before this happens. But most of us would not have one. If you manage to find the next job before finishing off your severance package, then you should make good use of the amount for investment in preparation for your next job lost. Yes, economics and jobs are very mobile now, and what you do now is to prepare you for your next job lost, sadly.

Hopefully my readers will not have to refer to this post during your work journey..

When should you cut loss

When market is on the uptrend, everyone is happy. But no stock market goes up forever, at some point it will correct, whether big or small ones. When the trend turns the other way, most of us will struggle emotionally on whether should we take profit off the table or to cut loss for the losing trades. This is why Mr Market is so interesting and everyday, every events bring different end results to Mr Market due to human emotions.

Take for e.g., this trade which I had made during October 2012(the first red arrow on left). At that time, I bought ishares silver(SLV) at about USD33. Also note that the 50MA has crossed above 200MA, so trend should have been reversed to uptrend. 

However, in Feb 2013, this had changed with 50MA below 200MA. At that point, instead of selling when TA told me to, I was holding onto hope that silver will ride up again. But it never did, and I finally cut loss at about USD27(the 2nd red arrow), sometime in April this year. 

Looking back, if I had not cut, I would have lost more(on paper), cause silver actually hit a low of USD18. And because I had cut loss in April, only then I had the capital to buy again recently. 

Related post: silver trend reverse