January 2021

Should you be afraid of such market volatility?

Recent market movement is crazy. Looking at the chart below for Dow Jones Industrial Average Exchange Traded Fund, it is the daily chart showing the daily fund movement. When the market opened, look at the few red candles, it was a sharp drop! Slowly through the trading hours, it recovered back but it was still ended slightly lower than the market open time. It is scary, isn’t it?

Don’t over-react. Look at the scale, the market was merely moving from 310+ to 305+ then back to around 309+. The percentage? Nearly 2% movement from the highest and the lowest of the fund price.

Market volatility could be a good thing as it is an opportunity window. If you buy when the price dropped during the early trading hours and closed the position(s) at the end of the day, you would have profited about 2% in a day. But, this is normally not the case! Most inexperienced traders will panic when they see market is dropping sharply during the market opening hours. How many actually dare to buy in when the market drops sharply?

So, as value investors, I don’t fancy fast market movement. When I saw this kind of volatility, the best is not to see it. Tuning in to watch the market movement will easily lead me to making wrong investment decision. If no investment has been made, it is good to look at good companies to buy in during market crash period. The market crash hours (days) would be the best shopping day. If you have invested in some companies, staying calm will be the best choice. React only after the volatility is over. Re-look at the long-term plan and re-look at your portfolio investment. If the companies / funds are good, stay invested in the companies and the funds you invest in, the growth is being seen by being patient. Don’t let the market volatility to affect the long term investment plan. It will eventually return back to where it is supposed to be!

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Is Gamestop worth investing in?

While having so many news flying around this popular stock “GameStop”, should you follow the trend by betting on this stock?

GameStop was once a selected stock under my stock portfolio while I first started investing in the US stock market. The company issued reasonably good dividend every year but the stock price was not high at all back then.

When I did the valuation few years back for this stock, the intrinsic value was about USD 30-40 based on one of the valuation models. You can see that the stock price never went past USD 50 until recently (see the 5 years stock price chart). Coupled with COVID-19, this company was struggling with its brick and mortar business. However, with the amateur US traders piled in, the stock went up 400% within a week.

There are more new traders joining in the game with the hope to profit using this stock. Most traders out there now are emotional. It can be seen by the big price movement of the stock (see the 5 days stock price chart). The price movement is more than 50% every single day!

I had message from my friend asking whether this stock is worth investing in. My answer is “We should know the company well before we invest. Most people who are trading don’t even know the company, they are purely speculating. Is such investment decision sustainable in long term?”

None of us in the world can predict where the market will go. It can go up another 100% tomorrow and down 200% in the next day. What we can be more certain is the company’s fundamental. This company is doing well in its sales during the pandemic period. When one company is not doing well in its sales, the company share price will eventually be going back to where it is worth. With saying this, should you short sell? With this kind of volatility, short selling is extremely dangerous. There are better investment opportunities out there, why bother to look at this stock when the rational thinking has been thrown out of the way. Avoid FOMO – Fear of Losing Out!

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How does the Permai stimulus benefit Malaysian?

Our Prime Minister has announced additional stimulus package named “Permai Stimulus Package”. As mentioned in the article above, there are 3 main objectives. While some of them are to help businesses and increase the healthcare workers and protective measures such as protective equipment and vaccination. Public can also benefit from the following ways:-

For individuals

Entitle for tax relief for full health screening expenses expanded to include Covid-19 screening, tax relief amount increases from RM 500 to RM1000.
Extra Bantuan Prihatin Nasional Phase 2 (BPN 2.0) disbursement for households earning income less than RM 5,000 per month starting from Jan 21 (family RM 300 each and single RM 150 each)
Bank will continue to offer moratorium extension and restructuring of loan repayment
EPF will provide advance of up to RM 1,000 from amount applied under i-Sinar Category 2 facility. The withdrawal process under Category 2 has also been simplified as members only need to provide a self-declaration that they meet the prescribed criteria and submit supporting documents online.
Special tax relief of up to RM 2,500 on purchase of mobile phones, computers and tablets to be extended till end of 2021.
Provision of 1 GB data for educational purposes extended until end of April 2021
PTPTN loan repayment moratorium for 3 months for borrowers affected by COVID 19 or floods, with applications to be made up to March 31, 2021.
Special allowance for certain occupations: –
One-off provision of RM 500 to healthcare frontliners, and RM 300 to other frontliners in the first quarter of this year
Existing special monthly allowance of RM 600 to healthcare frontliners and RM 200 to other frontliners will continue until the pandemic ends
1. One off RM500 aid to 14,000 tourist guides and 118,000 drivers of taxis, school buses, tour buses, rental cars and e-hailing vehicles.
1. RM24 mil allocation to fund the full contribution under Socso’s Self-Employment Social Security Scheme for delivery riders
Rules will be relaxed for those who lost their jobs to apply for the Employment Insurance Scheme (EIS)
Electricity rebates for domestic and non-domestic users at a rate of 2 sen per kilowatt-hour, from Jan 1 to June 30.
Sales tax exemption for locally assembled and imported passenger vehicles until Dec 31

SMEs

The Wage Subsidy Programme 3.0 is enhanced, where for one month, eligible employers will receive a wage subsidy of RM600 for each employee earning less than RM4,000. In addition, the wage subsidy limit of 200 employees for each employer will be increased to 500 employees.
Prihatin Special Grant Plus to now cover 500,000 SMEs in MCO states (RM 1,000 each) and 300,000 SMEs in other states (RM 500 each).
Special discount of 10% on electricity bills from Jan to March 2021 to 6 business sectors; hotel operators, theme parks, convention centres, shopping malls, local airline offices as well as travel and tour agencies.
The government will also expedite the implementation of microcredit schemes including soft loans amounting to RM390 million by Bank Simpanan Nasional, RM350 million by Agrobank and RM295 million by TEKUN.
The Danajamin PRIHATIN Guarantee Scheme will be enhanced, with the maximum financing limit of RM500 million to be increased to RM1 billion and the scope of financing to include working capital with a guarantee period of up to 10 years. The scheme is also now open to foreign-owned companies operating in Malaysia as long as Malaysians make up at least 75% of their workforce.
The special tax deduction given to companies that provide at least a 30% reduction of rental on business premises to SMEs will also be expanded to include non-SMEs and extended until June 2021.
The Human Resources Development Fund will also exempt the employer levy for companies that are unable to operate during the MCO and CMCO periods.

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Is it wise to keep money in the fixed deposit?

The fixed deposit rate has been revised downwards several times in 2020. Despite recently the Bank Negara has announced the base rate remains unchanged, however, it is unknown whether the fixed deposit rate will reduce again. Interest rate reduction is required to boost the economy. While saving interest rate is low, people will spend rather than save. While loan interest rate is low, people will borrow money for investment and for business expansion. These are important to stimulate spendings and the economy.

While fixed deposit rate is low, the upcoming inflation is going to kill the wealth. 10 years ago, a Teh Tarik cost RM 1. In 2021, a Teh Tarik cost RM 2.20. The price has increased more than 200%. If we save RM 1,000 in fixed deposit 10 years ago, now, it is RM 1,350 at 3% annual interest. Why the value is not double? This shows that the inflation rate is in fact higher than the fixed deposit rate. If you keep your money in the Fixed Deposit without increase in your active income / saving amount, your wealth will decrease over time, i.e. you will become poorer because your affordability decreases.

However, by saying so, where to put the money if not fixed deposit? To make sure the money grows better, investment is the right place. Read more about investment trends here.

Investment is not a sure win, especially within short period of time. Market is always uncertain. Hence, for short term, putting your money into the investment is not suitable. For those who have cash flow issue, having emergency fund in fixed deposit is more important than investing. When one cash flow is not stable, investment fund will be withdrawn within a short period of time. Considering the management fees, brokerage fees involved, putting money into investment for people who have cash flow problem will be worse.

In conclusion, for those who have cash flow problem, they must first set up 3-6 months emergency fund in the fixed deposit. Fixed deposit can be easily withdrawn without loss. For those who are cash rich with emergency fund, it is indeed not wise to put the money into low-interest fixed deposit as the wealth will be reduced over time.

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What is diversified investment portfolio?

I have always encountered questions from my clients on why invest in so many funds. So, I have decided to write about this topic. Many are looking for return for their investment. Hence, investment risks are being overlooked, if not ignored. The right way for long term investment with stable growth shall be a diversified investment portfolio. Investment is a game of probability. There is no guaranteed win. To ensure long term gain, it needs to consider the risk to reward ratio and the probability of winning.

If the risk to reward ratio is 5:5, as long as the probability of winning is higher than losing, you will win in the long term. For example:

Investment 1: 75% winning probability, expected return is 10%, expected loss is 10%. The gain calculation = 75% x 10% + 25% x (-10%) = 5%

If the winning probability is 50%, expected return is 10%, expected loss is 10%. The gain calculation = 50% x 10% + 50% x (-10%) = 0%

If the probability of winning and losing is the same, then it is down to the risk to reward ratio to make sure the winning in long term. Say the possibility of the investment win and lose is both 50%. Hence the return percentage must be higher than the losing percentage for one to yield positive return. Example:

Investment 1: lose 20%
Investment 2: earn 50%
Investment 3: lose 20%
Investment 4: earn 30%

In this case, even though there are 2 losing investments and 2 winning investments, the overall portfolio is earning money.

This is the reason why diversified investment portfolio is crucial for one’s investment success. If one only invests into single item at single time. The chance of winning is 50%. If he/she has done some research, maybe the probability of winning is higher. Still, it is not certain.

A diversified investment portfolio into several countries, several sectors is the way to ensure risks are being mitigated. Despite some investments are not performing, as long as the percentage of earning is higher than losing, or the probability of winning is higher, the investments will do good in long term. Coupled with market research, the probability of winning hence being increased.

Example of the diversified balance investment portfolio is as follow (this is the example of iFast managed portfolio):-

Looking for personalised investment advice. You can contact me via telegram link below.

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Is Malaysia worth to invest in? If not, where else?

MCO struck again. As known, Malaysia economy will be impacted again due to restricted movement. It is again coupled with political unstableness. The future prospect of Malaysian investment remains unknown. Unless highly targeted investments in selected sectors or companies, Malaysia remains unattractive comparing to other countries.

According to Ifast Capital: “Fitch Ratings has downgraded Malaysia’s long-term foreign-currency issuer default rating (IDR) to ‘BBB+’ from ‘A-‘, with a stable outlook where the downgrade marks the ratings agency’s first for the country since the 1997/98 Asian Financial Crisis. The downgrade came as the rating agency opines that Malaysia’s key credit metrics have been impaired by the economic fallout from COVID-19 and has added to the country’s fiscal burden. While Malaysia’s economy is expected to rebound by 6.7% in 2021, lingering political uncertainties have added to the downside risk of the outlook. On fiscal deficit, Fitch expects it to remain higher than pre-pandemic levels, given a continuation of support measures and political pressure for higher spending. It also pointed out that uncertainty about the continued inclusion of Malaysia in a key bond index remains, and exclusion in 2021 could potentially generate capital outflows.”

If not Malaysia, where else?

China – China had its export rose last year to their highest level on record, positioning as the only major world economy to grow during the pandemic year. Chinese exports rose 3.6% from a year earlier according to data from China General Administration of Customs. Chinese factories are resuming on production after the lockdown. Chinese Yuan has strengthened against USD over the course of 2020.

Asia Pacific and emerging market – There are many countries such as South Korea, Indonesia, Philippines and Hong Kong are worth investing. These countries are having much more stable government than Malaysia. The post pandemic recovery should benefit the countries compared to developed countries. The loose US monetary policies will weaken US dollar which will increase additional investments in the emerging market and make cheaper borrowing for USD denominated debts.

If you are looking for personalised investment advice. Please contact me via telegram through the link below.

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How to buy Bitcoin in Malaysia?

Is Bitcoin legal in Malaysia? This is one of the most popular question in Malaysia. Bank Negara issued a statement mentioning that bitcoin is not recognized as a legal tender in Malaysia on 6 Jan 2014. In April 2019, the MAS referred it as a digital payment token for purposes of the Payment Services Act. It is unregulated in Malaysia.

We can buy Bitcoin in Malaysia through “Luno”, the first Malaysia’s regulated cyptocurrency exchange platform. It is fully licensed by Security Commission to operate in Malaysia.

Currently the platform is having over 6 millions customers and have processed over 17 billion USD worth of coins. At the moment, there are only 4 crypto currencies available in the platform, i.e. Bitcoin, Ethereum, XRP and Litecoin.

One can buy coins using local currency, MYR and sell the coin easily through the platform. Luno charges a small percentage of fee on selling and buying the coins if the transacted amount is small.

To open the account in Luno is easy but it requires several verification steps to prove identify. You can register a free Luno account via this link and receive RM25 worth of Bitcoin when you first buy min RM250 worth of coin.

Disclaimer: this is not a recommendation to buy / sell bitcoin. Do your own due diligence before starting. The writer has no liability on the loss incurred due to action taken for investing in Bitcoin.

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How does Bitcoin work?

Bitcoin is one of the cryptocurrencies, it is a type of virtual money which present only in the online world. It can be purchased using real money currency such as USD or local currency MYR. It is not controlled by the government or banks and thus it is often referred as “decentralized money”.

It can be used to purchase products and services if the seller accepts it. Not many shops are accepting Bitcoin yet and some countries ban it. It has a private code tied to each coin in which its value lies. When it is transferred online, its transaction will be tracked using a public list – blockchain. Since every transaction is being tracked, it is hard to be copied, and hence hardly any “fake bitcoin”.

The supply of Bitcoin is limited to 21 million coins, and all the coins need to be mined. Once all the 21 million coins have been mined, there will be no more supply. Hence, this is why the value of bitcoin can rise sky high because when the supply is limited while the demand currently is high.

As of end of 2020, around 18.5 million coins have been mined, leaving less than 3 million coins to be mined. Mining process is to complete the “block” of verified transactions of the bitcoin. Each miner doing the verification task might be rewarded with portion of the bitcoin. The reward of bitcoin is only given to the first miner who complete the task, hence not every miner completing the task will get the reward. This is the way to own bitcoin without paying “real” money.

Want to buy bitcoin in Malaysia? Click this link to open a free account from Luno – the first regulated cryto currency platform by Security Commission of Malaysia.

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How to make your new year resolution sticks?

You often see people doing new year resolution for things or goals they want to achieve every new year. But, I believe you also see most of them stopped doing what they planned to do after few weeks or few months, including myself. I’ve always constantly searched for the reason why some people can stick on with their resolutions and make them happen. These are my findings including how you can continue with what you plan every new year: –

Know your strong why: most people give up half-way because they are lack of internal motivation. If we want to slim down, what is the reason? The external why does not work as well as internal why. If the reason is: I want people to admire me, I want other people to like me, these are external why. If the reason is: I want to be healthy so that I can see my kids growing. This is an internal why. Identify your internal why.
Commitment: Tie the resolution with time and money commitment. If you do not commit, it is probably not important to you. You must be able to put in your time and money (or other resources) to do what you want to do for the new year. The more time and money you put in, the probability of sticking with your plan is higher.
Planning: A goal without a plan is pure imagination. “I want to be rich.” There is no plan on how to get rich, there is no way you can get to it.
Daily habit: Big plan without action, there is no use. People who start with big action will most likely give up. It is better to break the plan down to small daily actions which you can execute daily. For example, “I want to earn RM 240,000 a year.” Break it down into monthly goal of RM 20,000 a month. What type of activities you need to do daily to earn that money? If you are having a fixed salary of RM 10,000 a month, you know you have a shortfall of RM 10,000 a month, how are you going to catch up with this gap? Selling things online? Short term trading? How much time you are devoting for setting up your store online? How much time you are spending on trading? These are daily habits to be considered. Not just big plan like “I’m going to trade like the professional within a year”.
Accountability: Internal motivation will not be enough, there should be also an external force to encourage you to move ahead with what you plan. Have a group of positive people who can guide you, check on your progress to ensure things are moving ahead.
Environment: If you are surrounded with the right people wanting what you want to achieve, things are easy. They can share with you their lessons learnt, your learning curve is shorter. If you are surrounded with people who are against your resolution, you need strong internal motivation which you need to spend huge amount of time convincing people who don’t trust your planning, discouraging you from your goals. Most of the time, this is what happens. Change your environment, change your friends who you hang out with the most. You will see your life changes as well.

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Is change needed for the new year?

When it comes to new year resolution, identify what needs change is crucial for better self-growth. How do you determine whether something needs to be changed? The followings are some guidelines: –

Are you happy with who you are now? This is the simplest form of identification. If you are happy, why do you want to change? We only change things that we are not satisfied with. There are many aspects you can consider on, i.e. health, wealth and relationship. Are you happy with your current body shape, your weight, your look? Are you happy with your current networth? Are you happy with your relationship with your friends, your spouse and your kid?
Check the reason of your unhappiness. You don’t need to change if it is due to external factors. Somebody suggested you to change a car. You are wondering whether you should. This is not the reason you should change. Understand the real reason. For example, you are considering in changing your job. The reason shall be related to yourself, i.e. you cannot see personal growth or career development in your current job. If it is mainly due to your boss or your colleagues, these reasons are not solid. You should first try to check whether you can change departments than changing the job.
When change is needed, it is better to identify what exactly needs to change. Let say, I want to have more money than last year because I want to buy a new home. This is vague. How much money is considered “more”? How long do you need to save RM x to buy a new home (consider how much you have currently?) What are the activities you need to do to have more money.
Visualise the end goal / change, put it on the dream board. Having something in a written form will increase the probability of success in getting what you want. Spend few hours having the new yearly dream board.

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