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 Personal Financial Management V3, It's all about managing your $$$

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kaiserwulf
post Feb 17 2014, 04:02 PM

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Lets play a game. Say you have RM 7000/mth to invest.

How would you allocate your investment(s) and in what frequency?

Other info: You have house loan at BLR-2.4% and car loan at 2% p.a. Your family is well provided and don't ask you for anything else.

Lets see how you grow this cash! Begin!


kaiserwulf
post Feb 18 2014, 08:00 AM

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QUOTE(sonicbull @ Feb 17 2014, 09:38 PM)
My answer in general...
After monthly repayment of the loans, the remaining cash
'Agressive':I will invest in a mixture of 10%fd, 30%mutual funds & 60%stocks.
If I have a business plan:I will save up enough capital in a fd/savings account to start the business.
Balance lifestyle: 5%fd, 50%vanguard etf, 45%stocks & mutual funds.
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Just curious... Why want to pay for 4.2% house loan when you get 6% or more investing in other stuff (as you mentioned MF and stocks)

Separately, is it wise to pay off 2% car loan when it penalizes you when you opt for early settlement.

Others any comments on his choice?
kaiserwulf
post Feb 18 2014, 08:01 AM

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QUOTE(shankar_dass93 @ Feb 17 2014, 04:09 PM)
FD would be the only choice I guess. You could choose for something like OCBCs smart savers account. By depositing
RM 700 a month you would be getting around 2.75%p.a.
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It's 7000/mth bro...
kaiserwulf
post Feb 19 2014, 10:07 AM

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Nice breakdown WMK. I am just curious why the percentages since we have the game case of RM 7000/mth. 11.11% = RM 770 approx. Any reason for this number?

I like your 8% guideline for emergency cash. RM 500k networth = RM 40 000. Decent but not overboard.

Networth is asset + EPF - liability?

Also... anybody else with their personal breakdowns?

QUOTE(wongmunkeong @ Feb 18 2014, 08:52 AM)
no expert here yar, just curious.
When U mentioned "30%mutual funds & 60%stocks"
U meant 30% bond funds or equity funds?
IF U meant equity funds.. er. then one would be 90% into equities (30% +60% stocks)?
Very aggressive indeed.

that 10% in FD - what if market collapses within 6 mths or 1 year.
how would one take advantage with monthly i keep my Fixed Income (FD or Bonds IMHO) at only 10% monthly?
Based on Kaiserwulf's "game" criteria:
Say you have RM 7000/mth to invest.
How would you allocate your investment(s) and in what frequency?
Other info: You have house loan at BLR-2.4% and car loan at 2% p.a. Your family is well provided and don't ask you for anything else.

My personal additional assumptions: mortgage = FlexiMortgage +do NOT have EPF a/c +not a biz owner.
IF biz owner, i'd suggest own biz be part of "Equities excluding REITs or Properties" if my biz is in trading/services

I would:
A. $7K - channel 50% to build emergency buffer, 50% for investments.
Once emergency buffer hits 6 months expenses or 8% of my net worth (keep topping up bit by bit if it is too far from 8%), 100% will be channeled to investments

B. Investments
1. Asset allocation of:
a. Fixed Income: 1/3 - to hold dry powder for FEAR / major value buys
b. Equities excluding REITs or Properties: 1/3
c. Real Equities (REITs & Properties): 1/3

2. Sub-asset allocation:
a. Fixed Income:
11.11% to local cash equivalent in FlexiMortgage
22.22% to local developed bond funds. Heck if BLR goes up, may even move this portion into FlexiMortgage
Note: since FI is just to hold dry powder for usage, local bond funds & FD/MM is good enough. Dont want to complicate things

b. Equities excluding REITs or Properties:
20% in Developed Markets ETF like URTH (including US) or a mix of ETFs like VEA (dev mkt exUS) +SPY (US)
13.33% in Emerging Markets ETF like a EEM or mix of CIMBA40 (ASEAN) +CIMBC25 (China)
yes yes CIMBA40 has SG in it, which is a Developed Mkt.
Again - point is not too nitty gritty, "close enough"

c. Real Equities (REITs & Properties):
REITs: Based on value hunting in SGX (0% tax on dividends for individuals) & MY (local expertise mar)
Criteria: net DY% >=7%pa & Price/NAP <=0.9 & D/E or leverage <=33% (buy for DY%)
OR Price/NAP <0.7 & D/E or leverage <=33% (buy depressed price for flipping)
Properties: Based on value hunting similar to above reasoning.
3. Execution:
With the Asset & sub-asset allocation done +specific vehicles identified, i would execute once every 4 or 6 MONTHS.
Why 4 or 6 months?
a. More cost effective purchases of ETFs, yet "timely" enough as done at least 2 to 3 times a year
b. Forces a review of Asset Allocation & sub-allocation at least 2 to 3 times a year

If AFTER the new injection of funds, any of the Equity classes or sub-classes varies 20% or more, FORCE a rebalance.
eg. 20% is for Developed markets, thus
if Developed markets hit <=16% force buy to hit back 20%
if Developed markets hit >=24% force sell to hit back 20%

If AFTER the new injection of funds, both Equity classes varies 40% or more, FORCE a VALUE BUY - spend down Fixed Income % down to 10% and bump up Equities & Real Equities equally.
IF DONE - do not buy into Equities anymore until Fixed Income rebuilt back to approximately 33.33%, then Execute as usual biggrin.gif

Why?
Approximately every year, about 10%+/- fall is expected
Once in 4 to 6 years, about 20%+/- fall is expected
Once in 8 to x years, major falls is expected (think 1997-1998 ASEAN currency crisis, 2008 credit crunch)
Statistics from statistical & equities company - sorry, can't recall which/where

Whew.. that's it.
All logical criticisms & suggested solutions are welcomed. The above is actually part of my "possible" Trust's asset management rules tongue.gif

Just a thought  notworthy.gif
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kaiserwulf
post Feb 19 2014, 11:52 AM

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QUOTE(wongmunkeong @ Feb 19 2014, 11:27 AM)
<<advice>>
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Looks good rclxms.gif What's the annual return for 2013 following that if I may ask?

'i assume you are practicing that already' so its not too difficult to count.
kaiserwulf
post Feb 19 2014, 09:08 PM

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QUOTE(wongmunkeong @ Feb 19 2014, 12:55 PM)
I think (1.) & (2.) is too long/complicated to list, thus my net worth or ROE growth?
note i didnt buy new home & i dont count cars, 100" TVs, etc. as assets:
2010: 37.05%
2011: 18.91% (index futures exploration soured, profits hit)
2012: 28.35%
2013: 15.20% (complicated pregnancy & birth cost impacted savings for investments since had to rebuild emergency buffer)
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Your CAGR each year is better than WB!

I will be starting rebalancing portfolio after my upcoming wedding. Your sharing is very insightful. Trying to keep cashflow and reserves right for this since I am paying for marriage solo!
kaiserwulf
post Apr 15 2014, 11:30 AM

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Works fine in other countries... malaysia true inflation is more than 3.5% so effectively as long as his real return is -% he still rugi.

Yes truly get what you mean if the capital is big... even 0.5% of real return on RM 2 mil = RM10k

QUOTE(Showtime747 @ Apr 15 2014, 08:25 AM)
Very often we hear people say putting money in FD is useless because of inflation that will eat you up alive

Yesterday I was talking to my elder brother, who has retired and has tonnes of money in FD. He is a very risk aversed guy, so the bulk of his money is in FD. I asked him the above question.

He told me FD is not actually that bad. Those who say FD cannot cover inflation is not entirely accurate. He said that income doesn't equal to expense. So if your FD principal is big enough, you can still beat inflation in absolute amount. I run a simple scenario on his theory :

FD - 3.5%, Inflation - 3.5%, Putting FD is worse off ?

He has FD for eg. RM1.2m as principal. Each year he makes RM42k = RM3.5k pm

His expense is for eg. RM2k pm = RM24k pa. So, he still has RM1.5k left over to roll into FD. While the price of goods increases every year, his income also increases. Repeat it over 20 years, he still has positive RM3.5k yearly or ~RM300 pm extra to cover his inflated expenses. And his FD principal has grown into RM1.46m

So, the trick is to have a FD principal that is large enough, and it still can cover inflation. Comparing % may be just the trick of financial planners who try to convince you to buy their products  tongue.gif
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kaiserwulf
post Apr 15 2014, 04:21 PM

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I dont think you get me.

Lets go again... FD for him can nego good rate say 3.5%.

What do you think the Msian inflation rate is?

sample for you- http://invest-made-easy.blogspot.com/2013/...-inflation.html

I'll respond to you once you get the true inflation rate right.

QUOTE(Showtime747 @ Apr 15 2014, 03:19 PM)
Inflation worst hit product I suspect must be property. He already retired and has a house fully paid. He even has holiday homes in cameron highlands and UK. So he is not buying any more properties. I think a well planned retired people worry about housing last. So the biggest expense is taken care of

Second biggest spending is cars. The price is quite stable over the last 15 years. And I think car price may come down if FTA is really put into reality. So, this one is also quite taken care of. Furthermore, retired people may not change car as often. So the 2nd biggest expense is also taken care of.

Education for children is another big expenses. But his children has gone through that and has been working for quite sometime.

Then it would be other expenses like food, clothing, holidays, household which I think the prices increase close to the inflation rates. Or for holidays, it is actually cheaper as competition between the airlines is fierce.

So, I think for retired people, FD is still one of the safer bet. But for young people, FD is damn hard to beat inflation unless he has a very big sum in FD
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kaiserwulf
post Apr 15 2014, 08:06 PM

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Thanks. That said, I'll wait for others to come explain to you about inflation...

in any case negative real value will erode savings.
kaiserwulf
post Apr 16 2014, 08:16 PM

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Showtime747... you got your answer de smile.gif

QUOTE(kaiserwulf @ Apr 15 2014, 08:06 PM)
Thanks. That said, I'll wait for others to come explain to you about inflation...

in any case negative real value will erode savings.
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QUOTE(howszat @ Apr 15 2014, 11:16 PM)
Actually, it's not. It's the most precise comparison that they (financial planners) or anyone else can come up with that is not a trick.

Because it's pure and simple comparison between incoming (FD) and outgoing (inflation) differences. If outgoing > incoming, that's negative. Both in terms of arithmetic and accounting.

Whereas you brought up numerous other side issues like risk-appetite, accumulated wealth, required/essential expenses and personal circumstances to cloud the matter further.

For example, if you spend zero, the impact of inflation on you is zero.

It doesn't mean the impact of inflation is zero, if you get the drift?
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QUOTE(td00164306 @ Apr 16 2014, 03:02 PM)
Essentially the buying power of your money is ever decreasing if you can't beat the inflation regardlessly you spend it or not.

You can live until your last breath with 10 millions today in FD @ 3.5%; but by that time the same 10 millions probably can't buy you the equal value of items. Make sense?
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QUOTE(td00164306 @ Apr 16 2014, 04:59 PM)
No idea. But we can always used what is published by the authority as a guiding principle.
We should make our investment decision based on return vs risk. One should not forced "Beat the inflation" to be in their investment objectives if they certainly can't take that corresponding level of risk. Inflation is completely out of consideration when I am making a decision to invest into something.
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The last line about authority... works pretty well in well developed countries. Thats why I never questioned your brother's risk appetite, or his financial success in accumulating assets etc... His risk adverse strat works perfectly when the real return is positive (even though its small in percentage- his high networth offsets it).

In Msia... I think we should be smarter than just accepting the govt's facts on inflation.

(and pretty much everything else)... saving since young to buy diamond rings? Saving RM3k EACH DAY since birth?

Inflation is easily high possibility more than 3.5%. Wongmunkeong help me out if showtime still blur k?

This post has been edited by kaiserwulf: Apr 16 2014, 08:17 PM
kaiserwulf
post Apr 16 2014, 08:51 PM

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QUOTE(Showtime747 @ Apr 16 2014, 08:39 PM)
No I didn't get your answer. Your inflation without subsidy is quite peculiar. I am blur blur and I prefer to get answer from the house's mouth instead of wong seafood  tongue.gif
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Msia inflation is currently more than Malaysian FD. Thats all.

Contrary to what the govt tells you.
kaiserwulf
post Apr 17 2014, 02:47 PM

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QUOTE(asambai @ Apr 17 2014, 01:44 PM)
An Indian expat colleague noted to me once that the FD rates in India hovers ard 12 - 13%. Go figure  rclxub.gif

Guess what the inflation rate there must be
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That's why they love to buy gold. Until the govt curb them... tongue.gif

@showtime- I keep money in FD actually as it is most liquid (other than the stuff I keep in my wallet). And some money for my soon to start house renovation smile.gif

I share with you a story of an old man i knoe... he never trusted properties, never trusted stock market, never trusted anything but cash (and FD). He was debt adverse and risk adverse.

When he retired, he realised he had way less net worth than his friends. His friends who owed banks when young had cleared their mortgages, made money from bull runs and had good interest growth in UTs. All debt free but he was in last place.

Btw, he gaji tinggi type. Retired de.
kaiserwulf
post Apr 17 2014, 04:40 PM

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QUOTE(td00164306 @ Apr 17 2014, 03:45 PM)
He does get his peace of mind all the while and made it to his retirement. Doesn't he?

Life is never a race of wealth. While it may be important to most of us, but there are also people who are happy with what they have right now and furthermore he is already a high-earner smile.gif
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He was sad actually... but he dint say. Cos his colleague also high earner ma same 1. Tapi they ada few biji rumah. Total cash also lebih.

OFC for sure not go home hungry la.
kaiserwulf
post Jun 19 2014, 03:13 PM

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That what is not inflation la bro.

Please reread what you have just typed. You are saying expenditure increase 50%. Cos from 2012 to 2013 for sure you bought MORE items. If its exactly the same items in same amount, yes inflation would have been 50%.

shakehead.gif
QUOTE(meejawa @ Jun 19 2014, 02:34 PM)
I beg to differ.

Inflation must be personal, and be detached from whatever figure the authority or your friends/family etc said. It will be different to each person.

Say you spent 50k in 2012, then spend 75k in 2013, so your inflation rate in 2013 vs 2012 is 50%! The whole concept of inflation is that it ALWAYS must be compared to past expenditure. Who cares if you made exceptional/special purchases, your money out increased, plain and simple. The whole intention of "beating inflation" is to make more money than you spend. And if you spend more than 50% compared to previous year, then make more money than that! Who cares if kangkung increase 1000% or government said it's 3.5% inflation rate?

No one can give you your inflation rate but you.

shakehead.gif
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kaiserwulf
post Jun 20 2014, 12:00 AM

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QUOTE(meejawa @ Jun 19 2014, 08:01 PM)
If that is your concept of inflation, i feel sorry for you. Then it's just a number to you. Meaningless. You take what the book say wholesale. Well, your choice then.

My point is inflation is the number u need to beat every year.

What if you buy new things every year? And you WILL. You're saying as long as the prices of things you bought LAST YEAR remain, its OK? And at the same time total expenses increase, and you dont care about those?

Don't be naive.
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I am naive. Ure perfectly right. Total expenses increase is my inflation rate. I'm sorry. The others here will agree with you wholeheartedly as well.

Any comments from others?
kaiserwulf
post Jun 20 2014, 06:45 AM

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QUOTE(yklooi @ Jun 20 2014, 06:27 AM)
hmm.gif would like to suggest go google or yahoo for the meaning of "inflation", then read it up and try to understand the meaning of it.  icon_rolleyes.gif
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Haha agree icon_rolleyes.gif

Sometimes we meet interesting characters online that needs special care
kaiserwulf
post Jun 21 2014, 12:29 PM

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Thanks guys for clearing it up for our newcomer.

Let's all learn n develop together smile.gif

Recently there is low uptake of msian bonds due to concern bank negara will revise their lending rate upwards... Any comment on that? I know lots of people barely meet monthly payments for properties. if it goes up... blink.gif

QUOTE(yklooi @ Jun 20 2014, 06:27 AM)
hmm.gif would like to suggest go google or yahoo for the meaning of "inflation", then read it up and try to understand the meaning of it.  icon_rolleyes.gif
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QUOTE(wongmunkeong @ Jun 20 2014, 02:29 PM)
personal inflation:
one's total spending increase yoy (personal interpretation for focused effectiveness)
VS
one's spending increase on same items yoy (technically correct)

similar to the "argument" on net worth:
total assets minus total liabilities (technically correct)
Vs
total REAL assets (ignoring doodads that dont make $ AND depreciates AND cost $ to keep like personal cars, bikes, etc.) minus total liabilities (personal interpretation for focused effectiveness)

Those that uses personal interpretations (like me tongue.gif) should lar acknowledge the "technically correct" versions as well lor since that is "universal" gua.
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QUOTE(Showtime747 @ Jun 21 2014, 06:48 AM)
thumbup.gif  thumbup.gif
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kaiserwulf
post Jun 25 2014, 06:58 PM

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QUOTE(meejawa @ Jun 25 2014, 06:23 PM)
Second, I don't disagree with the clarifications
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Alright we are on the same boat then. rclxms.gif welcome...

kaiserwulf
post Jun 25 2014, 07:11 PM

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QUOTE(meejawa @ Jun 25 2014, 07:04 PM)
Don't conveniently leave out the whole context. Grow Up bro. We can all learn here.
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Your fight is not with me. No need to compare epeen size here. The others n myself have shared our views.

Stick with the topic.

Any further aggression will not be tolerated.
kaiserwulf
post Jul 16 2014, 05:16 PM

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QUOTE(wongmunkeong @ Jul 16 2014, 04:54 PM)
Yar bro and also Germany charges (generally lowest for tertiary education, even for pendatangs tongue.gif
There was an article last month i read - cost of tertiary education + student expenses in Germany is THE LOWEST. 2nd was Taiwan, 3rd China, etc etc SG was like equivalent to AU or higher  sweat.gif

Been talking with my partner to educate my youngest in German (Gutten targ Herr Lym smile.gif ) since my eldest already doing Mandarin. Hedging mar heheh.
If any forumers' interested - i'll post the overview snapshot in this thread. Just let me know - lazy to search for it (from my filed archives) without interested parties - yes, i'm a lazy fler laugh.gif
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Good planning mr Wong.

@the rest: TBH I think we should save a portion but please do spend the rest. I feel no point living life if you save save save and you retire richer but sadder.

Hypothetical scenario:
A normal guy in KL making 4k a mth. He spend 3k and save 1k.
B saver guy in KL making 4k a mth. He spend 2k and save 2k. Drastic change to lifestyle compared to A. Saves 12k more a year.

Saver guy B
20-30 yrs old stay at home, weekend no go watch movie and date
30-40 yrs old small/no wedding, everyday homecook to send kids to SRK
40-50 yrs old change new local car (e.g. protong to protong), everyday homecook to send kids to SK
50-60 yrs old spend on TAR college for kids, wear cheap shirt cos uncle age de
Retirement = kids start to earn RM 2.5k/mth PV, EPF and extra income from UT (from 12k more/year money) not significantly better than normal guy A.

Normal guy A *Rmbr 1k extra spend makes a lot of difference at 4k/mth income level
20-30 yrs old weekend out watch movie and date, sex with nice young girl in love with him
30-40 yrs old small wedding, bring kids out once in a while, wife happy got wedding- heard wife B complain cos no wedding
40-50 yrs old change new CKD car (safe and comfortable), kids turning out normal and happy cos got holiday when young
50-60 yrs old spend on kids go to local govt uni, wear clean shirt
Retirement = kids start to earn RM 2.5k/mth PV, same EPF and some saving.

I dunno la. Please dont kill your life (which is worth more) by oversaving.

My 2 cnts.



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