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4 Mistakes People Make In Stock Investing
As a dividend investor who derives dividend income regularly from a portfolio of dividend paying stocks, I believe all of us can move towards financial freedom investing in the same. However, many fail to build additional income or grow wealth sustainably over the long-term despite having a sincere desire to move ahead financially.

So, where do we fall short?

In this article, I will list four major mistakes that most people make when attempting to make money from the stock market.

1. Investing without a Plan

First, investing starts with one having an investment plan.

Basically, it has four key elements:
1. Your Current Financial Status
2. Your Future Financial Goals
3. Duration
4. Choices of Investment Vehicles and Strategies
An investment plan is likened to one planning a trip. It starts with where you are now, where you want to be, when you intend to reach your destination, and how you intend to get there safely. The subject of investing is confusing but usually this is due to one trying to invest without having a plan beforehand. It is like driving around in circles when investing their money.

This leads to:

2. Investing Becomes a Game of Chance

Today, we have 900+ stocks listed on Bursa Malaysia. Which stocks should you invest in?

Logically, the answer depends on your investment plan as it helps you select stocks that would propel you towards financial success. However, many do not bother to sit down and have their plans crafted as the process seems boring. Thus, how would most people pick their stocks?
1. Feel, Guts, and Emotions?
2. Colleagues, Friends, or Relatives?
3. Stock Tips, Rumours, and Commentaries?
As such, many treat stocks like lottery tickets. They may buy stocks out of hope after having heard of some “exciting news” about them. Many expect the prices of these stocks would go up forever. It is a fallacy as they would soon met with disappointment when their stocks fall in prices. This leads us to:

3. Buy High, Sell Low

Ideally, success in investing revolves around four words: “Buy Low, Sell High”.

However, it is easier said than done. As mentioned, many buy stocks after gaining knowledge of exciting news about them. What is this news usually about? In most cases, they are about stocks that have experienced the highest appreciation in a short span of time. Instead of “Buying Low”, many resort to “Buying High” as they want to join the bandwagon.

Usually, a savvy investor would stay away from such stocks or would have sold their shares at high prices (“Sell High”).

This is a reality of the stock market. Stock prices go up and come down. It is the norm and hence, a savvy investor would have prepared for what to do if his or her investment fell in price. But since most people do not have a plan, they panic when prices drop and “Sell Low” out of fear even though they “Bought High”.

At these times, an investor with know-how would enter the market to accumulate more of these stocks as their prices would be trading at a discount (“Buy Low’).

This brings us to the next question: What gives these investors the guts and confidence to invest in stocks when their stock prices drop?

4. Not Treating Stocks as Businesses

Investing is more intelligent when it is businesslike.

Warren Buffett, the living legend and an example of how one who can amass billions by investing, advised not to speculate the markets.

So, what is the meaning of being “businesslike”? It is one who views stocks as businesses which own assets and generate profits and cash flows from their customers. Thus, an investor would first study, in great length, a stock’s business models, financials, and its future plans for growth. If the stock is fundamentally solid, he proceeds by assessing its stock price and would only commit his capital into it if its prices are relatively cheap. This explains why savvy investors, like Warren Buffett, can be confident on their stock purchases in a bad market.

Regrettably, many do not view shares as certificates of ownership of a business and thus, buy stocks with little knowledge on what businesses they are into and how much money they are making. It is a mistake and the biggest downfall is one who bought into stocks where their businesses are unprofitable.

Think about it. Are they able to grow shareholders’ wealth sustainably over the long term? In short, it does not take a genius or a crystal ball to build a stable and a regular source of income from stock investing. It takes a plan, logic, willingness to learn and a business mindset to profit consistently from the stock market.

This article was written by Ian Tai. Ian can be reach via email iantai888@gmail.com.
June 15, 2022

Insurance: Planning for the Future

Insurance planning is the foundation of a good financial plan, ensuring that you have a backup plan to provide enough family income and to fund medical expenses in the event of unforeseen circumstances such as premature death, total permanent disability, critical illness, accidents and hospitalisation, in terms of personal risk.

You should also extend your insurance planning to cover properties risk, liability risk and professional liability risk based on your circumstances and needs.

In the financial planning process, you must first determine your current financial position and make sure you have emergency funds for six to 12 months before you proceed to insurance planning.

With proper assessment of your current financial position, which includes your cash flow and net worth statements, you can determine your insurance needs more clearly in terms of family expenses and outstanding debts obligations.

As a financial planner, I would normally advise my clients to have adequate emergency funds and insurance coverage before they consider venturing into investment. As far as investment is concerned, all investment assets need time to mature to meet your financial goals without any disruption from personal risks, property risks, liability risks or professional liability risks arising from unforeseen circumstances.

Insurance serves as the cheapest and most effective tool to cover potential financial losses without touching your investment assets.

When engaging in insurance planning, seek advice from your trusted professional financial advisor to assist you while working out which insurance plan will best fit the requirements of you and your family, according to the following guidelines:

What kind of insurance do you need?
What will your insurance policy cover?
How much insurance coverage do you need?
How much will you be paying for the insurance coverage?
What happens if you fail to pay the required premiums?
Should you replace an existing insurance policy?
What happens if you terminate your policy?

Your active participation is required when working with your financial advisor to work out an insurance plan that best suits your needs. Be honest about your financial situation. Communicate your goals and objectives. Do not be afraid to ask questions!

In the attached charts, I have provided some guidelines as to the types of insurance coverage to consider. You may then determine the quantum of coverage to ensure you and your loved ones are protected. Take time to make your decision. Regard your financial advisor as a trusted partner, and not merely a salesperson.

What Type of Insurance Do You Need?

If you are worried about…	You may want to consider this type of insurance…	How it helps…
Life insurance
Death of breadwinner	Life	Provides some money for your family if you die.
Total & permanent disability	Life	Provides some money for your family if you suffer from a total or permanent disability.
Death of mortgagor/main borrower of home loan	Mortgage term reducing insurance (form of life insurance)	Pays off mortgage if mortgagor dies.
Health insurance
Trauma/critical illness	Critical illness	Pays a portion or lump sum on first diagnosis of serious illness.
Medical bills for major illness or accident	Medical expense, other hospital and medical plans & riders	The main medical expense insurance plan pays a portion of hospital and surgical costs if you are ill or suffering from injuries due to an accident. Complementary plans such as riders cover co-payment portions (eg deductibles and co-insurance) that are not covered under a main plan.
Long-term care for disability	Long-term care, eg supplements	Pays a fixed monthly amount for long-term treatment upon the insured’s inability to perform a number of “activities of daily living” like bathing, dressing, etc.
Loss of income because due to hospitalisation	Hospitalisation cash plans	Provides income if you are hospitalised.
General insurance
Loss of or damage to your belongings	Home contents	Pays for repairs or replacement if you suffer loss or damage to your home or contents. If you are renting your home, it’s your responsibility to cover loss of or damage to the contents of your home.
Damage to car/theft	Car	Pays for repairs or replacement if your car is stolen or damaged.
Damage to your home	Fire/home	Pays for repairs or replacement if you suffer loss or damage to your home as a result of perils such as fire, flood, and burglary.
Loss of luggage/trip delays/cost of medical care while travelling	Travel	Pays for repairs or replacement if you suffer loss or damage to your belongings. Also pays for financial loss if there are delays or cancellations. Pays for costs related to personal accidents while overseas, including medical and repatriation expenses.

About the Author

Tan Kim Book, CFP, IFP is a Licensed Financial Planner with Phillip Wealth Planners Sdn Bhd and certified member of Financial Planning Association Malaysia (FPAM).

June 15, 2022

7 Rights As A Financial Planning Client That You Should Know

Working with a financial planner can be an extremely rewarding and valuable experience for you and your family. If you’ve decided to work with a financial planner, it’s important to understand your rights in the professional relationship. By knowing your rights and what to expect from a financial planner, you can take an active role in shaping your financial future.

1. You have the right to a planner who has integrity

Trust between you and your financial planner is central to a successful financial planning relationship. You rely on your planner’s honesty, professionalism and abilities to achieve your financial and life goals.

When you know that your financial planner takes his or her professional obligations seriously, placing principles over personal gain, you can develop the type of partnership that is crucial to the success of any professional relationship.

2. You have the right to objective advice

Your needs should be at the heart of all recommendations made by your financial planner. Your financial planner should use his or her experience and judgment to carefully consider your situation, and provide you with advice that best meets your goals.

Sometimes, this objectivity may require your financial planner to explain that your goals are unrealistic given your current resources and financial commitments. He or she may then suggest alternative goals or priorities.

3. You have the right to be treated fairly

Your financial planner should treat you the same way he or she would like to be treated in a professional relationship. This involves clearly stating what services will be provided and at what price. Your financial planner should also explain the risks associated with his or her financial recommendations and any potential conflicts of interest.

For example, does her or she gain personally or financially from your purchase of a particular product, or from the outcome of a suggested strategy?

4. You have the right to a planner who is professional

Your financial planner should not provide investment advice or stock brokerage or insurance services unless he or she is properly qualified and licensed to do so. If your situation requires expertise that your financial planner does not have, he or she
should suggest other professionals who may assist you.

5. You have the right to a planner who is competent

You have the right to expect your financial planner to demonstrate an appropriate level of knowledge to offer financial planning advice, such as the attainment of CERTIFIED FINANCIAL PLANNER certification, the standard of excellence in financial planning.
Your financial planner should complete continuing education courses as part of his or her ongoing commitment to competency.

6. You have the right to privacy

To get the best results from your financial planning relationship, you need to divulge relevant personal and financial information to your financial planner on a regular basis. Your financial planner should keep this information in confidence, only sharing it with others to conduct business on your behalf, at your consent, or when required to do so by court order.

7. You have the right to a planner who is diligent

Your financial planner should discuss your goals and objectives with you and explain what you can expect from the relationship before engaging you as a client. Once the financial planner has determined that he or she (or his or her staff and/or network of related professionals) can assist you and has gathered sufficient information, the financial planner should make – and, if appropriate, implement – recommendations that are suitable for you.

A diligent financial planner reasonably investigates the products or services he or she recommends. A diligent financial planner also closely supervises any staff working with you.

This article is courtesy of Financial Planning Standards Board Ltd (FPSB).

June 15, 2022
Buying A Car? Here’s Some Tips On How Best To Finance A Car
For many people, there’s nothing quite like taking delivery of your brand new car. However, taking on long-term loan to buy a car can have serious repercussions on your financial health.

We’ll take a look at the key issues and the ramifications of buying a car.

Question:

Hi, I’m Denise. Some people say the one single monthly commitment which can make or break your wealth building is payment of car loans. Is every car loan an upside-down loan as most cars depreciate much faster than we can settle them off, especially if we take a 7 or 9-year loan? In your opinion, how best to finance a car purchase? Is it in cash or a car loan?

First, what does Denise mean with “upside-down loan”?

If your car value depreciates faster than you pay off your loan, you will need to come up with extra money out of your pocket to repay the bank.

For example, when you sell your car at RM20,000, but your outstanding loan is higher, say RM25,000, you will need to fork out that difference of RM5,000.

In other words, it is negative equity.

That might happen in any of these situations:
- If you have a long tenure hire-purchase loan like nine years;
- You buy a car that depreciates too fast i.e. depreciates 50% in two years, versus some brands that only go down 50% after five years; and
- You finance the vehicle up to a maximum of 90%, 100% or even more after the mark-up price.
Or any combination of the above situations, you might end up with an upside-down loan.

Back to the question:

So, what is the best way to finance a car purchase? Should people only buy with cash, and only if they can afford to pay for the car in full?

To understand this issue, you must separate the subjects into two parts:

The Car And Its Value

Let’s get this straight. The value of a car falls over time. It doesn’t matter if you finance it with cash or with a car loan.

The higher price you pay for it, the more you lose. Whether you pay cash, or pay with a short three-year loan, or a long-term nine-year loan, or you only borrow 50%, regardless how you pay for the car, the car still goes down in value at the same rate.

It doesn’t matter.

The buyer of your used car won’t bother whether it the loan has been settled. They don’t pay you more because you don’t have a car loan. They might pay you more if the used car is well-maintained and looks good.

So, can we agree with these?

If you want to lose less money, just buy a cheaper car. Buy a better brand that depreciates less comparatively. Or the best choice, don’t get a car if you don’t need to. Buy the car that fits your needs now.

Don’t make the mistake I made. I used to own a 12-seater Hyundai Starex, and it was too big for my small family.

So, if you wish to be prudent about it, you may consider having a lower-priced car that serves your daily needs, or not get one for a car is a liability and its value depreciates in the long run.

How To Finance The Purchase

Now the second part is the one you want to consider – how to finance the purchase?

Short answer: That depends on the rate of return on your fund.

After you decide what specific brand, model and specification of vehicle you are going to get, the next step is to find out the cost of financing the purchase.

If you have 30,000 in a fixed deposit earning 2-3%, you might as well use that cash to pay for a car loan which will cost ~4%-5%.

On the other hand, if you have a stock holding that yields 8% a year, you should take a very long term car loan (nine years). So you keep your stocks… and earn the difference (8% stock yields – 5% car loan interest)

Does that make sense?

In summary, if you are a good investor, and you make an investment return that is way better than 4-5% you pay the bank, it is no-brainer to decide. Take the most extended loan that can offer the cheapest financing cost.

Debt Service Ratio (DSR)

So, let’s say you made that car purchase and your car loan installment amounts to RM 1,100 a month. If you earn RM 5,500 a month, the car loan installment is equivalent to 20% of your monthly income. This works out to be a DSR of 20%, that is if you have no other outstanding debt.

If you have other debt commitments such as a student loan (PTPTN), credit card debts, personal loans… etc, you may want to assess what your DSR is after you buy your car. For instance, if you are paying RM440 a month in PTPTN loan installments, you would increase your DSR from 8% to 28%.

Before buying your car

= (Existing loan commitment / Monthly income) x 100%

= (RM 440 / RM 5,500) x 100%

= 8%

After buying your car

= (Existing loan commitment + Car loan installment) / Monthly Income) x 100%

= (RM 440 + RM 1,100) / RM 5,500) x 100%

= 28%

So, What’s The Significance?

First, calculating your DSR will help you to determine if you can really afford the car purchase with a car loan. For instance, if you find that your DSR after buying the car is above 40%, you may want to reconsider because you could be over gearing. You could put yourself in financial distress if you lose your job, business or your sources of income.

Second, do you plan to buy yourself a home or an investment property some two to three years down the road?

Here is the thing. Little do people realise that the same RM1,100 monthly installment for a RM90,000 car loan is worth as much as RM220,000 in property mortgage.

Essentially, you are committing RM1,100 a month to get a RM90,000 car loan to buy a car that depreciates in value over time while forgoing your opportunity to acquire a property worth RM240,000 that could generate rental income and appreciates in value over time.

So, if you’re looking to buy a property in the near future, it would be helpful for you to refrain from getting a car loan and use your loan eligibility or quota for a piece of real estate.

The Final Piece Of Advice: Don’t Do The Following!

The above discussion is based on the assumption that you already have the money to buy the car. I strongly suggest that you put yourself in this position before considering to upgrade.

A car loan can only break your finances if you are spending your future money to buy it. That means you don’t have the money ready for the car.

So, you take up a loan to buy a car that is not affordable to you, perhaps to impress your colleague who just showed off his latest vehicle.

That’s a big NO-NO. Please refrain from doing that.

Don’t buy something you don’t need, with the money you don’t have, to impress the people you don’t like. That’s plain stupidity.

About the Author

This article is co-written by KC Lau and Ian Tai.

Ian Tai is a Dividend Investor. Financial Content Machine. Producer of 200+ Articles, Weekly Host and Presenter at KCLau.com. Co-Founded DividendVault.com, an online educational membership site that empowers retail investors to build a stock portfolio that pays rising dividends in Malaysia and Singapore.

KCLau is a financial educator, having published seven books including the current bestseller Money Smart, and co-created a dozen online financial courses. He gives away his popular Money Tips e-book volumes free at his website: https://KCLau.com
June 15, 2022
Your Investments Have Increased But What About Your Net Worth?
We can all concur that the past few years has definitely thrown everyone a curveball when it comes to our finances. In fact, challenging would be quite an understatement and most of us would have experienced more downs than ups in light of the disarrayed state of the world economies.

Yet, even with the darkest clouds some silver linings did emerge and we have seen some sectors thrive amidst the gloom. So rather than despite the turmoil but because of it, some phoenixes managed to rise from the dust to favour the bold with good fortune.

If you had invested after the market correction, there’s a good likelihood that your investments performed fairly well. This is especially so for those who made the “right” calls, for example, investing in glove or technology companies’ stocks or in the gold sector.

For those lucky investors, there is certainly cause to rejoice given the current economic outlook, but how sure are you that you can strike another impressive home run any time soon?

Some investors may be content to treat their winnings as a one-hit wonder, and now turn their attention to enjoying the fruit of their investments in tangible forms such as upgrading their property or vehicles or just putting it aside for rainy days.

Nevertheless, positive returns on investments should not be regarded as the end-all but rather as a springboard towards other financial goals. For this to be achieved, some insight into your investment position is required and this can be ascertained with a few questions:
- Now that you’ve made some returns on your investments, what should the next step be? Should you simply take the profit or should you make changes to your investments? How can you repeat your investment performance in the coming year(s)?
- If you have made money on your investments, did your net worth grow significantly? Are you happy with the quantum or do you feel it can be further improved?
- Have you tracked your overall investment performance from Day 1? Do you know the annualised returns of your investments? Are you satisfied with the returns?
Unlike striking a lottery strike where you place your bets and keep your fingers crossed for your next windfall, investing is a process whereby consistent results can and should be obtained over the long term.

You probably will not get an exact repeat of your latest investment performance but having some control over your future returns sure beats leaving it to fate and chance. To this end, I would like to offer a different approach to have more consistent and repeatable results over time:

1. Invest Based On Your Risk Tolerance And Investment Objective

Roller coaster rail ride in the park

We’ve often heard this time and again but what does risk profile actually mean? Risk profile refers to how comfortable you are as an investor when the value of investments goes up and down over time. Do these movements cause you to lose sleep at night? If yes – then you need to dial it down and choose an investment with a slightly lower volatility. Having said this, your ability to take risk (i.e. risk capacity) is also a function of the investment objective.

If your investment objective is to save for retirement which is over 10 years away, then you are likely to have a higher capacity to take on more risk on this investment compared to other investments earmarked for shorter term goals. Similarly, if your aim is to grow your small investment capital significantly to meet your financial objective over a shorter period (e.g. between 5-10 years) – then you will need to consider a higher target return on investment. It is likely that a fixed deposit-only profile might not be realistic for you to meet your goals.

2. Invest With Your Ideal Strategic Asset Allocation In Mind

Coins in bottles with trading graph. financial investment concept use for background.

While stock investments might be suitable for you, it will not be a good idea to put all your investable assets in the stock market alone. Similarly, while you might be a die-hard property investor, placing a very high percentage (e.g. above 50%) of your investable assets in property assets might cause liquidity issues should you need to dispose these in a short period.

Ideally you should have a right combination of low, moderate and high-risk assets that match your risk profile to be able to generate the ideal target weighted average growth rate required to help you achieve your financial goals. As a simple guide, a moderate risk investor should target to have a 10-20% allocation into low risk assets, 70-80% in moderate risk assets and the remaining 10-20% in high risk assets. Based on this breakdown, the target expected return on the portfolio is somewhere between 6-10% p.a. in the long run.

3. Keep A Keen Eye On Your Investments

Now that you have your overarching strategic asset allocation in place, it’s time to determine the target portfolio allocation of the actual investment to help you to keep tabs on its performance more effectively. Let’s take the example of a moderate risk profile investor who invests in a balanced portfolio comprising of 50% stocks and bonds. Should the stock market experience a bullish trend thereafter, the allocation in stocks would rise to say 80%, causing him to be deemed as an aggressive risk profile investor instead.

Keeping an eye on the investments would prompt him to rebalance to the ideal 50:50 target allocation, thereby triggering the investor to apply the “buy low, sell high” philosophy by selling down on the stocks and reinvesting back into bonds. Similarly, you need to ensure your investments remain fit for purpose – retain the good performers and switch out from the non-performers. Is there a profit taking opportunity? If yes – consider locking in the profit while retaining the underlying investment if the prospects remain good.

4. Track The Performance Of Your Investments & Net Worth

Shocked and Surprised Asian man has the problems with billing and debts.

If your investments are in profit – good for you. However, knowing this is not enough. You need to determine the annualised returns of your investments so that you know if this is in line with the expected returns of this asset class or otherwise. Similarly, if you have had a good run in investing this year and made a lot of profits – great. But has this translated to a meaningful growth in your net worth?

If you’re not sure, then it’s time to start tracking your net worth on an annualised basis and more importantly look for ways to grow your overall net worth instead of just focusing on the performance of individual investments. When you diligently track your investment performance and net worth, you will be in a much better position to take the necessary steps to enhance it over time.

5. Rinse And Repeat

Businesspeople working in finance and accounting Analyze financial graph budget and planning for future in office room.

While the steps above are not rocket science, it does require a consistent application over a long period of time if your aim is to grow your net worth optimally to achieve your financial goals.

As the saying goes, make hay while the sun still shines. Your recent investment returns may be the envy of your peers, but winning streaks are often flashes in the pan and not sustainable in the long run without adopting a systematic approach.

Nobody can predict how the economy is going to fare in the coming year given the volatility of the pandemic situation the world over. Rather than just sitting back and waiting to jump on the next hot investment idea with your fingers crossed, it’s time to reposition yourself to do well irrespective of the short-term market conditions.

View your recent returns as one step further to increasing your net worth in its entirety and apply the above five step process to enjoy the prospect of growing your net worth consistently for many years to come.

About the Author:

Felix Neoh CFP ^{CERT TM} is the Director of Financial Planning at Finwealth Management Sdn Bhd and is a certified member of FPAM. He can be contacted at enquiry@finwealth.com.my

We at Smart Investor and Finwealth is committed to help you better manage your financials. Get a free consultation from an expert by filling in your details here: https://www.smartinvestor.com.my/SIxFinwealth
June 15, 2022
Will Your Mother be Kicked Out from Your House?
Question:

Hi, my name is Ed. I’m happily married to Pei Pei, my wife and together, we’ve been blessed with two daughters namely, Cindy and Mandy aged 5 and 3. As I write, we reside together with my mother in a bungalow located in Penang.

The property has been a family home since my childhood and its ownership was bequeathed to me by my late father who passed away three years ago. Presently, the bungalow has been fully paid off and is valued at RM2 mil.

If I pass on prematurely, I wish to bequeath this property equally to my wife and two daughters via a will. But, I have the following questions and concerns:

a. Will my mother be allowed to continue to live in the bungalow?

b. What will happen if my wife and two children wish to sell off the bungalow?

c. Is it possible to only bequeath the title deed when my daughters attain the age of 25?

Answer:

Lets say, you have a simple will written for the purpose stated above.

If you pass on, the title deed to your bungalow shall be transferred to your wife and two children by your appointed executor. If Pei Pei is the executor, she then shall hold onto your daughters’ stake in the property until they turn 18, the age when they are legally entitled to inherit and hold onto assets.

This means, if your children are minors, Pei Pei shall have full autonomy to hold onto and manage the bungalow as she sees fit upon your passing.

Your wife has the authority to decide who shall reside in the property, apply for loan facilities by offering the property as a collateral and to dispose of the bungalow to a new prospective buyer based on her agreeable price.

Sadly, this could also mean that Pei Pei:
1. Has the authority to ask your mother to vacate the bungalow.
2. Can sell the bungalow, let’s say at RM3 mil, and pocket the full proceeds into her bank account without needing to share her gains with your mother and… your two children.
3. Can obtain a loan facility from the bank via refinancing for the purpose of setting up a new business. The venture may fail which could cause Pei Pei to lose her ability to repay the mortgage and thus, leading to a possibility that the bungalow could be auctioned off by the bank.
4. Can remarry and enjoy her new life with her husband, your two daughters and maybe, her children with her new husband in the bungalow bequeathed to her. Your bungalow or a portion of it could be bequeathed to the new husband and their children via Pei Pei’s written will. OMG!
But My Wife Is Not That Bad…

Of course, your wife is of noble and virtuous character. How could it be possible for your wife to do any of the above mentioned?

I understand. Here, the purpose is to highlight the various possibilities open to your wife legally after having received the title deed to the property if you pass on prematurely and especially if your daughters are still minors.

Thus, bequeathing the bungalow to your wife and two daughters does not offer an ironclad guarantee of your mother’s livelihood upon your passing. This could potentially lead to conflict, strife and bitterness to your loved ones namely your mother, wife, and two children.

So, What Can Ed Do About It?

The answer is simple. Ed could include a testamentary trust in his written will in order to have a say in how the bungalow is to be managed upon his passing.

A testamentary trust is a trust that kicks in effectively only upon Ed’s passing for the trust is embedded within Ed’s written will. Here is how it works:
1. Ed could set up a testamentary trust where he would engage a licensed trustee firm to be his trustee and name Pei Pei, Cindy and Mandy as his beneficiaries of the testamentary trust.
2. Ed could decide when is best for Cindy and Mandy to inherit their stake in the bungalow. Here, let’s say, Ed wishes for his two daughters to only receive their stake when Mandy, his younger daughter, reaches the age of 25.
3. Ed could name his mother to be the living tenant of the bungalow. This means his mother is entitled to reside in the property for as long as she lives. The property could not be sold to a buyer as its title deed shall be held by the trustee.
4. Upon Ed’s passing, the bungalow’s title deed will first be transferred to the testamentary trust. The trustee shall hold onto it for Pei Pei, Cindy, and Mandy.
5. The property’s title deed shall only be bequeathed to Pei Pei, Cindy and Mandy after fulfillment of two conditions in the Testamentary Trust:
  
  a. Ed’s mother has passed on.
  b. Mandy is 25 years old.
Conclusion

Ed could protect the interest of his mother, wife and two daughters by having a testamentary trust included in his will and appointing a licensed trustee firm to administer his estate upon his passing.

His mother is guaranteed a place to stay and thus, securing her livelihood in her golden years. His wife and children shall be guaranteed of inheriting their stakes in Ed’s bungalow for as long as they live past Ed’s mother. This helps to maintain harmony among Ed’s family members.

About the Author

Jocelline Chee is the founder of WG Legacy, a leading professional estate planning firm. You can download a Strategy Report at wglegacy.com/report to find out how she preserved her family’s financial future via a combination of insurance, will and trust and how you can do the same for your loved ones too.
June 15, 2022
Why The Best Investment On Earth Is Earth Itself?

Raw land is a “Hands-off” investment. In fact, land is the ‘raw material’ for just about every property development. As a budding investor, you need to know just what kind of land is needed for an upcoming project:

Is it the right size? The project may not be big enough to meet demand around the area. The individual unit size may or may not meet the demands of the demographic it is attempting to serve.

Is it the right type? Is the land fit for agricultural projects, or is it better suited for industrial ones? Are there any environmental factors that may hinder project growth? If it’s a residential project, does it connect well with surrounding facilities (public transport, hospitals, etc)?

Buying land is usually significantly cheaper while it is underdeveloped than land that has a useable structure constructed on it. It is clear that land is the raw material of any property development. Thus, the saying “the best investment on earth is earth (land)”.

Might be a good read : 4 Tips To Invest For Long Term

Land is always a scarce resource as it is non-produceable. Hence, developers are constantly on the lookout to increase their land banks.

Acquiring the right type of land (agriculture, industrial, residential, commercial, etc) and the right size (density, plot ratio, type of usage and development, individual unit size, etc) will ultimately help decide the potential value of the land.

Right Location?

Is it at the right location? The area could already be matured, which could lead to a steady interest. If it’s an upcoming developing location, there may be a spike in valuation over time.

Our strategy includes land acquisition for property development in Hong Kong (HK), probably one of the most challenging markets in the world. Population density, land scarcity, and off-the-charts growth make it an extremely complex one.

However, we have managed to gain a foothold with a strategy of land bank acquisition, i.e., acquiring small tracts of land with an eye to future development, taking into consideration the political, social, environmental and cultural realities of HK.

When we were first introduced to land acquisition opportunity in HK, we felt excited to explore more and eventually got involved due to HK properties which are ranked among the most expensive in the world. And with land scarcity, it all boils down to capitalising on demand and supply.

Below are some key indicators that will be used to decide if the stipulated land will be suitable for this strategy.

As a rule of thumb: Islands with scarce build-able land and high population density with high PPP or FDI will never go wrong.

Please keep in mind the information below is an example to help you understand details on a new level and I would like to remind you that every opportunity is different. You must always do your own research before you commit anything.

Location, Political System And Economy

With a landmass of 1,104km² and a population of over seven million people, HK is one of the most densely populated areas in the world. As of 2018, HK’s gross national income (GNI) per capita is US$67,810 Purchasing Power Parity (PPP) dollars and its gross domestic product (GDP) per capita is US$64,597 PPP, according to the World Bank.

Under the principle of “One Country, Two Systems”, HK has a different political system from mainland China. The law of HK is based on the rule of law and the independence of the judiciary where the constitutional framework is provided by the HK Basic Law.

The Lands Department in HK is practicing the British system, which is common law and familiar to us when we invest.

Hong Kong has a free market economy and it is highly dependent on international trade and finance.

Alternative To Land Acquisition

One of the alternative proposals to land acquisition is leasing the land from landowners for a certain lease period. Leasing land may also support sustainable project development since the lands need to be returned to the landowners at the end of the lease period in a condition similar to its original form without considerable environmental degradation.

When the land is leased then anybody who has to otherwise give up land or livelihood will be compensated for its growing valuation over time. In this model, the landowner lends her land to the government for a steadily-increasing rent, or through an annuity-based system.

In any case, how do we contrast this with what we are doing in Malaysia?

Despite having already established viable businesses in more than 10 countries, and being able to show healthy profits in most of them, I am still bullish about the place I call as home. I believe there are many areas where both local and foreign investors can invest their funds for very healthy returns on investment.

We tend to believe that we need a lot of money to invest, but it’s not always true. But it can be done.

You have to be able to make different kinds of investment, like investing time in doing proper research and learning about markets, that will help you make well-informed decisions and taking a calculated risk. Be consistent. Your attitude towards small things should be the same as your attitude towards big ones.

Some “good” and “bad” qualities vary from one community to another. If the investor knows the local community, they could know better which parts of the land or town are less or more desirable.

It is always smart to rent in a new community before committing to purchase a land for investment. Sometimes, renting allows the investor to become familiar with the location.

“Location, Location, Location” Makes All The Difference

“If you are avalanched by adversity, hold on. Don’t give up; rebuild. Make decisions and stick to them.”

About the Author

Max Shangkar is group CEO of Max Capital Management Holding Ltd and an expert in global project management consultancy. He is also the author of the best-selling book Investment Strategies for Global Real Estate.

He propounded the market-proven investment strategies of Property Investment Life Cycle and Business Investment Life Cycle that educated over 6,000 Global Investment Community members to invest in property projects and businesses in over 10 countries.

June 15, 2022
Why Investing Is Confusing?
To many, investing is a complicated subject and one that is overwhelming when you are new to it. It is confusing because:
- There are different types of investment products in the market. They include stocks, bonds, real estates, commodities, businesses and so on.
- There are different segments for each type of investment product. If we take stocks as an example, we have growth stocks, dividend stocks, value stocks, blue chips, small caps and so on.
- There are different methods of investing for each type of investment product. For stocks, you may choose to buy and hold, do short-term trading, invest via unit trust or EPF, short-selling and so on.
- Above all, many people “believe” they are investing when they are actually not. These people include traders, gamblers and even speculators and they make “investing” an even more complicated subject, especially if they profess to be successful “investors”.
What ‘Investing’ is Really All About

The subject of investing is made more confusing when people are not aware of the differences between:
- An Investment Plan,
- An Investment Procedure, and
- An Investment Product
Many today are still trying to get into investment products (stocks, real estates, unit trusts), or investment procedures (buy and hold over the long-term, short-term trading, dollar cost averaging) without having an investment plan. They also unconsciously follow the following order when buying their “investments”:
- Select Investment Products
- Explore / Test Out Investment Procedures or Strategies
- Have an Investment Plan, if ever, when needed
This investment approach is likened to building a house without first having a blueprint. This is not investing. Clearly, it is not a sustainable method for creating wealth.

What then is Investing?

Investing is a Plan, not a Procedure or a Product. Hence, a savvy investor would instead follow this path:

1. Have an Investment Plan.
2. Explore and Learn Investment Procedures or Strategies.
3. Select Investment Products.

As you can see, this is the exact opposite route taken by those who know how to build sustainable wealth over the long-term. I will touch briefly on the three points above:

Step #1: What is an Investment Plan?

An investment plan is like having a travel plan as illustrated below:

Say, I have to travel from Subang Jaya to Petaling Jaya in 20 minutes using X vehicle.

The plan will have four elements to take into consideration:
1. Where You Are Now – Subang Jaya
2. Where You Want to Be – Petaling Jaya
3. Duration (Travel Time) – 20 Minutes
4. How to Get There Safely – by X Vehicle
Likewise, investing starts with an assessment of your life. This includes your age, marital status, earning capabilities, financial condition, set of skills, tolerances of risk, expected returns, and a vision of your future self. Often, it takes quite a fair bit of soul searching to find your unique answers to the questions stated above. So, please take your time to do so. Don’t rush into it.

The first line of your investment plan should look something like this:

(A) I want to increase my monthly income from RM5,000 to RM10,000 in three years by using X strategies.
(B) I want to earn a passive income of RM1,000 a month in two years by using Y strategies.
(C) I want to grow my net worth from RM500,000 to RM1,000,000 in five or 10 years by using Z strategies.

What then are your X, Y, or Z strategies? Let us move onto Step #2:

Step #2: What is an Investment Procedure?

Let’s use the same travel plan from above:

I will be travelling from Subang Jaya to Petaling Jaya in 20 minutes by using X vehicle. Your X vehicle could be any of the following:

– A Car
– A Bus, or
– by LRT

If you know how to drive, then, you would choose a car. If not, you may hop onto a bus/LRT/Grabcar/Taxi to get to your destination.

So, the mode of transport is the procedure that will take you to where you intend to go. Likewise, the skills of investing are procedures that will act as the modes of transport to bring you to your financial destiny. The more skills you have today, the more vehicles you get to choose from to get to where you intend to be.

In travelling, some procedures include:
– Walking or Running,
– Riding a Bicycle,
– Driving a Car, or
– Flying a Plane

In investing, the procedures include:
– Working (get a job or starting a business)
– Saving (building cash reserves)
– Trading (Simple Moving Average (SMA), Exponential Moving Average (EMA), Bollinger Bands, etc)
– Investing (Growth, Value, Dividend, etc)

Step #3: What is an Investment Product?

An investment product is likened to an X vehicle: a Car, a Bus, LRT and so on. One vehicle is not necessarily better than the other. It all depends on suitability.

A car is not necessarily better than a plane. Likewise, investing in real estate is not necessarily better than investing in stocks, bonds, unit trusts, gold, EPF and so on.

Two guys may invest in stocks but their choice is for their own reasons. For example:
- Mr C aims to build a stock portfolio that earns RM1,000 a month in dividend income. He intends to buy and keep dividend stocks as long as their dividend yields are 5% and above. Thus, Mr C may consider an investment into a REIT that pays 6% dividend yields as the REIT fulfils his investment criteria.
- Mr D aims to build a stock portfolio that appreciates in value for the long-term. He intends to buy and keep stocks that have grown profits consistently and are expandable over the long term. Thus, Mr D may consider an investment in growth stocks as they fulfil the needs of his objectives much better.
In short, here are the key takeaways:
- Investing is a Plan, not a Procedure or a Product.
- A Plan helps to determine Your Procedures and Products.
- One Product is not necessarily better than another Product.
- Take time to do Soul-Searching.
- Your Plan will Advance according to your Skills (Procedures).
About the author

This article is co-written by KC Lau and Ian Tai.

Ian Tai is a Dividend Investor. Financial Content Machine. Producer of 200+ Articles, Weekly Host and Presenter at KCLau.com. Co-Founded DividendVault.com, an online educational membership site that empowers retail investors to build a stock portfolio that pays rising dividends in Malaysia and Singapore.

KCLau is a financial educator, having published seven books including the current bestseller Money Smart, and co-created a dozen online financial courses. He gives away his popular Money Tips e-book volumes free at his website: https://KCLau.com
June 15, 2022
Land Titles And How They Affect Your Property Buying Decision

While a freehold land refers to a land title in perpetuity which, in most cases, is the most preferred type of land title to own, a leasehold land means that you just have a lease from the freeholder to use the land for a number of years, which can range from 30 years to even 999 years.

In most parts of Petaling Jaya, the authorities have extended leases for another term. The extension of leases for leasehold properties is governed under section 197 of the National Land Code (Act 56 of 1965) pertaining to the applications for approval of surrender of the whole of the land, as well as the land rules of the various states (for the state of Selangor, the extension of a lease is governed by the Selangor Land Rules 2003 and Selangor Quarry Rules 2003).

Read : Housing Loan In Malaysia: What Is Debt Service Ratio (DSR) And How To Calculate DSR?

There is also another type of property built on private leases of similar tenures to that of government leasehold. This type of lease poses more challenges for buyers as the owners of the land are private parties and they do not have renewal or lease extension in the same manner as the government.

In addition, there is also the case of Malay Reserve Land (MRL) vs Bumi Lots. While it is quite common to think that both are the same, in reality, they are not. Properties developed on Malay Reserved Land can only be owned by Malays and are governed under the Malay Reservation Enactment. Malay owners are not allowed to sell the properties built on MRLs or the lands themselves to non-Malays. Businesses operated on MRLS must be owned by Malays.

Bumi Lots, meanwhile, are units of land or property which can only be purchased and owned by Bumiputeras. To some, this means a more restricted market whereby you can only resell your property to another Bumiputera. There are, however, incidences where a transfer can be made to a non-bumi, although this is subject to approval from the authority.

“Bumi Quota” is also another term commonly used when developers market new projects, and this is again not to be confused with Bumi Lots. Under the New Economic Policy (NEP), this was introduced to increase Bumiputera shares in real estate to at least 30%. However, depending on locality, this percentage differs. Bumi Quota can also be released and is subject to the fulfilment of conditions.

About the Author

Chan Ai Cheng is the General Manager of S.K Brothers Realty (M) Sdn. Bhd.

June 15, 2022
Takaful vs Conventional Insurance: What’s the Difference?

There is a prevailing misconception about how takaful is simply the Islamic version of conventional insurance, and is therefore only available for Muslims. This is, however, inaccurate.

Takaful provides similar protection products as conventional insurance, and is open to anyone regardless of religion or creed.

What is Takaful?

Takaful is essentially a Shariah-compliant insurance option that is grounded in Islamic Muamalat (Islamic transaction) principles, and share the same objective of providing protection against financial loss in the event of misfortune that occur from an accident, loss or damage to property, hospitalisation, critical illness, disablement or even death.

The term ‘takaful’ is derived from the Arabic word ‘kafala’ which simply means “to guarantee; to help; to take care of one’s needs”. The term also refers to the concept of Islamic insurance that is based on the Islamic principles of mutual assistance (ta’awun) and donation (tabarru’), where the takaful participants donate their money into a takaful fund that will be used to provide mutual financial benefits.

Similar to conventional insurance, there is an array of Shariah-compliant products under takaful which includes life, health, motor, home and travel insurance as well as many other types of protections.

While there are many similarities between Takaful and conventional insurance, a takaful company ensures that its products and operations are in accordance to Shariah principles. The key difference is in fact the underlying contractual relationship between the takaful operator and the customer.

An insurance contract mainly involves the purchase of a product or a service from the insurance company where the insurance risk is transferred to the insurance company.

Under a takaful contract, on the other hand, the customer undertakes a contract (aqad) to become one of the participants by agreeing to make a donation (tabarru’) to participate in the takaful risk pool fund for claims payment should any of the participants suffer from a defined loss, and appoints the takaful operator to manage the takaful fund.

An important feature of takaful is that the takaful risk fund is owned by participants, and therefore, the risk is shared among them and any surplus will also be retained within the fund or in some cases, distributed back to participants. The takaful operator, too, may be entitled to a share in the risk fund surplus.

The takaful operator is mainly remunerated based on wakalah (agency) fee. The tabarru’ amount and the wakalah fees are stipulated in the certificate contract, which promotes transparency to the customers.

As such, takaful funds are managed in accordance to Shariah, and invested in Shariah compliant assets, while the Shariah committee oversees the activities of the takaful operator to ensure that they are Shariah-compliant.

Takaful in Malaysia

Taking into account the current low penetration rate, rising standards of living, escalating medical costs and ageing population in addition to the robust growth in the Islamic banking and finance sectors, the long-term outlook for the takaful sector in Malaysia remains positive.

The development of the takaful industry is set to remain on a positive note in tandem with the government’s ongoing initiatives to spur the demand for protection among consumers.

The key component in driving growth in a competitive environment especially during the pandemic situation, is digitalisation. As such, takaful operators will continue to incorporate digital capabilities into their business models and marketing approaches to stay competitive in the market.

Within the Malaysian takaful industry sphere, the takaful operators continue with concerted efforts in enhancing awareness on takaful and in providing protection plans suitable for every segment of the society to increase the takaful penetration rate.

These initiatives include strengthening the professionalism of takaful agents, intensifying awareness and interactive programmes for the consumers as well as the introduction as well as the introduction of value propositions by embracing the concept of value-based intermediation.

Despite the cautious business sentiment, the Malaysian takaful industry is expected to remain resilient. The regulatory body, along with the takaful industry players, will continue to introduce and implement various initiatives to further promote the development of the takaful sector.

June 15, 2022