Big Drop Tuesday

Singapore stock market took quite a hit today, ouch... Main reason for this was over worries in USA about a fallout in their subprime mortgage market weighing on investor confidence. Another testament of how investor sentiment can move and shake markets. DBS Vickers reports that we can expect the market to be soft for the earlier part of this week, but there may be recovery towards the end.

In Singapore though, good news regarding the manufacturing sector may do well to boost local sentiment so we may see a bit of recovery tomorrow. However all these would be weighed by how the other overseas markets do over the next couple of days. A lot will also hinge on the Federal Open Market Committee meeting.

Current mood: Highly Cautious

Taken from the Business Times 26th June 2007

SINGAPORE - Singapore share prices closed 1.54 per cent lower on Tuesday as players turned cautious a day before the two-day US Federal Open Market Committee meeting, dealers said.

The Straits Times Index closed down 55.23 points at the day's low of 3,525.10 on volume of 3.89 billion shares worth $2.35 billion (US$1.54 billion).

Losers beat gainers 756 to 157, with 601 unchanged issues.

'This correction is quite healthy but 3,500 points should hold as a support for the index,' said a local brokerage dealer who declined to be named.

'It's most likely we will consolidate for another couple of weeks, with people looking to corporate results for guidance when the (June quarter) earnings reporting season starts in the middle of next month,' he added.

Most analysts expect the Fed to keep its key short-term fed funds rate pegged at 5.25 per cent, where it has been for a year, after the meeting which begins on Wednesday.

Weighing on the main index were property stocks, as some investors cashed in gains from the recent rally in the sector.

Leading the pack was UOL Group, which fell 0.25 to $5.65. CapitaLand dropped 0.25 to $7.80, and Keppel Land shed 0.20 to $8.85.

Bank stocks also declined, with Oversea-Chinese Banking Corp down 0.15 at $9.10, United Overseas Bank down 0.50 at $22.30 and DBS Group shedding 0.30 to $23.10.

Blue chips were likewise sold off, with Singapore Airlines down 0.10 at $18.70, Singapore Press Holdings losing 0.08 to $4.56 and ST Engineering down 0.14 at $3.60.

Keppel Corp was down 0.30 at $12.30. -- AFP

Stock Analysis - An Introduction

Hi! I''ll soon begin on my stock recommendation and analysis section, bringing to you noteworthy stocks that are worth investing in or to stay clear of. I base my opinions on fundamental analysis, as well as news reports as I believe stock prices are also to a certain extent driven by investor sentiment.

I'll also set up a Stock-Watch panel to track certain stocks which I think in the near future will give bright returns, so you can pay more attention to those as well.

This blog is a money blog, and I try to encompass as many money-making articles as I can within this blog. What you can expect is a very active stock analysis section in this blog, as I will be very active on the stock market front myself.

Nonetheless, there'll still be a plethora of other finance articles which address financial planning and investments options. Do stay tuned! =)

The deal with IPOs

I read a friend's blog some time a few days ago, and she was mentioning someone asking her to invest in IPOs. Currently, it seems that IPOs are gold in Singapore, and we saw two recent IPO launches hit the jackpot recently.

CHINA XLX FERTILISER LTD.
Offer price = S$0.77
1st day closing price = $1.20
Premium = 55.8%

COSMOSTEEL HOLDINGS LIMITED
Offer price = S$0.26
1st day closing price = $0.69
Premium = 165.4%

There you go! What easy money eh? Haha, that's what I thought too initially. Let's say I buy 20 lots, i.e. 20000 shares, of Cosmosteel:

Initial capital = 20,000 x $0.26 = $5200
Sell on 1st day = 20,000 x $0.69 = $13800
Profit = $8600!!!

Whoa! I thought, instant riches! Haha, if that's what you think you can do with IPOs, and plan to sink $20,000 into them to turn into $50,000 in one day, take a look at this.

Take a look at the IPOs' shares offered to the PUBLIC. 6,000 lots for XLX and 1,000 lots for Cosmosteel. The rest of the millions of shares? Sold to institutional and high-networth individuals (read: millionaires...) Yes, so for the average singaporean, you are fighting about another 30,000 investors for 1,000 lots or so. How many will you get? You have a better chance of queing up for Hello Kitty dolls at Macs or for donuts at Donut Factory during peak hour. Lucky people may get one or two lots. So that's how the rich get richer. They get all these sort of preferential treatment. Haiz.. poor students like us? Try for IPOs, but don't bank your profits on them. =)

Short Term Strategy Details

Although with 35% of my money in short-term - not the highest portion of my 3 prongs - I am choosing to spend the most time with it because of two things.

ONE: It generates the best returns for my money.
TWO: It equips me with investments knowledge and skills which I believe will help me out in future should I pursue a career in Banking & Finance.
ONE STONE, TWO BIRDS =)

Short-term wise, I choose to to make money through the stock market. The STI (Straits Times Index), i.e. the Singapore Stock Index has been surging like a bull on drugs these 12 months, so much so that it has gained over 1000 points from under 2500 mid last year till over 3600 now!!

Straits Times Index (Mid-2006 to Mid-2007)

My goodness, the recent IPOs have made a buckload of investors multi-millionaires overnight. Before you jump right in and start smacking stocks left, right and centre, let me pour a bit of cold water. Remember 1999? The dot-com boom? Yeah, felt good didn't it? Year 2000? The dot-com bust? Felt like crap didn't it? Now's the boom, so everybody feels good. When is the bust gonna come? Tomorrow? Next week? Next month? Next year? I am aware that this euphoria will not last, so I'm not jumping head-in to the stock market, but slowly picking strong stocks to buy into rather than chasing the flavors of the day.

Jacking stocks wantonly will never be a credible short term plan, because just as intensely stock prices rise, they can drop just as easily. Just look at the top gainers and losers at the end of each day. Even in this stock market, some stocks can lose over 40% of their value in a single day! At this stage, most of us beginners will NOT be able to handle the fluctuations, and I find it no point to put my money in based on luck. Might as well bet on soccer... (well, I do, but $10 here and there only for fun hehe..)

Currently I am building up my fledging portfolio with the limited money pool I have, but it has been growing pretty well over the past few weeks. I buy my stocks based on fundamental analysis - i.e. judging the financial fundamentals of the companies - and try to balance between high-risk shares and moderate-risks shares. I also find dividend-paying stocks pretty attractive, and am currently holding a couple of them. =) Overall I am confident of getting a 15% return by end-August, especially since one of my dividends will pay me a few hundred quid. So this would mean I only have to pump up another 10% for the rest of the period from September till June next year to hit my 25% target. If I exceed it, all the better! =P

Currently I am also researching the warrant market for any good buys, but I don't plan to make any moves yet because I am still learning more about warrants. Till I comprehend them fully, I shall stick to shares for now.

My Aggregate Financial Strategy

Apologies for the long delay between posts. Been busy the past week with work as well as other commitments. =) Now I'm back and ready to kick off the blog proper again.

Now for my aggregate financial strategy. What I lay out here is my generic financial strategy using an amount of seed money. I shall start with $30k from July 1st and follow to the plan. Previously I had tried out various strats and played around with the numbers till I came out with an end result I desired that looked attainable for the average joe. =)

Here it is: Darren's Aggregate Financial Strat: 35-40-25
Seed Money: $30,000
Short Term: 35% = $10,500
Mid Term: 40% = $12,000
Long Term: 25% = $7,500
TARGET: $50,000 from this $30,000 in 5 years' time, i.e. 2011.
Gain year-on-year average: between 13%-16%
Gain overall: 70% appreciation in 5 years.

Illustration: Wonder how a 35-40-25 strat would work for $30,000 after 7 years? Check it out below. =)




Reason for 35-40-25 strat:

I put a rather heavy emphasis of 35% on short-term investments, because firstly the stock market is hot now (just be careful not to overplay and do margin trading etc, IT CAN KILL YOUR MONEY!!) and I'm trying to garner some good gains. It's been kind to me thus far, making about a couple grand for a bit of work these few months on the side while I was studying.

Then a bulk (40%) of my pool goes into mid-term investments which are relatively safer and provide decent solid returns. Through this I can get 30+% appreciation over 5 years so that by the time I graduate, I'd have a decent pool of money that has accumulated well over the few years while I studied in Uni.

The final 25% goes to long-term investments which in essence are there to beat the miserable savings account bank interest rates, as well as to trump inflation. Therefore, this 25% would yield decent returns over the years and provide a "rainy-day" pool of money for me to fall back on should the need, touch wood, arise. Either way, in short, it means I got safe money that is still growing healthily rather than sitting like a dead duck in a bank savings account.

Conclusion

Well, the numbers look good, but ultimately the onus is on you to make it work. It's easy to crunch numbers and look at them and feel good. But hitting those numbers will take a fair bit of research and work, but the dividends of good ol' hard work pay handsomely. =)

PLUS: remember, you should still be saving some money every month and adding it to your money pool. Imagine how large a pool you can accumulate over 4 years in Uni if you save $100 every month and apply the 35-40-25 strat to it. Getting from say, $30,000 to $70,000 over 5 years is a realistic, attainable goal. =) You should tweak your strat to suit your lifestyle and goals and I wish you all the best in your money-growing endeavors!

Cheers!

Spalsh

Aggregate Financial Planning

Well, we shall begin the journey of financial planning. First off, we need a master plan - a main strategy to see out how we want to perform financially now and in future. I’d call this a 3-prong strategy. It’s nice and dandy to go about saying stuff, making claims and all, but until we get a strategy down pat, we’re never going to get any substantial results.

The 3-prong strategy uses a time-based concept as its backbone. It’s an aggregate strategy, and is the most basic skeleton strategy for anyone to use. You hear stuff about technical analysis, portfolio building etc right? This 3-prong strategy isn’t anything about it. In fact its more of a layman’s strategy, and its main purpose is to give you some form of structure to building money. The 3 prongs are:

1) Long-term money building
2) Medium-term money building
3) Short-term money building

There you go! =) Simple as that. Many people miss out on this though, because they either prefer to go safe all the way and think long term, how they want to earn money fast and focus short term. By using all 3 prongs, we are able to provide balance to our money building which will yield steady results.

How it works is like this -->

We need to plan our time horizons. How we define long term, medium term and short term. Then we need to know how much of our money to put into the individual prongs. By “money” I mean our entire fortune. Haha yeah well, still in college, I’d reckon that most of us only possess a tiny kitty of a fortune, but dawg, we gonna grow that kitty into something solid eh =)

1) Long-term money building
Risk = Low
Returns = Decent
Target (Appreciation per year) = 4%

Long term would be somewhere farther in future, and is more for the proverbial “rainy day”. Thus you’ll want to keep this prong safe from risks while getting a decent return, while at the same time, making sure inflation is not eating away at this prong. In Singapore, for the year 2006, we had a very comfortable inflation rate of 1.0%. That’s a wonderful number, so for now inflation is not a big worry. However, for our long-term prong, we must err on the side of caution. Hence I always assume inflation to be 3% at least, and thus my long-term prong must beat the 4% level for returns in order for it to be meaningful.

2) Medium-term money building
Risk = Medium
Returns = Good
Target = 7% - 8%

Medium term would be somewhere in the foreseeable future, a period of a couple of years, give or take. This prong can be a little bit more adventurous, as you want a good return on your money to make it have some substantial impact in your life in a few years’ time, right? This is the backbone of your personal money pool, and a 7% rate of return would be a comfortable number to most of us. We shan’t take big risks on this though, as we have to protect our money in this prong as well and limit risk.

3) Short-term money building
Risk = High
Returns = High
Target = Up to you. For me, I'm aiming for a 25% return.

Well, this is the most exciting prong you have. Making big decisions, playing your timing right, making losses, making gains. All part of the high-risk game. Returns are potentially good, but we have to be realistic and understand potential for losses are high too. It’s up to you to set your target levels. The higher your target level the more the risks you need to take. I’ll go for at least 25%, for the fun and for the returns. =)

I think everyone would have a strategy for himself or herself, depending on her risk appetite and how serious he or she is in building up money. There’s no hard and fast rule to strategizing and as long as you take a look at it and feel happy about it, then it’s good. If not, then alter your strategy accordingly.

My next post will outline my strategy for you guys to take a reference =) stay tuned!

Cheers!

Spalsh

Financial Planning For The University Student

First Note: I'm not a financial planner, nor am I officially trained in any financial planning courses. No CFP, no insurance agent background for me to lay out my credentials to plump out the credibility of what I am talking about. What I'll discuss here though, is my own view on financial planning for the average uni student. I'll use the Singapore context, but some of these opinions and viewpoints may be applicable to other lands. =)

Well let's get started shall we? =) The first proper post for Money-Buddy shall address the issue of financial planning for the uni (aka college) student. I won't go into the details like technical analysis or MACD charts and stuff like that, I prefer layman's stuff for now, so don't worry about technical jargon and stuff like that. This post is just to give you a gentle push towards being open to financial planning.

Some of you may ponder... "Why should I plan my finances now? I'm still in uni, I've got to explore the world, explore my individuality, and enjoy the last few years of my real life before I enter the workforce where I have to start behaving like a real adult. " I don't mean you have to be like a psyched-up finance-driven money-grubbin' person just because you do financial planning. I certainly put a lot of heart on character and having a well-balanced life.

What I hope to bring across is that, even as you enjoy your university life, play your sports and carry out your other commitments to hall or societies etc, you should still keep an eye on your finances so that you don't graduate and start from square one like a sizable number of people do. Many of us will start our independent lives (ie. free from parents' protection) after we graduate. Most of us will look at our bank accounts, see a 4-digit number (well, some of you luckier ones out there may have 5-digit bank balances. If you have 6-digits in your bank... haha dang you got it good lolz!) and tell ourselves:" I'm in my early twenties. I'll get a decent job, work hard. And by the time I'm 26, I'll have 100k in my bank!".

It doesn't work this way... =) Think CPF, think of daily expenses, think of income tax, think of the money you give to your parents. Even if you earn about $2700 a month with your first job, you'll be left with, taking into account the gloomy scenario I painted above, about $1200 at the end of the month if you're lucky. $100k divided by $1200 a month will give you a grand total of about 7 years to reach that figure. By then you'll be at a really mature 28-30 years old. Don't forget, all these are EVEN without you taking into consideration buying your flat. (and your car? And marriage? You can't expect to get married and throw your wedding dinner at Lau Pa Sat right?)

So if you don't want to come out of graduation day standing at the bottom of a 100-foot ladder, try to make use of these 3 to 4 years in university to bring yourself up a few rungs. You'll find your shoulders a lot lighter when you step out into the real world as you have the fruits of the past few years' planning propping you up a fair bit.

I'll paint you this scenario. Say you have about $5000 in your bank now. Wouldn't it be nice to make that $5000 do something more useful instead of sitting in a bank earning interest of less than 0.3% PER ANNUM? Imagine if you can do something so that that $5000 accrues interest and increases steadily over 4 years. Add your savings each month to that figure and voila, you'll have a pretty decent kitty of about $11,000 when you graduate from that $5000. It's not much, but imagine if you continue with your shopping, blowing all your monthly allowances and not doing anything with that $5000. Assuming you were a good kid and didn't touch that $5000, you'll have a grand total of $5060. Yes $60 interest from 4 years of that $5000 sitting in your savings account. That's like 60 bubble teas if you want to make yourself feel better lolz =)

Now which scenario sounds nicer? $11,000 for a bit of work every month? Or a measly $5060 after 4 years in university? I know it sounds a bit extreme, but I am certain these figures hold true for quite a number of students around Singapore. You don't have to scrimp and save just to make that $11,000 either. It's just a little bit of awareness, a little bit of prudence and a tiny bit of sacrifice to make your post-graduate life start off a little bit more sprightly. =)

Cheers!

Spalsh

PS: I've hyperlinked the income tax and bank savings account balances above. For those who can't access the links, here are the links once again. Note that I have nothing against DBS or anything like that. I posted their rates here because in my opinion, most people are using DBS/POSB savings accounts. =)

DBS/POSB Savings Account Interest
http://www.dbs.com/ratesonline/dddd.html

Singapore Residents Income Tax
http://www.iras.gov.sg/ESVPortal/iit/iit-se-a1.1.15+tax+rates+for+resident+individuals.asp

Just Started Out

Woot! Finally, after a 4 year hiatus from blogging, I have decided to start up a blog once again. I pondered a while before deciding on making a blog, as I feel that blogs are great personal diaries but I'm not that keen on the idea of writing out my life for the world to see. =) Instead, I'd rather share my interests with everyone, and hopefully this blog will be able to help you out in some small way or another. And maybe, I may learn some stuff from you guys as well.

This is primarily a finance / money blog, where I will discuss all things financial. I am not a finance professor or banker/financial planner, to be honest. Thus I cannot say that my posts are constructed by an expert. However, what I aim to achieve is to provide an informative, first-person perspective and opinionated blog for you all to have a look. Do bear with me if I end up looking stupid at times, k? Haha but nonetheless hope this project/hobby will be useful in any way to everyone.

Small nuggets of information regarding this blog:
I'll discuss, disclose, review various financial and money issues, such as financial planning, investment issues, making money etc with objective and subjective views, at time injecting my own opinions to give my two cents' worth.

Give me some time to pump up this blog, and I look forward to your support.

Cheers!

Spalsh