If you refer to the previous rates in August 2009, you will notice that there’s no change to the rates at all. But many people are saying that our Bank Negara will increase the interest rate soon, considering the fact that our economy is slowly recovering. I’ll post up an update to this list of FD rates once there’s any changes to the interest rate.

Hope it helps.

The Malaysia government has recently announced Budget 2010. To be honest, there are not much good news for this time’s budget. But whether there’s bad news or not, it is really up to you to decide.

Anyway, for this post, I will talk about one of the most talked about changes – the reintroduction of the Real Property Gains Tax or RPGT.

From BERNAMA:

The real property gains tax (RPGT) will be fixed at five percent on the gains from the disposal of real property effective 1 January 2010.

Reiterating this on Sunday, Second Finance Minister Datuk Husni Hanadzlah said that the rate imposed is irrespective of the holding period and the category of the owner.

However, exemptions to the individuals are given as follow;

* The level of exemption is increased from RM5,000 to RM10,000 or 10 per cent of the chargeable gains, which ever is the higher;

* Gifts betwen parent and child, husband and wife, grandparent and grandchild; and

* disposal of a residential property once in a lifetime.

To be honest, there are pros and cons here.

Pros:

• This will deter property investors from acquiring too much properties. Most often than not, the property price fluctuates because of flipping and holding activities. If a place is too crowded with property investors, the price will go up and down pretty fast. This is quite bad for people who are looking for a place to stay, and not investors. So by having this, it will limit the property investors’ activities, thus keeping the property price under control.
• Lesser property investors also mean the number of mortgage loans defaulters will decrease.
• More people would be able to purchase properties for their own stay since they don’t need to fight with so many property investors anymore.
• There could be a number of good bargains on the secondary property market from now until end of 2009. Existing property owners might want to offload their properties without incurring the 5% tax, and due to the competition, it could end up as a buyer market where the sellers are more willing to bargain.
• The fluctuation in prices for properties in prime areas will be minimized. This is because the demand will drop due to the big property gain often associated with properties in prime locations. Remember the more profit you gain, the more tax it’ll incur, and the more tax it incurs, the more property investors would avoid it.

Cons:

• Unfortunately, despite what the government wants, I believe the property price will still increase. The secondary market will have to include the 5% RPGT. As a result, a property which is selling for 500k now as compared to 300k when it was first bought, would cost additional 10k in 2010. As for primary market, the price will also go up because home buyers would turn to new properties instead of the expensive secondary market.
• Luxury property developers would take a hit. A 1,000,000 condo in Mont Kiara (bought 3 years ago at 700k) would cost an additional 15k in RPGT if the owner decided to offload it in 2010. That is quite a huge amount. That’s why I believe the luxury property projects would take a hit due to this RPGT especially when most of the buyers are property investors who would want to maximize profit.
• Some property investors are foreign investors who are investing their money in our country. By implementing this, the foreign investors might stop to pour in more money into our property sector.
• The banks are likely to increase their interest rate as the economy recovers, and this will be worse for those home buyers who have to pay for the extra 5% and then pay the higher interest rate.

Many people say that the reintroduction of the RPGT is not really helpful but I believe there are pros and cons to everything. The main question here is whether the cons far outweigh the pros and whether this RPGT is really able to achieve what the government is trying to do – to make homes more affordable to the middle and lower income groups.

Feel free to post up your opinions on this. Again, this is based purely on my opinions and views.

But irregardless of how easy and simple trading it can be, the sole question remains – should you switch (or trade) your mutual fund often? For me, it’s not recommended. But this is just my personal opinion. Don’t come after me if things end up differently for your case.

Anyway, here are the reasons why I do not switch my fund often.

• I’m lazy. Yes, I admit it. The amount of research needs to be done is hugeeee. It’s even worse than stock trading. Because for any single fund, you are practically looking at few stocks or an entire industry in general. In stock trading, you only need to look at few companies that you know about.
• The service charge is high especially if you are changing from equity fund to bond fund. But even for standard fund trading, the service charge is high. Do bear in mind that the amount you are trading is pretty huge too.
• Mutual fund investing is more like a savings account for me. And well, I don’t go changing my savings account from one bank to another. So it’s the same concept. I pump in money every month, and just leave it there. Once I need it, I will get it out.
• Mutual fund investing runs on the concept of dollar cost averaging. It means you buy the same unit at a lower price in order to average out the units you’ve bought at a higher price before this. So if you are going to switch it around….doesn’t that defeat the purpose? It’s just like buying the stocks of a single company at different pricing VS buying different stocks at different pricing. That’s not dollar cost averaging in my opinion.
• Last but not least, if I really want to switch fund often, I should just spend my time, efforts and money into stock investing since it’s a lot easier to monitor. The rewards are bigger too (so are the risks).

So yeah, those are the 5 reasons why I don’t like to switch fund often. Most people I know have the same reasons of not switching their funds often. And there are also those who don’t like to trade at all, be it stocks or funds. To them, it requires too much time. But either way, there are more people who do not like to switch their mutual funds often, as compared to those who always switch around. Yes, there’s no doubt that you might be able to earn more by switching around – it’s the same with short term selling in stocks. But the risk is also there.

At the end of the day, it depends on your objectives to invest in mutual fund. Are you looking to earn some quick cash and are willing to face some risks? Or are you just treating it as some sort of a savings account? The answers to these few questions will determine whether you should switch your mutual fund often.

Hope it helps.

And for some people, such prices have gone overboard and they could no longer afford these properties especially those in the Klang valley and also few popular spots in Penang.

Then the question of “when should I really get a property?” comes out. Is it better to get it now since the property price is just going to go up anyway? Or should I look at what can I afford irregardless of the demand-supply in the property market?

It’s a tough question to answer because ….well, I do believe our property market will not slow down. More and more people form other states are coming into the Klang Valley and some towards Penang. So the demand will still be there especially at the popular spots like Petaling Jaya, USJ and Shah Alam areas. Waiting it out could mean that the gap between what you can afford and what it takes to afford a property, might end up getting wider and wider.

But don’t panic. In my humble opinion, you need to consider a few things before you dive into the property market.

• Do you have emergency fund? – you need to have at least 6 months to 2 years of emergency fund, depending on your monthly expenses. Yes, this should be the priority before you get a property. If you don’t have this, then save up for this before thinking about property.
• Is your job or career path stable? Can your skills and attitude help you to get a job where many have failed? - this is to ensure that when shit happens and you get retrenched, you will not remain jobless for too long. Because if you’re jobless, you still need to pay the bank for the property loan and that is going to make your life very very stressful.
• Do you have other investment? – stocks, mutual funds, fixed deposit accounts, EPF, these things can help you to move some of the money into property investing.
• How desperate are you in looking for a property? – are you getting married, or the current landlord is chasing you out? This will determine how desperate you are and also determine if you can actually wait a little longer before getting a property. Remember that desperation is not good when you cannot even afford it in the first place.
• and why are you looking to get a property in the first place? – is it for investment and you plan to sell it out after few years, or is it for your own stay? This question will determine the location and the type of property you should invest in…and of course, these 2 conditions will determine how much you actually need and if you can afford.

Once you have the answers for the questions above, you should know whether you can afford to buy a property now, or is it still better to rent a room for now and wait it out?

In the end, I believe that investing in a property is a good thing to do but you really need to know why do you want to get a property…and also if you can afford one with your current financial condition. Never ever dive head-first into property market if you are unsure of what you are doing. It can be disastrous, just like what happened to many newbie property investors in 2007-2009. They bought properties they could not afford, and were forced to sell them off cheaply.

Property market can be rewarding, but it can also be pretty damaging. So thread carefully. Do your research, do some soul-searching and think carefully before you invest.

All the best.

Why? Well, it’s because it’s more rewarding than our Fixed Deposit and less risky than investing in stocks. For some, it is because they don’t really need to manage their portfolio. They normally just leave it to the fund managers to handle their money for them. The losses will be minimal, and same goes to the rewards.

But lately, things have changed a little on the mutual fund front. There are more and more funds to choose from now. Investors need to read up about the background, the industry, market segment, etc before deciding which to invest in (and choosing a proper mutual fund can be quite a daunting task now). Also, investors can start to trade their mutual fund units ONLINE.

As you can see, the mutual fund we have now is no longer the same as the one we used to know. Instead, it has become something similar to the stock investing that we all know (and some of us fear) - online trading, a lot of options and plenty of research works to be done.

So other than the high service charges, the minimal losses and profits…. there’s really not much difference from stock investing. If that is the case, why are people still interested in mutual fund investing and the same group of people remain fearful of stock investing? Aren’t these 2 becoming incredibly similar? Mmm perhaps most people still don’t know anything about these 2 and the mutual fund…being cheaper, definitely looks to be ’safer’.

Not really. For your information, my losses in mutual fund in the year 2008 was about 60% while my stock losses was lesser than that. And to make things worse, I can’t simply change/sell the funds because it’ll incur further losses for me – service charges. I can only stop putting money in, cost averaging, or switch to bond (and incur service charges). Who says mutual fund is safer?

That is why I always suggest people to look into stock investing. There’s really not much difference between the 2 and for me, the pros of stock investing far outweighs the pros of mutual fund. Treat mutual fund as a form of saving, and stock investing as…well…a form of investment.

But either way, you should know what you are putting your money in BEFORE you actually do so. Putting money into something you have no idea off is equivalent of gambling….and not investing. So thread carefully.

Well, to be honest with you, saving is not really that difficult. Even if you can only save 5% of your monthly salary, it is still good enough. The ideal case is of course to have 10% or more, but any saving is better than no saving.

So to get you started, here are some simple ways you can do to come out with that 10%.

• Cut down on your WANTs. This is important. The things that you want can be very expensive – fashion goods, gadgets, cars, etc. These things can take away a large sum of your money. Try to cut them down as much as possible. It’s okay to have 1 or 2 WANTs…. but a warning to you, don’t ever fall into the trap of having too many WANTs.
• If you always have no money left due to debts, then clear or reduce them as much as possible. Credit card debts should be the first to clear. Also, try to refinance your loans and see if you can get a better deal. Once your debts are cleared, you should have sufficient amount of money to save up – provided you don’t go get another debt!
• Start to cook at home. Eating out is expensive – the food, the parking and the fuel. Furthermore, it’s healthier too.
• Minimize expensive activities such as movies, clubbing, meals in posh restaurants, etc. For example, if you are a regular Starbucks customer, cutting down 1 cup of coffee per week can save you around RM 50 per month. That is already 1% of RM 5000 (average salary for Malaysians).
• Get some side income such as earning money online, get some part time jobs, freelance, etc. You need to sacrifice some time to earn, but I feel it’s worth it in the long run. But only do this if you are sure you won’t neglect your day job.
• Remove your credit cards. They can be helpful if you know how to use them but if you are the type of people who can get tempted easily, then stop bringing them out. Credit card debts are the type of debts which bring a lot of people down.
• Travel by public transport or car pool. You can really save a lot there, even though you need more time to commute.

Some may argue that the amount of money saved using the above methods will not be much….well, I think it really depends on your lifestyle. Also, I can’t stress enough that any saving, even 1% of your monthly salary, is better than no saving.

Just always remember to control your own WANTs. Know your limits, and your financial condition. Don’t wear a hat that is bigger than your head.

I think one of the main reasons is fear (or uncertainty). After witnessing so many economy crashes (notably the one in 1997-98, early 2000 and the recent 2008 crash), most people are feeling fearful. Well, to be honest, it’s not easy to see thousands of your (or your friends’) hard-earned money burning and feel nothing about it.

But sad to tell these guys….investment is a must whether you like it or not. Saving up is good but if you don’t invest, your savings might end up as waste paper few years down the road due to our inflation rate. So unless you really want to see your money ends up that way…you should really consider investing your money.

So what are the investment types that you can consider?

Fixed deposit - this is the simplest and the one with the lowest risk. But it is also the one with the lowest return. If you keep your money here and here only, fear not, your money will still be waste paper after 10 years or so. My advice is, only keep your emergency fund here.

Mutual fund - this is the most common and popular option for many people especially those that do not dare to venture into stock market. It is relatively safe but with minimal return. But then again, do bear in mind that you are paying the fund managers a substantial amount of money per transaction. That alone will minimize your return. True, it’s safer than stock market but don’t expect too much out of this. My advice is, treat this as your saving account and pump in money every month. Invest in a mixture of equity and bond fund.

Stock market - this is the so-called high risk investment type. I’ve been investing in this for few years now…. a lot of ups and downs really. But one important lesson I’ve learned during the March-8 crash ….. never ever speculate because speculating = gambling and in stock market, gambling is suicidal. My advice to you is to read up more about stock investing and invest only in blue chips. Defensive stocks like Telekom Malaysia is a good option since they give pretty good dividends. And be ready to put there for few years. Remember that short term selling in stock market is equivalent to speculation/gambling.

There are other options such as gold investing, money market fund, etc but I’m not very well-versed in those. That is why I never talk about them. So that’s another lesson for you – don’t invest in things you don’t know.

At the end of the day, I believe stock investing is the best option if you know what you are doing and if you can control your emotions well (the ups and downs of a stock market are not for the faint-hearted). But no matter which option you choose, it is still better than no investment at all. So start taking your first step – invest 10% of your monthly income is always a good start.

All the best.

p/s…. property investing is out of scope because it requires a substantial amount of money as compared with the options above.

So the next question is, is this the right time to enter the stock market?

Well, it depends on what kind of stocks you are looking at. If you are planning to invest in a good company with good management (and good cash flow. Don’t just look at the profit), then I don’t see any problem. Buy it when the price is right…..not the lowest and not the highest. Then keep it for few years.

On the other hand, if you are a speculator and want to invest in those stocks with fluctuating price, you better be careful. Don’t forget what happened during the stock market crash especially the one in 1997-1999 period. Stocks which were priced at $20 could disappear within a weak. That is 20k worth of money burnt in 1 week.

These stocks are what I always call empty vessels. Companies which have no proper cash flow, limited assets and yet have a ridiculously high price tag.

My advice, never to invest in such stocks. Yes, you might be able to earn a lot by trading them within a short period of time due to their fluctuating prices but chances are, you will get yourself in big big trouble most of the time. Because the stock price does not reflect the true value of the company.

Remember that investing in stock market is not gambling. And if it’s not gambling, why do you want to put your money into a company which is practically an empty vessel? And if you are not investing in empty vessels, there’s no need for you to panic even if the stock market crashes.

p/s…. over the years, there have been a number of companies which are regarded as empty vessels. If you have been in the stock market for long, you should be able to see. I won’t give any examples here though.

p/s…. empty vessels are not necessarily petty stocks. Some petty stocks actually have pretty good records, with proper management.

• To make it your personal home – for your own stay.
• Flip it when the price is right and when you found a buyer.
• Leave it vacant until a suitable buyer or the price increases.
• Rent it out.

If you happen to choose the last option which is to rent it out, you have to be careful. From my observation, there are a lot of tenants who move out without paying the rent. I’ve myself have witnessed 2 or 3 such cases in my condo. The landlords came over and complained about it. Apparently, these tenants did not pay a single cent for the past few months. They kept on delaying the payment and moved out within 24 hours.

Just imagine if you are renting your condo unit out for RM 2000 per month. And 3 months without rental, it’s a huge RM 6000 ! Not to say you have to repair and refurbish the whole unit once they’ve moved out.

Some of you might say that you will have legal documents and stuff. But the thing in our country is, how are you going to find those people? It’s near impossible.

So my advice to you, don’t rent it out if you can. If you still insist on renting the unit out, make sure you collect the rental every month and always ensure you select the right tenants. I know sometimes it’s hard to even find a tenant, but leaving your unit empty is still better than finding a tenant who doesn’t pay.

Should I go against the market?

Some investors who managed to catch stocks at cheaper prices may have been selling most of their holdings lately. Unfortunately, the market continues to trade higher than previous selling prices. In such situation, the worst mistake for some retail investors is to abandon their contrarian strategies and start buying back the shares that they disposed off earlier at even higher prices.

I still remember one of Warren Buffett’s favorite quotes is something like “to be fearful when others are not, and to be brave when others are fearful”. In other words, when others are panicking and sell, the price of the stocks will take a plunge. That is the good time for long term investors to acquire some stocks. And when others are franctically buying in order to jump on the so-called ‘wave’, it’s time to sell before the bubble bursts.

But as you’ve read in the article, this is not always the case and it CAN be disastrous if you don’t have a proper plan. I believe the keyword here is patience. Never ever panic. Remember that in stock market, missed opportunities are nothing special. Whatever that goes up will eventually come down.

Conclusion, go against the market and also the main population (of the investors) if you know what you are doing. Don’t ever become impatient because being impatient can be disastrous when investing in stock market. But if you are truly an investor (and not speculator), buy low on the stocks that you really interested to invest in. Just be prepared to hold on to your stocks for at least 3 to 5 years.