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5 Factors To Consider When Choosing Your Financial Planner
It is very easy to get financial advice nowadays, especially with the boom of the internet and social media. If you visit financial related Facebook groups or forums, everyone is eager to give their opinion on the best ways to manage your money.

However, one downside of these free online advice is bypassing of important safeguards such as ensuring the person seeking advice is subject to a detailed financial health check and understanding their current financial position.

So, choosing your personal financial planner can be one of the most important decisions you can make. Your financial planner is your partner to guide you through many decisions about handling major financial and life decisions.

To find the best financial planner who is right for you, here are five important factors to keep in mind:

1. Make A List Of Financial Planners

Start by creating a list of potential financial planners. Ask your friends or family if they have engaged with any financial planners. Take the time to check if the planners have the required license from Securities Commission Malaysia’s database (). Then, call each financial planner to see if he or she is accepting new clients and arrange a meeting with the planner.

2. Research The Financial Planner’s Credentials And Experience

In Malaysia, most financial planners do not start their career as a financial planner. Some are trained lawyers and accountants. Knowing the background of the financial planner allows you to understand whether the financial planner has the resources to help you in your financial decisions. The more experience a planner has, the better your results are likely to be.

If you need a specific form of planning, such as the involvement of business or family offices, ask the financial planner if he or she has any experience handling the matter.

3. Evaluate The Financial Planner’s Communication Style

Choose a financial planner with whom you are comfortable talking to. Do you feel that the financial planner understands your situation? Find a planner who shows an interest in getting to know you and will respect your decision-making process.

Also think of the convenience of meeting your financial planner. In the beginning of the financial planning process, you may need to meet your financial planner several times in a month. Can you reach your planner online, especially during the COVID-19 pandemic?

4. Evaluate The Financial Planner’s Company/Team

Take the time to research the company and team behind the financial planner. Is the financial planner working alone? What are the credentials of the team behind the financial planner?

As finance is a very broad topic, a good financial planner usually specialises in a particular field and works with another financial planner or other professionals (such as lawyers and accountants) to handle other parts of the planning and solution implementation. Think of it like the case of a hospital, where a patient may get treatment from different specialists.

5. Understand How The Financial Planner Is Getting Paid

There are 3 main types of fee-structure when it comes to financial planners:
- Commission only;
- Fee-based; and
- Fee-only.
In Malaysia, we usually see commission only and fee-based planners. Fee-only financial planners are extremely rare.

A financial planner that receives commissions only works great with someone that wants a product that they already have some idea in mind. The relationship is usually transactional in nature and heavily focused on advice with a product-based solution.

A fee-based financial planner earns a fee for developing a financial plan for you, while also earning a commission if you require him or her to service your insurance policies or investment portfolios.

Make sure that your financial planner is transparent on the fee for their services.

Summary

Just like when making any major purchases, it is important to do your homework when it comes to choosing your financial adviser. Not every financial planner has the same level of training or offer the same range of services. It is important to talk to several financial planners and choose someone that meets all the above-mentioned criteria.

Finally, it is important to understand that financial planning takes a long process. Find a financial planner that you feel comfortable talking to and feel he or she is helping you work through your problems.

About the Author

Marshall Wong is a financial planner holding licenses from the Securities Commission Malaysia and Bank Negara Malaysia. He can be contacted via email at Marshall@plannerd.io
June 10, 2022
Will Initial Exchange Offerings (IEOs) Change the Crowdfunding Game?

In this final part of our article series, we explore the viability of the new IEO model. Two IEO operators have been announced so far.[1]

From the aspect of the platform, how will these operators perform as a capital formation channel i.e., how will they raise serious money? This has traditionally been the domain of licensed investment banks, so all eyes are on these operators. The business community is eager to hear its first success stories.

And from the aspect of the market, how will these IEO assets be structured to appeal to investors? These are exotic financial products that befit a narrow risk profile. They have often been compared as alternatives to IPO. Suitable investors who are seeking digital asset exposure in their portfolios might consider this.

Given that IEO is a major innovation, there are bound to be problems when we look under the hood. They are not operational yet, generally high risk, and involve novel points in law. Many things could change, including regulatory positions over time. Hence our opinions too are tentative.

Is There Enough Local Investor Base for This?

The IEO operators’ role is to draw investors into the platform. But they do not underwrite raises. In other words, they do not guarantee results.

When you do the math, you will understand that this is not retail play. Here is a simple back-of-envelope calculation: Retail investors can only invest up to a limit of RM2000 per project. If a project has a RM100 million target, it will need to raise from at least 50,000 retail investors – assuming every single one of them maxes at RM2000, passes background checks, and nobody backs out during the cooling off period.

Imagine the sheer marketing cost and investor relations effort needed to convert such a large group. Imagine the due diligence work to onboard 50,000+ names.

And there is a further rub: According to the Securities Commission (SC), the total number of investors that have collectively used ECF and P2P financing platforms since 2017 is only about 31,000 investors!^[2] So IEO operators – if they focus only on the retail segment – will need to be able to recruit new adequate investor bases to cover the demand, presumably within Malaysia itself.

This is the reason why institutional participation and sophisticated investors will be crucial to the success of IEO. They are the main target.

But it remains to be seen whether the IEO operators will take an active role in building the order books i.e., sourcing investor demand; or whether they will merely facilitate the offering like an ECF model.

Rather than setting a blanket investment limit on all retail investors, the regulators should consider marketing restrictions and ensure IEO operators perform suitability assessment on all investors. This could ease the fundraising burden of IEO operators. Even with the investment limit, vulnerable investor groups like the elderly and financially illiterate can still be indiscriminately targeted by IEO marketing.

What Would IEOs Look Like Without Crypto?

At first thought, the local digital asset exchanges (DAX) may seem to provide some low hanging fruits and serve as the addressable market for IEOs. The number of DAX accounts has been growing phenomenally and may well cross 1 million this year.

But investors who are used to trading highly liquid digital currencies like Bitcoin and Ether might not have the same appetite for tokenised private securities like IEOs.

The biggest impact will come from the restriction on the use of crypto (or digital currencies) to pay for IEO investment. This effectively turns off the crypto segment and the entire trillion-dollar global crypto capital pool. While it is possible to cross-sell IEOs to third party DAXs in Malaysia, DAX customers cannot use their crypto holdings to invest in IEOs.

Foreign-based crypto investors including hedge funds and venture capitalists will have to convert into Malaysian Ringgit, wire through the correspondent banking system, and be subject to exchange control rules.

Why is crypto restricted? Perhaps from a compliance viewpoint, this mitigates the money laundering and terrorist financing (MLTF) risks associated with crypto. Unlike DAXs, the IEO operators are not equipped to screen and surveil illicit cross-border flows in crypto.

There are other substantive implications. In a standard ICO or IEO, the crypto received is used to activate the ‘smart contract’ for the automatic distribution of digital tokens to investors. Without the crypto element, this step is removed.

In the Malaysian modified version, it is basically just an ‘asset tokenisation’ process. What this means is that digital assets are programmed and recorded on a blockchain ledger and issued as tokens.

Also, there will be no need for digital asset custodians (DAC) as there are no crypto funds received and handled. The digital tokens, minted by the IEO operator on behalf of the issuer, don’t require custody as they are proprietary, remain in a closed loop, and all settled in fiat currency.

The reality is, IEOs without crypto is a rather hollow proposition. IEOs may end up like another vanilla ECF platform – but with more investor risks!

If Something Goes Wrong, Where Do I Seek Help?

If digital tokens are not well-defined legally, it will be tough for both aggrieved investors to litigate and for regulators to prosecute. In our opinion, the current taxonomy does not provide sufficient clarity on the status of stablecoins, DeFi lending, and non-fungible tokens (NFT) – what more private tokenised securities that can be designed in so many ways?

It will be good to have legal certainty and a path of recourse if things go awry. Having to go to court to enforce an ambiguous investment contract is the last thing any investor wants. In the absence of such, you can expect IEO operators to prop up the legal paperwork.

Despite the use of ‘smart contracts’ for IEOs, it is very likely that investors will be required to physically sign subscription agreements, including the acknowledgment and acceptance of all instrument risks, and even limitation of liability!

Conflicts of interest need to be properly disclosed if any, where the IEO operator approves the project, develops the token, promotes to the public, and gets paid in tokens. Whose interests is the operator beholden to – the issuer, investor, or its own? If the tokens purport to be asset-backed, the collateralisation agreements and prudential policies should rightfully be shown.

For the smart investor, this is the Achilles heel of IEOs: Wouldn’t he or she be better off putting their money in normal shares or loans (via ECF or P2P), where there are more legal safeguards, investor protection, and formal dispute resolution?

For the impatient investor, please be reminded that there is currently no linkage between the primary (IEO) and secondary markets (DAX) locally. The digital tokens are unlisted products for time being. Angels and early investors cannot take money off the table. Investors cannot transfer their tokens between one another.

Note: Remarkably, the IEO guidelines do not state any prohibition of foreign DAX listings, which could be something to watch out for.

Will IEOs Be Around a Few Years from Now?

The race for global crypto capital has become heated. The major economies in ASEAN have rolled out crypto licensing regimes which are capital-friendly, competitive, and compliant. Regulators expect market operators to keep the pace of innovation, sustain the interest of investors, and remain relevant.

The face of global crypto capital is also evolving rapidly. IEOs can already be offered on normal centralised exchanges like DAXs (in Singapore), through licensed intermediaries (like ICO portals in Thailand), or without going through DAXs at all e.g., through an Initial DEX Offering (or IDO) on open decentralised platforms. There are even DAICOs where decentralised autonomous organisations are created as the token issuer.

Investors and issuers will be spoilt for choice as this space matures. IEOs will morph into the next in-thing. There will be more regulatory uniformity and cooperation across jurisdictions. New bespoke laws will be created instead of relying on extant securities laws. This article series surely won’t outlive its purpose.

About the Author

Edmund Yong is the managing partner of Celebrus Advisory and appointed by MDEC as part of its Talent Expert Network (formerly known as Digital Expert Panel) for blockchain technology. He is also the resident consultant for GLT Law, a multi-award-winning legal practice with specialisation in digital assets. All opinions expressed are the author’s own.

[1] https://www.sc.com.my/resources/media/media-release/sc-registers-two-initial-exchange-offering-ieo-operators#

[2] Securities Commission of Malaysia, Capital Market Masterplan 3: 2021-2025 (2021).

June 7, 2022
5 Different Types of Income
Since childhood, parents advise us to study hard, get good grades, go to college and graduate so that we can land a job with great benefits. It has been our only concrete financial plan until we faced the reality of adulthood. here are many types of income which easy.

We became students of financial matters ever since and have begun to explore many types of income from books, workshops, online media, and casual chats over coffee. It has led us to build multiple streams of income, instead of relying solely on a single job for pay.

In this article, let’s explore these income types. Each has its unique attributes, requirements, and usages to build wealth for the long term. We’ll examine five different types of income, discuss their pros and cons, and how they can contribute progression towards your financial life.

1. Active Linear Income

It is income derived from an exchange of physical labour and time with a single paymaster. This type of income is most common for it is the fastest means that one uses to make money as it requires the least time, effort and investments to establish this source of income.

For instance:
- You are an employee working for $ xxx per period (hour, day, week, month, shift, etc.).
- You are a freelancer who charges a fixed fee of $ xxx per project.
This type of income is useful when one is starting off. After all, everyone has bills to pay. With that being said, this income is dependent solely on your effort physically.

So, it may be limiting in terms of growth for all of us possess only one physical body, 24 hours a day, 365 days a year, and can only be at one place at a time. As such, this leads us to explore our next few sources of income.

Maybe this worth your read : 4 Lessons I Learnt on Wealth And Life As I Enter My 30s

2. Active Scalable Income

Likewise, it is also income earned from an exchange of physical labour and time but to a network of paymasters. It involves one having built a system or a team or multiples of both to increase income exponentially via scale.

It includes:
- You earn x% in overriding commission from sales generated from your sales team.
- You are a freelancer who makes x% profit share from project undertakings.
- You sell products or services via a network of distributors and retailers.
- You sell digital products to an online community consisting of xxx people.
This type of income is expandable because the number of clients you serve can increase significantly without you substantially increasing your efforts at work. In other words, a 100% growth in your customer base may bring 100% more income without you increasing your workload by 100%.

This is usually the type of income that propels one from earning 4-figures to 5, 6, or, 7-figures per month, hence, raising more significant capital faster for investments.

But, if it is that good, why not more people earn this type of income?

This is because it requires people to invest time, effort, and money to first learn about marketing, branding, leadership, and system building. Upon which, there might be no immediate payoffs.

For instance, you may have a desire to make millions from pitching your products to a broad audience in a mega preview event. The money sounds enticing. But, you would need first to master effective public speaking and closing.

3. Passive Income

It is recurring income derived from ownership of profitable assets. It includes:
- Interest income from fixed deposits, P2P lending, and other forms of credits.
- Coupons from bonds.
- Dividend income from a portfolio of stocks that pay dividends.
- Rental income from tenanted properties.
- Royalty income from intellectual properties.
- Passive income from owning businesses that you don’t physically manage.
This type of income is awesome because cash is flowing into your bank account without physical labour. In essence, receiving passive income is earning time as it frees your time to pursue what you like. Besides, there are many tax benefits if you have any of the above sources of passive income.

If you are earning $ 100,000 in active income, you will be paying more income tax on as compared to another person who makes $ 100,000 in passive income. He may even pay literally zero in income taxes in Malaysia.

However, you need higher financial intelligence to create passive income effectively. One inevitably has to learn about investing and be a skillful investor with a great temperament.

Therefore, although passive income doesn’t require much physical labour, you need to study a lot (mental labour) before being good at it. Besides, without huge capital, you can’t survive on meagre passive income to do it fulltime.

4. Portfolio Income

It is income derived from market value appreciation of your assets, also known as a capital gain. Alternatively, you can earn this profit via investing in assets at prices below their market valuation. Some examples include:
- Your stock has appreciated from $1.00 to $2.00 in x period of time.
- You bought a property for $80,000. Now, it is worth $100,000.
- The value of your home is $200,000. You bought it for $80,000 7 years ago.
Many people find investing appealing because of the prospects of earning portfolio income or capital gains. It is even more attractive as compared to making passive income for the money is more significant. After all, eating steak immediately is more appealing than having milk every day.

I find there are two types of people who want to earn portfolio income.

First, it is people who are focused on money. They intend to make more money via selling assets at higher prices than their cost of purchasing them. This group of people are either traders if they can make money consistently or speculators and gamblers if they lose money consistently from their activities.

Second, it is people who are focused on accumulating assets. They are not ones who will kill their golden goose as they treasure them. For instance, they would invest in stocks or properties and hold onto them for long-term capital growth. Their mindset is to keep them and not sell them for a profit. In most cases, they would build massive net worth from their investments over time.

5. Phantom Income

It is income derived through the leverage of tax benefits, corporate entities and debt. It is known as Phantom Income as the income is not receivable via cash. It is an income of the rich as it requires a higher degree of financial intelligence to grasp the concept and utilise it fully.

We won’t list down its examples for its explanation is more technical. Here, suffice to say, the best way to use this income efficiently is to surround yourself with a team of advisors such as investors, consultants, accountants, lawyers, bankers and other related professionals.

Looking for financial freedom? 8 Healthy Financial Habits To Build Your Financial Freedom Fund

Conclusion

There you go, the five different types of income that one could earn for himself to increase financial wealth.

If you think about it, the five types of income is an income progression of most wealthy people who began with very little. You would begin with earning active linear income first to survive, expand your income through scale, invest your capital for passive income and portfolio income and roped in a team of advisors to make phantom income by setting up corporations to save on tax payments and use low interest rate debt to accumulate more assets that would build even more wealth.

Now you know how it works. Go work on it!

About the author

This article is co-written by KCLau and Ian Tai

Ian Tai is the founder of DividendVault.com, a platform that analyse and filter stocks that pay increasing dividends year after year.

KCLau is a financial educator. He had published 6 books and co-created a dozen online financial courses. After conducting more than 461 hours of free webinar and 2000 articles published online, he gives away his popular Money Tips e-book volumes absolutely free at his website: https://KCLau.com
June 7, 2022
Picking the Best Time to Invest
Since the start of the market rout in mid-March 2020, when benchmark gauges worldwide plunged due to pandemic fears over COVID-19, investors are probably wondering if it’s a good time to invest. A sea of red across equity markets certainly has attracted the attention of bargain hunters looking to scoop up stocks that are trading at a discount to their premium.

However, the vagaries of market timing can make it challenging for investors trying to pick this elusive bottom.

Of course, the biggest question is whether these gains are sustainable or just a dead cat bounce. The reality is that there are too many market variables to know for sure, and what’s more, we are in uncharted territory. The world has never seen an economic shutdown on such a scale before due to a pandemic.

It is likely that the economy is already in a recession as a result of this clampdown on business activity and consumption. The depth and length of this economic slowdown still unclear given the many variables at hand.

But what is absolutely certain is that volatility is poised to persist.

So What Should Investors Do?

Keeping perspective for one. It may seem like uncertain times, but this isn’t the first time that stock markets have gone through a recession before. History shows that every bull market cycle ends at a higher point than the previous one by subsequently recovering and notching higher gains.

For instance since the MSCI World Index plummeted by -13.5% in March 2020, the index has retraced losses by climbing +10.8% in the month of April. Similarly the MSCI Asia ex-Japan index recouped back gains of +8.9% buoyed by stimulus hopes as central banks eased monetary policy.

Gains during expansionary periods have also far outpaced losses suffered during a downturn. As such, it is important that investors remain disciplined and stay on track towards achieving their investment goals. Adopting a long-term approach and staying diversified is important in this regard to weather the turbulence ahead.

More defensive asset classes such as fixed income tend to hold up better compared to equities during periods of market stress. But that does not mean investors should overlook equities completely.

The stock market will eventually recover and it is important that investors stay invested to be in a position to capture that rebound. Similar to sell-offs, market gains often occur in short bursts at high velocity. Timing precisely for such moments require more than a stroke of luck and is highly unlikely.

As can be seen in Graph 1 below, missing out on the best days in stock markets can significantly undermine an investor’s long-term financial success.

Graph 1: The Cost of Market Timing The Risk of Missing the Best Days in Market, 2000 – 2019

Source: Morningstar, 2020

According to research by Morningstar, investors who stayed in the market for all 5,035 trading days achieved a compound annual return of 6.1%. However, that same investment would have returned 2.4% had it missed only the 10 best days of stock returns.

Further, missing the 50 best days would have produced a loss of 5.5%. Although the market has exhibited tremendous volatility on a daily basis, over the long term, stock investors who stayed the course were rewarded accordingly.

This underscores the peril of market timing that could lead to significant opportunity loss.

The appeal of market-timing is obvious by avoiding periods of poor performance to improve portfolio returns. But the truth is timing the market consistently is extremely difficult that even the savviest investor can get wrong.

As aptly put, history does not repeat itself, but it often rhymes. The COVID-19 pandemic may be unprecedented with little clarity yet on outlook, but some of the strongest rebound often occur when the market is at its most bearish.

The ideal approach to invest in such a period then is by staying disciplined and investing consistently by sticking to a regular investment plan to ease one’s way into the market.

Over the long-term, this would reduce the impact of volatility by spreading out your investments over periodic time intervals by dollar cost averaging. This ensures that one do not buy at inflated prices as well as seize the opportunity to acquire more units at lower prices.

Best Time For You, Not The Market

Instead of looking outward and trying to time the market, investors should turn inward to decide when the best time for them to invest is.

An easy way for investors to do so is by asking themselves basic financial questions such as:-
- Do I have enough in my emergency savings to cover necessities?
- What about future commitments and liquidity needs?
- Can I take a long-term view on my investments?
The global economy is undoubtedly in a fragile state as businesses grapple with closures due to nationwide lockdowns to stem the spread of the coronavirus. With companies embarking on cost-cutting measures, the likelihood of pay-cuts, redundancies and job losses may be inevitable.

That is why the importance of having enough in emergency savings cannot be emphasised enough. A rule-of-thumb is that one should have at least 3-6 months’ worth of living expenses in a rainy day fund for precisely in times like these.

Similarly, investors should also look at their time horizon and liquidity needs. Do you require cash to pay any outstanding debt or expenses in the near future? Also, can you afford to hold your investments without withdrawing for at least 3 years?

These are important points because no investment can churn out returns overnight. Patience is needed for investment success and history has proven to be kind to investors who do sit through market cycles and stay invested.

Waiting for the perfect time to invest should not be an external exercise and what happens in the market. Rather, it should be an introspective one by taking into consideration your own financial standing, investment horizon and risk appetite.

About The Author

Lee Sheung Un is the Communications Officer of Affin Hwang Asset Management. A former business journalist, he is an ardent investor who is passionate about markets and is working towards building his dream portfolio.
June 7, 2022
Gold Investment From An Islamic Point Of View
Gold is one of the most popular precious metal investment and can provide a source of income for investors.

Gold has historically been used as a hedge against currency depreciation and inflation. When there is a rise in inflation, gold usually gains in value.

As a result, in this post, I will discuss gold investing from an Islamic perspective.

Gold Is One Of The Ribawi Item

Initially, it was ruled that buying something with cash or in instalments was permitted in Islam. However, if a transaction involves ribawi items (items included under the ruling of riba), then each party involved will have to give attention so that he or she would not be involved in riba.

أَخْبَرَنَا مُحَمَّدُ بْنُ عَبْدِ اللَّهِ بْنِ بَزِيعٍ، قَالَ حَدَّثَنَا يَزِيدُ، قَالَ حَدَّثَنَا سَلَمَةُ، – وَهُوَ ابْنُ عَلْقَمَةَ – عَنْ مُحَمَّدِ بْنِ سِيرِينَ، عَنْ مُسْلِمِ بْنِ يَسَارٍ، وَعَبْدِ اللَّهِ بْنِ عَتِيكٍ، قَالاَ جَمَعَ الْمَنْزِلُ بَيْنَ عُبَادَةَ بْنِ الصَّامِتِ وَمُعَاوِيَةَ حَدَّثَهُمْ عُبَادَةُ، قَالَ نَهَانَا رَسُولُ اللَّهِ صلى الله عليه وسلم عَنْ بَيْعِ الذَّهَبِ بِالذَّهَبِ وَالْوَرِقِ بِالْوَرِقِ وَالْبُرِّ بِالْبُرِّ وَالشَّعِيرِ بِالشَّعِيرِ وَالتَّمْرِ بِالتَّمْرِ – قَالَ أَحَدُهُمَا وَالْمِلْحِ بِالْمِلْحِ وَلَمْ يَقُلْهُ الآخَرُ – إِلاَّ مِثْلاً بِمِثْلٍ يَدًا بِيَدٍ وَأَمَرَنَا أَنْ نَبِيعَ الذَّهَبَ بِالْوَرِقِ وَالْوَرِقَ بِالذَّهَبِ وَالْبُرَّ بِالشِّعِيرِ وَالشَّعِيرَ بِالْبُرِّ يَدًا بِيَدٍ كَيْفَ شِئْنَا قَالَ أَحَدُهُمَا فَمَنْ زَادَ أَوِ ازْدَادَ فَقَدْ أَرْبَى ‏.‏

It was narrated that Muslim bin Yasar and ‘Abdullah bin ‘Atik said:

“Ubadah bin As-Samit and Muawiyah met at a stopping place on the road. ‘Ubadah told them: ‘The Messenger of Allah forbade selling gold for gold, silver for silver, wheat for wheat, barley for barley, dates for dates”‘- one of them said: ‘salt for salt,”‘ but the other did not say it-“unless it was like for like, hand to hand. And he commanded us to sell gold for silver and silver for gold, and wheat for barley and barley for wheat, and to hand, however we wanted.”‘ And one of them said: “Whoever gives more or ask for more has engaged in Riba.”

According to the preceding hadith, sales and purchases of ribawi products like as gold jewellery must be made immediately and without delay.

If there is a condition of delaying payment or delivery of the item, it falls into the category of riba al-nasiah, which is riba that occurs as a result of the item’s delayed payment or delivery. In fact, it is of greater prohibition when the delay is included with some additional charges.

As an alternative, the buyer may take a financing from a third party before buying the gold in cash. However, using a leverage technique in gold investment is riskier because it will magnify the profit (when gold price appreciates) and loss (when gold price depreciates).

6 Ways To Invest In Gold

There are 6 common ways to invest in gold for an everyday investor:

1. Physical Gold via Bullion or Coin Websites

Bullion refers to high-purity physical gold and silver held in the form of bars, ingots, or coins. Purchasing gold bullion bars is the most conventional method of gold investment.

However, don’t limit yourself to buying actual gold, such as coins or bullion, when considering gold investments.

2. Physical Gold via Jewellery

Gold jewellery is one of the most popular ways for women to invest. This strategy is a popular option for women to invest in gold because it makes them happy by allowing them to use the gold while also making them look attractive when worn around their neck and on their wrist.

However, there are a number of drawbacks to gold investment in the form of jewellery:
- You’ll probably pay more than the gold price for the piece’s craftsmanship.
- You’ll most likely be purchasing a piece of 24 carat gold that isn’t totally pure. Because 24 carat gold is delicate and easily scratched, it is rarely used in jewellery. As a result, make sure that you’re not buying 24 carat gold.
- It is a nightmare to keep the gold safe. Burglars know that Malaysians like to keep gold in their homes, thus they target a lot of Malaysian houses.
- Because each piece of jewellery is unique, you won’t get a uniform price when you sell it; instead, you’ll have to shop about and bargain, and you won’t likely get as good a price as a pure gold coin or similar item. This is because the buyer will be responsible for the cost of melting down the gold to rebuild it. As a result, they’ll pass that cost on to you.
3. Exchange-Traded Funds (ETFs) That Buys Gold

Besides physical gold, ETFs can be purchased like shares on a stock exchange. ETFs allow investors to gain access to gold without the expenses and hassles of markups, storage charges, and security risks associated with real gold.

The expense ratio of a fund causes an investor to lose a percentage of his or her investment each year. An expense ratio is a recurrent annual fee that funds levy to pay their management and administrative expenditures.

In Malaysia, TradePlus Shariah Gold Tracker by Affin Hwang Asset Management provide investors a Shariah-compliant Avenue to invest in physical gold without the hassle of storing or insuring gold bullion. The Fund closely tracks the returns of gold through an Exchange-traded Fund structure; where units are tradeable on Bursa Malaysia Securities.

4. Buy Gold Through Futures Or Options

Bullion futures or forwards contracts are also available to investors. A futures or forwards contract is an agreement to buy or sell an asset or commodity at a current price and have the contract settle at a future date.

The seller of gold and silver futures contracts agrees to deliver the metal to the buyer on the contract’s expiration date. The buyer will only be an owner of a paper gold contract until the gold is delivered. If the buyer does not wish to own gold bars or coins, the contract can be sold before it expires or rolled over into a new contract.

This form of investment is not permitted in Islam since, as stated in the hadith above, all item ribawi transactions must be made on the same measurement and on the spot. It indicates that the buyer must take possession of the gold immediately rather than waiting for it to be delivered later.

5. Contract For Differences (CFD) On Gold

Gold trading has progressed to the point that traders no longer require physical possession of the commodity. A contract for differences (CFD) is a financial contract that pays the difference between the open and closing trade settlement prices.

The objective behind gold trading with CFDs is to speculate on the price of gold. The profit or loss is calculated by the change in Gold’s price throughout the course of the contract. You can buy in rising and falling markets while trading Gold as a CFD, just like other assets. You can trade when the price of gold is rising or decreasing, in other words.

In a falling market you can actually SELL Gold and then later BUY it at a greater value. Likewise, you can BUY low and SELL when gold rises in value

Contract for differences (CFD) investing is categorically prohibited. This is due to the fact that there is no genuine gold transaction going on, and the economic effect is equivalent to gambling.

6. Exchange-Traded Funds (ETFs That Trade In Gold Futures Or Forwards)

When the underlying contract is gold futures or forwards, it is also Haram to invest in gold futures or forwards through exchange-traded funds (ETFs).

About the Author

Hanif Yahaya is a Licensed Financial Planner. He is the best student of Shariah Registered Financial Planner (Shariah RFP) in 2018 and completed Registered Financial Planner (RFP) in 2020. He is Certified HRDF Trainer and currently he is Youth Committee Member of Malaysian Financial Planning Council (MFPC) and Member of Malaysian Association of Muslim Finance Professionals.
June 2, 2022
Saving Up For Our Retirement, Is It Possible To Do It Post-Pandemic?

The global pandemic that hit the world has changed all aspects of our life. Besides the health and human loss that is caused by COVID-19, it has also impacted the economy quite severely.

Efforts by the government to curb the pandemic by imposing Movement Control Order (MCO) have a great impact on businesses and individuals. Many companies have closed shop and many individuals saw their income greatly reduced.

To help Malaysians, the Employees Provident Fund (EPF) rolled out three withdrawal retirement income initiatives namely i-Lestari, i-Sinar and i-Citra. The pandemic has clearly disrupted the cash flow of individuals affected by lockdown and economic slowdown.

A total of RM101.1 billion EPF withdrawals have been made and there are now 54% or 4.4 million members who have less than RM10,000 savings in their EPF.

This leads us to the question; can we save for retirement in this post-pandemic era?

A Long Term Game

Saving for retirement is a lifelong journey. Many Malaysians put their savings for retirement plans on-hold as they struggle for the past few years.

A survey conducted by the Private Pension Administrator (PPA) highlighted that 80.1% of respondents who are facing financial challenges were rethinking their retirement plans and goals, while 19.2% of respondents want to resume saving once they have achieved financial stability.

Government approval on EPF withdrawals should not be the only solution to ease an individual’s burden. To alleviate the difficulties of the rakyat, the government must create more funding schemes or come out with other forms of assistance rather than approving the withdrawals from retirement funds.

This will be a huge problem in the future, as many are left with very little once they retire.

The country is now rebuilding its economy, our borders have reopened, and many people are going back to work. Even the traffic jams are getting worse.

If you are badly affected and have exhausted the means from your EPF, it is about time to start filling in your retirement funds. We can see the light at the end of the tunnel, just need to persevere a little bit more.

About the Author

Nur Aiziera Sukman completed her Masters in Quality & Productivity Improvement from Universiti Kebangsaan Malaysia in 2007. She has more than 10 years of experience in the Financial Services industry and specializes in understanding financial planning needs and develop customized plans to suit retail and corporate client.

In 2019 she pursued her professional certificate in Certified Financial Planner from Financial Planning Association of Malaysia and continued her study in Islamic Financial Planner from IFBIM and received the IFP Certificate in 2021. She can be reached at aiziera@aswaadvisory.com.

Aswa Advisory is your preferred one-stop center for Shariah Independent Financial Advisory. Get a free consultation from an Islamic Financial Adviser Representative by filling in your details here: https://www.smartinvestor.com.my/SIxAswa

June 2, 2022
5 Things That You Should Know About This Local NFT Artist Who Is Making Waves Worldwide

Non-Fungible Token (NFT) is the buzzword these days, and you can see many brands embracing it. We have McDonald’s, Coca-Cola, Nike, Ray-Ban, Louis Vuitton and BMW among the well-known brands that have started their own NFT initiative.

Over here in Malaysia, we have KFC, AEON and MyeongDong Topokki offering NFT with benefits to its holders; whereas MY EG Services Bhd (MYEG) have launched their own NFT marketplace called Pangolin.

Having said that, there’s a local NFT artist that have been making waves worldwide and raking in millions of dollars from his NFT collection. Let’s meet Katun and get to know him a little bit better.

Here are 5 things that you should know about this local NFT artist.

1. How It All Started

Katun is a Graffiti Artist and Illustrator based in Kuala Lumpur, Malaysia. He first embarked on his NFT journey with his manager/partner David Ku. Although the NFT sector locally is still in its infancy, they both shared a common vision and their ideas clicked.

With Katun’s experience in the art community, David believed that they could take it to the next level by stepping into the NFT space. Several months of back and forth conversations with industry leader Elliot Wainman, co-founder of U.S based Superfarm platform, resulted in their partnership that set the groundwork for 4 Stages, which then sets the Apes R Us project into motion.

2. Have Been Creative Since Young

Katun have always been a creative person and he has been drawing since a very young age. When Katun was in kindergarten, he used to imitate all of his favorite 80’s cartoon character styles, and even told his teacher that he wanted to be a cartoonist when he grow up.

What do you know, dreams do come true!

3. His NFT Have Been Sold For Millions

His recent collection entitled Apes R Us, consisting of 8,444 NFTs was sold out within 28 hours. The collection, which valued at USD7 million, surpassed his previous NFT releases – ‘Apes Stands Strong’ and ‘Mystical Fruits’ – which reached an approximate total sale of USD401 thousand.

He have also worked with renowned international artists such as Chris Brown, Dua Lipa, & Post Malone, and brands such as DC Shoes, JBL, Vans, Sony and New Era.

4. His Advice To Fellow Malaysians

For fellow Malaysians who wants to get involved with NFT, it is important to know the value of your art and your audience. Take your time to create good artwork and most importantly, don’t rush. Don’t stress yourself out on how much you can earn, just enjoy creating instead of thinking about it.

Focus, concentrate, and trust the process.

5. His Plans For The Future

There is plenty in the works regarding the Apes R Us project. He aims to expand and explore other mechanisms and mediums.

A few brand collaborations are in store as well, and anyone that wants to know more about his projects, feel free to join their Discord community and follow their Instagram profile for the latest updates.

Of course we didn’t stop there, we also asked Katun on NFT as an investment tool. Let’s check out his answers.

With The Recent Crash Of Crypto, Will The NFT Market Crash Too?

Personally, he don’t foresee the NFT market crashing. As a creator, he have always been self-motivated, and don’t quit easily.

“Ups and downs are part of the game, you either keep going or you’ll get chewed out. For as long as there are creators in this world, it will always be survival of the fittest”, said Katun.

And we can see that NFT is still in a very early stage. We haven’t even get started talking about Metaverse, which is said to be booming in the next few years – which prompted Facebook to change its name to Meta.

Is NFT A Good Investment To Venture Into?

“If you have a solid plan of action, a valid strategy, I believe money can be made, but my core focus is on building and growing the project, along with the community, and putting emphasis on executing development work”, said Katun.

For investors, yes NFT would be a good investment. But maintaining a diversified portfolio to mitigate the risks involved is equally important.

June 2, 2022
8 Categories of Real Estate Investment Trusts (REITs) in Malaysia

Real estate or property is one of the ‘cliche profitable’ investment portfolios. Many people said that you can never go wrong with property or real estate investment. They never ‘betray’ you. It performs very well for the last few years.

Before REITs were introduced, an investor need to buy physical property to get exposure in real estate/property investment. But now, with REITs being introduced, an investor can just buy a fraction of the property prices.

Want to get investing started? You can try the easiest one : 5 Easiest Investments You Can Start With In Malaysia

Simply put, REITs offer you a high-value commercial property at just a low price and without the need for you to buy the properties physically. It’s very interesting and tempting! Isn’t it?

We can also say that it’s an investment that gather funds and access better investment opportunities which in this case, property.

So, what are the categories of REITs in Malaysia? This categories came from PropertyGuru.

8 Categories of REITs

1. Hotels

This includes any property with hotel business and also accommodation

2. Office

This includes office buildings or office spaces.

3. Retails

This includes malls, shops or commercial shops.

4. Industrial

This includes factories, industrial buildings, and industrial lands.

5. Healthcare

This includes clinics, hospitals, pharmacies or any healthcare buildings.

6. Warehouse

This includes storage and logistic facilities.

7. Carparks

This includes car parks or parking infrastructure.

8. Residential

This includes residential properties, multi-unit properties or rental properties.

You can buy this REITs via your CDS account in Bursa Malaysia. These are 18 REITs that you can purchase from Bursa Malaysia as of 1st June 2022.

Source : Bursa Malaysia

Remember! There are syariah and non-syariah compliant REITs (this will be discussed in our next article).

The best REITs in Malaysia? Best Reit In Malaysia. Which One Is Better? Is It Time To Invest Now?

As you can see from the image above, you can invest in property (REITs) with less than RM100. It’s kind of great opportunities for those out there that want to save their money, take lower risk without having to buy hundreds of thousands or million of physical property.

What do you think?

June 1, 2022
Avoiding Behavioural Biases Of Investing

C: Behavioural biases can lead investors to make decisions that can jeopardize their investments

The traditional economic theory assumes that all individual investors would behave and act rationally by considering all information available to them. This would be reflected in the prices of assets and ultimately, what makes markets efficient.

But we know textbook theories don’t apply in real life and investors do not behave rationally all the time. This is particularly true when markets reach euphoric highs or plunge to scary lows.

Following these mental cues or tendencies can be harmful, especially when logic gets thrown out the window. Decisions that may appear rational are in fact detrimental. Here are four common behavioral biases that can lead investors astray and how one can overcome them.

1. Recency Bias

Symptom: If you find yourself reacting immediately to every breaking headline and being trigger happy with your investments, you may be succumbing to recency bias which is the tendency to overemphasize new information.

In the current 24-hours news cycle with the prevalence of social media, the investment realm has become a global echo chamber constantly reverberating with news alerts.

The coronavirus outbreak and ensuing market correction is a more recent example. But if there is something more contagious than any viral outbreak is the spread of fear. Add a web of disinformation and fake news; you have a toxic concoction oozing with fear and market angst.

If you look at past outbreaks like that of Severe Acute Respiratory Syndrome (SARS) in 2003, the incident didn’t create any long-term impact on asset classes and equity markets promptly recovered after the outbreak was contained.

Having a recency bias will also almost certainly lead you to buy when markets are peaking and selling at the bottom.

Remedy: There is nothing wrong with staying informed with new information, but the problem lies in how we react. According to Lim Chia Wei, a portfolio manager of Affin Hwang Asset Management, it is essential to first recognize the media’s thrives by sensationalizing new news.

“I think it is helpful to clearly write down every investment’s long-term thesis. As new information presents itself, we should ask ourselves how the new information will affect our long-term thesis. It is crucial to think in terms of probability. Anything is possible to break or support one’s thesis. But not everything is probable,” he says.

The prevalence of market noise as well as the legitimisation of social media as a reliable news source has injected more volatility in markets. Think US President Donald Trump and his Twitter diplomacy during the US-China trade talks last year. If you reacted to every one of his tweet, you may find yourself burnt in the end by Trump’s randomness.

2. Herding Bias

Symptom: There is safety in numbers, correct? Well not really if you look through history. From Tulipmania in the 17^th century, the dotcom bubble in the early 2000s, and the 2008 subprime mortgage crisis, history has shown that investors are willing to suspend disbelief when the going gets good. But, we all know how the story ends when there is irrational exuberance bubbling amongst asset classes.

Investors are social creatures, and we are comforted that someone else is buying into a particular investment too. But the wisdom of the crowd can be wrong and the repercussions severe. More recent examples like the bitcoin mania underscore the dangers of herding behavior.

The truth is much of today’s market volatility is also fuelled by machines or algo-traders that profit from short-term fluctuation in prices and ignore any fundamental analysis. Behind each market plunge is a digital herd of trading bots programmed to buy and sell based on pre-determined formulas and models.

This ignited a ‘flash crash’ like that seen in 2010 when the Dow Jones Index lost close to 1,000 points in mere minutes. The S&P 500, Dow Jones Industrial Average and Nasdaq collectively lost US$1 trillion. But in 36 minutes, the rout was over and markets rapidly recouped its losses.

Remedy: Stop focusing on what the crowd is doing. Instead, work on developing a plan that is right for you. Understanding the self is the first step in modeling a portfolio that is meant to serve your life goals and financial aspirations.

Next, concentrate efforts on building a diversified portfolio that fits your own financial goals and risk-appetite. Intraday fluctuations in markets are unlikely to bother you if you are well diversified across asset classes.

A diversified multi-asset portfolio with low correlations helps smoothen the investment journey when faced with adverse market conditions. In turn, this would induce investors to stay invested and reap the benefits when markets bounce back.

3. Loss aversion bias

Symptom: We all hate to lose money. But if you find that fear of loss crippling and clouding your decision-making, you may be suffering from loss aversion bias. Investors often feel more acutely the pain of loss than the pleasure they reap from gains.

Why are we so afraid of loss? It’s an emotive response that is typically hard-wired into someone’s psyche. In markets, this is manifested through behaviors of extreme risk-avoidance, such as investing in only low-risk, low-return investments and selling immediately at the first sign of a headwind.

This behaviour is counterproductive to investors’ financial goals by not fully utilising their capacity for risk and financial resources.

Remedy: Investors’ memories are by nature short-term and most of the time we only remember the bad parts. If you are feeling jittery about markets, consider rebalancing your portfolio to its target asset allocation or locking-in gains to raise some cash.

Importantly, work on developing a financial plan that suits your goals and risk-appetite. If you cannot stomach the volatility, chances are that you may be taking too much risk and there is a portfolio mismatch.

Chia Wei believes it is important to have the right perspective of performance to overcome one’s loss aversion bias. “History has shown that taking a long-term investment approach and sitting through short-term declines has been very rewarding. Investors should push themselves to focus on the long-term prospects and de-emphasise short-term events.”

4. Confirmation bias

Symptom: One of the more common behavioral biases amongst investors stems mainly from overconfidence, particularly in bullish market conditions. When investors are misled to think they are invisible in the marketplace when they are raking it in, this can lead to tunnel vision when they only seek out information that supports or confirm their view.

For example, say you just added a new stock into your portfolio. When you continue your research on the stock, you only click on positive headlines which support your decision but avoid negative ones. Restricting yourself to such information only confirms your own assumptions that may lead you to miss important red flags or warning signs.

Remedy: Be open to new sources of information that may not sit well with you. Ask yourself if the issues raised have their merits and if they would impact the fundamentals of a particular investment you just made. It’s not easy to challenge your own assumptions. Still, it is important to do so, especially when there is a lot of hype built-in and technical indicators are pointing to overbought territory.

Investing With Clarity

The first step in overcoming behavioural biases is to understand why we have such tendencies in the first place. But proper planning with clear financial goals can help anchor investors and guide them in their financial journey no matter how markets behave.

Stick to a disciplined approach by investing consistently and be conscious about the decisions you make to navigate markets confidently.

About the Author

Lee Sheung Un is a communications officer at Affin Hwang Asset Management. A millennial, he is still finding that balance between wealth, freedom and purpose. Views expressed are his own.

June 1, 2022
Don’t Worry, It’s Okay To Spend!

In order to become financially independent, the need to track your net worth is a crucial step. And for our net worth to grow, we need to have good cash flow management where part of our income is retained and converted into financial assets. Can we spend or can we not?

However, when I say good cash flow management, this does not mean you have to track what you spend every day. Usually, people associate this with not spending money or cutting back on their lifestyle, which is inaccurate.

Rather than doing that, I believe that we should not suppress our urge to live our life the way we want it. We work so hard every day, so why shouldn’t we live the lifestyle that we would like to have?

Why it’s OK to spend?

I’m not here to tell you not spend money, and I’m not here to tell you that you should save x% of your income either. With our lives surrounded by advertisements that promote consumerism, it’s not easy to resist the temptation to spend. Instead, I’m here to tell you that it’s okay to spend money.

Generally, there are three types of spenders – which category do you belong to?

Type 1: Spend More Than You Earn

Despite enjoying and living on our own terms to the max as a Type 1 spender, it comes with consequences. Since the additional spending is funded by money that is not ours, there will be time when you will need to pay it back, and it will not be fun when that time comes.

Immediate gratification is common for Type 1 spenders, as their wants and needs get fulfilled. Over time, however, this may become a habit and if you are trying to adjust or change this habit later, it may already be too difficult, and the process may not be easy.

Type 2: Spend What You Earn

Those in this category are usually smart enough to avoid the painful journey of paying back what they owe the bank, and so they spend within their means. If they bring home RM1, they spend RM1. This seems slightly more attractive than the first type, as this is living in the present without having to worry about payback.

However, this has its downsides too.

The downside comes from you having to continuously earn an income to pay for the food and services you need. It means that you cannot stop working. The day you stop working is the day you stop earning an income, and you’ll then no longer be able to pay for what you need.

That said, this category isn’t entirely ideal either. On the flipside, if you are a salaried employee, you are automatically made to save at least 11% of your gross salary in anticipation of your golden age.

Interested to invest for your old days. Worth a read, Selecting The Right Investment Funds For Your Retirement Portfolio.

However, this can only be enjoyed after your retirement. What about the other life priorities and goals that you would like to pursue between now and when you retire? If we spend all that we take home now, we will never have the ability to pursue these life goals.

Type 3: Spend Not More Than 90% Of What You Earn

This type of spender acknowledges the irony of the need to spend and to save, and makes it a point to set aside part of their take-home income to prepare for their future.

While living in the present, they also prepare for the future. This group of spenders understand that it is better to prepare than to repair. With the goal of spending not more than 90% of the take-home income, they practice what is referred to as ‘pay-yourself-first’.

You can decide how to spend as you like, so long you keep the maximum available for spending at 90%. If you can lower that spending amount, you will have more control over your quest towards financial independence.

By doing so, you have choices for your future. You are not just saving money; you are giving yourself more flexibility and options.

Honest Self Review

So, which type of spender are you now? If it’s up to you, which type of spender would you want to be? If you are not there yet, what is stopping you from getting there?

Usually, people who have insufficient monies to spend every month would say that they have to spend all their monies because they are not making enough. For these people, their mantra is ‘I will start saving when my income increases”.

Do you have these same thoughts too? My advice to you is to not wait – we can start making an effort to not spend all your take-home income today.

Don’t forget your emergency funds!

Read here : 3 Tips to Building Your Emergency Fund in Malaysia

However, despite its benefits and advantages, just being a Type 3 spender is not going to promise you financial independence. Without managing the monies that you save in an efficient manner that supports your personal values, chances are you are not making full use of your financial muscles.

If you are unsure about your current spending behaviors and how to manage your personal finance, let’s chat.

Kevin Neoh is a NextGen Money Coach who works with people to help them transform their relationship with money to improve their lives with the money they have. Kevin can be contacted at kevin@nextgenadvisors.my and www.kevinneoh.my.

May 31, 2022