Wednesday, 3 April 2013

Make money 'without actual work'

Make money 'without actual work'
Joyce Teo
The Straits Times
Tuesday, Apr 02, 2013
     
SINGAPORE - Some people avoid checking the stock market every day to save themselves from minor heart attacks while others, like student Yeo Sui Chuan, monitor it closely.

"People check Facebook; I check the stock market. It's one of the things you do every day... It's enjoyable," says the first-year business administration student at the National University of Singapore.

Mr Yeo, 22, monitors the market two to three times a day but that's an improvement on his early days: When Mr Yeo made his first trade, he called up stock prices "obsessively".

"I checked it a few times in an hour and that lasted for a few weeks."

He had spent a year studying the market and learning about investing before finally taking the plunge in 2010 and buying four lots of ComfortDelGro.

It involved nearly $6,000 of his savings so he was eager to know whether he had made the right choice.

"I have friends who are into technical analysis so they have to pay close attention to the market. I don't fancy that kind of lifestyle... Mine is more 'chill'.

"If I don't have time, I don't check the market. During the school holidays, I can go for a few days without checking it. It doesn't bother me." If Mr Yeo makes it sound easy, it is because he is not your typical college student.

He already boasts a portfolio of five stocks - one he has built up on his own, acquiring enough knowledge and interest to speak at length about his investing style in the process.

It is rather impressive for someone who started investing around two years ago.

Overhearing his father talk about the stock market with his friends and how much money he made piqued his curiosity.

"I found it quite amazing that you can make money by just buying and selling shares, and not doing actual work. I am interested in the idea of earning money this way," says Mr Yeo.

"So, I read up on investing and Warren Buffett in Wikipedia, and went to the books that he recommended."

It helped that he had worked part-time during school holidays and hates shopping. By 19, he had accumulated about $20,000 in his kitty, which came in handy when he entered the market.

Before making his first trade, he had made a sell call and found that he was right.

His father, a project manager, had helped him buy seven lots of Genting shares at about 70 cents a share when he was 15.

But it was Mr Yeo who decided to sell them in mid-2010 at about $2 after doing his own research.

When it came time to part with his own savings, he decided that he wanted to keep about 25 per cent of his money in cash, leaving him $15,000 to play with.

As he did not want to put all his eggs in one basket, he initially bought four lots of ComfortDelGro and then five of Mapletree Industrial Trust.

"I saw that Comfort's valuation was cheaper than SMRT's and was comforted by that," he says.

"Transport is very personal. I felt that I know it as I take public transport. It also tends to be more stable. Plus it is a blue chip."

Mr Yeo is still holding his ComfortDelGro shares as the fundamentals of the company are
unchanged. "I follow Warren Buffett and do not look at the market."

As a member of the NUS investment society, he meets like-minded peers each week to discuss trading strategies and their purchases and to swop ideas.

Mr Yeo reviews his portfolio quarterly and reads books on investing, his favourite being Security Analysis.

When picking stocks, he looks for companies with large asset holdings and strong cash flow. He also watches out for their interest expense to see if they can continue paying their debts.

His best stock has been Elite KSB Holdings, which he sold for a profit of close to 50 per cent after holding it for a few months. He picked it after finding out that it was selling its core meat-processing business. He then checked its annual report and worked out a value that was substantially higher than its price then.

That did not call for a celebration, though. "To me, money is like a game. I don't have an emotional attachment to it. It's just a medium. It's like doing well in a test."

Still, he does have plans for it.

"Sometimes, I think about the money that I make, about what I am going to do with the money. Otherwise, it feels a bit pointless making the money."

"My dream is to own a good-class bungalow. I have a relative who lives in a bungalow with a pool, and I think it would be nice to have that kind of lifestyle," says Mr Yeo, who lives with his parents in a semi-detached house.

"If I achieve that, I would look at other things. I want to run a charity foundation and not just donate money.

"It helps to have different goals. If not, you will keep chasing money and never be happy."
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Monday, 1 April 2013

For Malaysians, a monthly juggle to escape credit card debt trap

For Malaysians, a monthly juggle to escape credit card debt trap

By Zurairi AR, Boo Su-Lyn and Emily Ding
April 02, 2013
Many people have fallen into debt due to their poor use of credit cards. — Picture courtesy of savemoney.myKUALA LUMPUR, April 2 — Despite several optimistic views of the economy for 2013 and beyond, Malaysians are struggling to save while attempting to clear off mounting debts as the country flirts below the 55 per cent debt-to-Gross Domestic Product (GDP) ratio ceiling.

The rosy economic view comes ahead of Election 2013 but economists have expressed concern with Malaysia’s ballooning ratio of household debt to its GDP that hit 80.5 per cent last year, pushed mainly by credit card and personal debts.

“It’s because Malaysian households now are very keen on borrowing money,” said Malaysian Institute of Economic Research (MIER) executive director Dr Zakariah Abdul Rashid, explaining the main cause for the nation’s rising household debt.

He said that Malaysia’s household debt-to-GDP ratio was one of the highest in the region, although some other countries have racked over 100 per cent.

Malaysia’s household indebtness has steadily increased from 75.8 per cent in 2010 to 76.6 per cent in 2011, and to 80.5 per cent last year, prompting calls for vigilance from financial analysts in the region.

“One of the reasons is lifestyle ... they fall into the trap because of poor financial planning,” said Mohamed Khalil Jamaldin, head of corporate communications from the Credit Counselling And Debt Management Agency (AKPK).

Khalil explained that 25 per cent of the around 84,000 people who enrolled for AKPK’s debt management programme fell into that category, which includes overspending and failure to pay the minimum monthly amount.

Credit card debts
Advertising and design entrepreneur Samantha Fong (not her real name), 36, was one such debtor, after she and her husband incurred debts of about RM10,000 and RM20,000 each two years ago from an unfortunate business loss.

Earning a household income of between RM5,000 and RM6,000 per month, Fong could only afford to pay around RM600 monthly for her two cards, while her husband could pay between RM300 and RM800 monthly depending on his income for that month.

Intan Jacquelina (not her real name), 34, is a single mother who got saddled with around RM10,000 of credit card debt from spending close to RM8,000 when she moved to a rented 1,000-square feet condominium unit in Kinrara, Petaling Jaya from Johor.

“You have to pay the deposit, plus all the furniture inside ... I used credit card because I didn’t have cash. I never managed to reduce it,” Intan told The Malaysian Insider.

The civil service executive confessed that she could only pay the monthly minimum of RM500 with her take-home pay of RM5,500 monthly, despite knowing that it will only pay her seven per cent interest while the principal sum stays unaffected.

Khalil explained that using credit cards to pay the downpayment on a house or car is a misuse of the credit card, which amounts to 13 per cent of the agency’s cases.

Easy credit
Meanwhile, Zakariah blamed the ease of lending money for the huge number of indebted Malaysians, contributed by high liquidity in the banking sector.

“If they don’t give out loans, they will not make any revenue. Their performance, their key performance index (KPI) are based on their revenue,” he said.

Just two Fridays ago, five people were charged in a Session Court with cheating Agro Bank of RM275,000 by fraudulently applying for personal loans, demonstrating such ease.
... I used credit card because I didn’t have cash. I never managed to reduce it. — Intan Jacquelina, a single mother who is saddled with around RM10,000 of credit card debt
Bank Negara Malaysia (BNM) has tried to curb rising credit card debt by raising the minimum income requirement for credit card eligibility from RM18,000 to RM24,000 per annum.

The central bank has also capped the maximum credit limit to double the monthly income of the cardholder per issuer for those earning less than RM36,000 per annum.

However, RAM Holdings chief economist Dr Yeah Kim Leng noted that it was becoming easier to ask for loans as more people are turning to non-bank financial institutions (NBFIs) such as building societies and co-operatives.

“These measures do not govern NBFIs. NBFIs are not supervised by the central bank,” he said, referring to the tight regulations that conventional banks have to follow.

Despite accounting for only 12 per cent of total household credit, NBFIs and development financial institutions (DFIs) account for 57 per cent of personal financing credit.

This has caused an increase in the percentage of personal financing over household debt from 16 per cent in 2011 to 17 per cent last year.

Credit bubble
Several analysts said Malaysia risked being mired in a credit bubble which is looming in Asia’s emerging economies, which also include Singapore, Thailand, China, and Taiwan.

If the bubble bursts, Zakariah warned of havoc when households default on their debts, causing a mini version of the 2008 subprime crisis in the United States which forced foreclosures and the collapse of several financial institutions.

Yeah also anticipated that there would be a “mild shock” to the banking system, with a rise of about two to three per cent in non-performing loans.

Low-income groups who cannot keep up with the urban high standard of living form the bulk of the increase in lending, thus carries the biggest risk if the credit bubble bursts.

According to BNM, most of borrowers from NBFIs earn less than RM3,000 monthly, with 80 per cent of personal loans granted to civil servants.

Zakariah, however, denied that a credit bubble is imminent in the near future, and explained that BNM has been preparing for the scenario since two years back.

“The Financial Services Act (FSA) is likely to come into force this year,” said Yeah, referring to regulations which will rein in the NBFIs.

BNM governor Tan Sri Dr Zeti Akhtar Aziz said last month that the central bank was supervising the country’s household debt, and lending measures have been tightened after the household debt-to-GDP ratio hit 80.5 per cent last year.

Zeti gave an assurance that non-performing loans in the household sector remained at only 1.5 per cent, and repayments stayed strong.



 
 
 
 
 



 


 

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