Your net worth

Two Australian (Mr Thomas Stanley and Mr William Dauko) have worked out a formula to calculate your ideal net worth that can be used as a benchmark for comparison.

Benchmark net worth = (Age X Annual Pretax Income) /10

You have to work out your net worth by using common sense formula

Net worth = Assets (only include those have disposable value) less liabilities (for all debts).

After which, you compare your net worth to Benchmark net worth.

If the difference is positive, your net worth is higher than Benchmark net worth, you are in good position of your wealth. If it is negative, you have to review your financial position and try to reduce your liabilities as much as possible or to improve your income.

Saving for raining days

It is wise to restructure our money and investment during this financial crisis period.


We have gathered some idea from different advices and outline as follows:


First we should set up a monthly as well as yearly budget and map out our planned expenses on a month by month basis. We can then confidently start to plan putting fund away into saving.

Income and expense budget become important during this crisis time. You should monitor every month on your income as well as expense so that you are sure of your bottom line that no deficit would appear in your budget. Beside, you are able to cut expense on those unnecessary items through the budget.

For younger people, you should take a long term view and be active in deciding how your saving is invested. You may put 60% of your saving in term deposits and another 40% into shares or property. When the economy is good, you may change your plan to invest more in shares or property and lesser in cash.

For investing in shares, you have to be patience in waiting for the good time to buying the shares (you may not be smart enough to buy it at the bottom but at least not far away from the bottom) and leave it for long term appreciation. You may apply "Dollars Cost Averaging" method (you may refer to our previous post on this method) to buy share in order to average the cost of shares purchased. Dividend yield is also one of the consideration.

For property investment, the capital commitment is great. So you may have to draw out another plan to project your income in order to have enough fund to service the mortgage loan. The plan should be conservative to project your income either from your salary, the rental income or other sources of income.

Food for children

Certain foods can help children build better brains, focus and learn better in school.

Protein is needed to jump start the brain's neurotransmitters, which drives creative thinking, memory, focus and concentration. Neurotransmitters are chemicals that transfer messages around nerve cells in the brain.

Other food which helps healthy brain development includes those that contain B vitamins (found in whole grains, cereals, eggs and dairy products), C vitamins ( in fruit and vegetables) and iron (in red meat, green leafy vegetables and peas). and don't cut all fats from your child's diet either, as fats and cholesterol are needed for proper brain development and function.

Breakfast is the most important meal of the day. A child who skips it may perform poorly in tasks that require concentration. Breakfast is critical to revving up young brains for learning, concentration and creative thinking in school. The trick to fuelling the brain is to include some protein foods such as beans, eggs, fish and meat.

World Financial Crisis

The impact of sub-prime crisis is really very terrible. The domino theory is applying to the United State's financial institution that one after another one is collapsing. The world may lead to recession if the problem is not solved.

The crisis of the financial risk in United State may happen in next couple of months. There must be something to ignite the crisis and possibly this may be the weakening of US dollars. At the moment, US dollars is firming up and foreign investors are happy about their holding of US government bonds (either short term or long term). But if the scenario changes and US dollars starting to weaken. Foreign investors may rush to liquidate the bonds to mitigate their losses. Assuming these investors only selling 10% of their holding, the financial markets in United State may be in danger. In 1980, this situation was happened and the United State government raised the interest rate to 20% to attract foreigner to keep their holding in bonds. The implication of the high interest rate had caused the inflation rate went up to 15% that damaged the United State economy for many year.

Debt deflation and de-leveraging in the US could further weaken the global financial system. Falling house prices, falling financial institutions and weaker growth could then ensue. Unemployment rate and protectionist pressures could rise and this could cause a backlash to deregulation, liberalisation policies and globalisation.

You may be interested to read an article from professor Robert J. Shiller - Moral Dilemmas for Fannie and Freddie. The website is www.theindependent-bd.com/details.php?nid=97862

Market Analysis - 5 Sept 2008

We refer to our previous post dated 20 Aug 2008. The indexes of the Asia & Pacific Region are not doing well.

Singapore from 2751.75 (20 Aug) to 2574.21 (5 Sep ) down 6.45%
Malaysia from 1073.21 (20 Aug) to 1070.54 (5 Sep) down 0.25%
Hong Kong from 20931.26 (20 Aug) to 19933.28 (5 Sep) down 4.77%
Australia from 4997.50 (20 Aug ) to 4949.50 ( 5 Sep) down 0.96%

Singapore market seems to be hit badly.

The banking shares are performing differently in respect of different markets during the same period.

For Singapore:-
DBS from 17.96 to 17.58 down 2.11%
UOB from 19.20 to 18.50 down 3.64%
OCBC from 8.18 to 7.88 down 3.67%

The banking shares go along with the index.

For Malaysia:-
Malayan Banking from 7.25 to 7.75 up 6.8%
Public Bank from 9.95 to 10.20 up 2.51%

The banking share is doing better than the index.

For Hong Kong:-
HSBC from 120.90 to 117.30 down 2.98%
Hang Seng Bank from 149.70 to 149.90 up 2.51%

Hang Seng Bank is performing better than the index.

For Australia:-
NAB from 24.10 to 23.60 down 2.07%
CBA from 41.1 to 41.59 up 1.19%
WBC from 22.37 to 23.35 up 4.38%
ANZ from 16.03 to 16.26 up 1.43%

Except NAB, the rest of the banking shares are performing better than the index especially WBC.

50 Prosperity Classics by Tom Butler-Bowdon

This book is a series of 50 classics written by Tom Bulter-Bowdon.

Bulter-Bowdon selected fifty important books from success literature. He gave a concise summaries of each book's main points, how they came into being and what each offers the reader on their path toward a life of abundance. He also provided biographical information on each author of the books he selected.

Butler-Bowdon brings together fundamental works on entrepreneurship, personal finance, investing, economics and philanthropy, providing guidance and support in the quest to develop a millionaire mindset, become a wealth creator, make wise investment decision, managing financial assets and give a little back.

Bulter-Bowdon believes there are four primary ways in which we relate to wealth. He's divided the fifty prosperity classics into these categories -

Attract prosperity; Create prosperity; Manage prosperity and Share prosperity.

Attract prosperity: Mastering the inner game of wealth and abundance with books such as
The Secret - by Rhonda Byrne (2006)
Prosperity - by Charles Fillmore (1936)
The Master key to Riches - by Napoleon Hill (1965)

Create prosperity: Learn from the secrets & strategies of wealth creators such as
The Art of Money-Getting - by P.T. Barnum (1880)
How to Get Rich - by Felix Dennis (2006)
Be My Guest - by Conrad Hilton (1957)

Manage Prosperity: Discover the nuts and bolts of personal finance and investing such as
The Little Book of Common Sense Investing - by John C Bogle (2007)
The Intelligent Investor - by Benjamin Graham (1949)
Cash flow Quadrant - by Robert Kiyosaki (1998)

Share Prosperity:Understand the flow of wealth and how to give something back with inspiration from
The Gospel of Wealth - by Andrew Carnegie (1899)
The Foundation: How Private Wealth is Changing the World - by Joel Fleishman (2007)
Banker To the Poor - by Muhammad Yunus (1998)

Phytochemical

Phytochemicals are plant derived chemical compounds under scientific research for their potential health promoting properties, but with unproved benefits. Phytonutrients refer to plant derived essential nutrients scientifically confirmed as important to human health.

There is evidence from laboratory studies that phytochemcials in fruit and vegetables may reduce the risk of cancer, possibly due to dietary fibers, polyphenol antioxidants and anti-inflammatory effects.

An important cancer drug, Taxol, is a phytochemical initially extracted and purified from the Pacific yew tree.

Phytochemicals in freshly plant foods may be destroyed or removed by modern processing techniques, possibly including cooking. For this reason, industrially processed foods likely contain fewer phytochemicals and may thus be less beneficial than unprocessed foods. Interestingly, a converse example exists in which lycopene, a phytochemical present in tomatoes, is concentrated in processed foods and make the processed version of the tomatoes better sources of lycopene than fresh tomatoes.

The following are foods high in phytonutrients:-

Soy, Tomato, Broccoli, Garlic, Flax seeds and oil seeds, Citrus fruits, Blueberries, Sweet potatoes, Chilli peppers & Legumes (beans, peas and lentils)

Buying Shares- undervalued companies

As written on previous post, we are now talking about how to find undervalued companies.

Anyone who can consistently get this right will end up astonishingly wealthy. Just ask Warren Buffett, the world's richest investor who is worth around US$ 52 billion.

His criteria is, seeking out and buying into companies with genuine business operations, sound fundamentals and good balance sheets - including low debt and high returns on equity - that are, for no particularly good reasons, out of favour with the market and resultantly priced below their intrinsic value.

Based on the above, Some analysts have worked out some of the methods for our reference.

One analyst says price-earnings ratio is not a good ratio to value a company. The main problem with PE ratios is that they only tell you about price. They don't tell you anything about value, because value is independent of price. Price is what you pay, value is what you get. Valuing businesses and assets has nothing to do with observing where the price is, or where it has been, or where it is going.

They determine a company's value using a number of inputs including return on equity, debt level and dividend payout ratio. In addition, They needs to determine whether a target company has the ability to convert $1 of retained earnings into at least $1 of additional market value and whether it has competent management with integrity that acts more like an owner than a caretaker.

It is difficult for us to follow their way of determination of the value of a company. So, some analysts recommends reading widely, noting the opinion of share analysts and favouring high-yielding, large-cap stocks (blue chips) with proven businesses and good management, while also taking note of their debt levels.

One analyst says one way to find value is to look for sound companies that have taken market punishment due to a short-term glitch, but whose long-term prospects remain favourable.

In conclusion, we should take note on three things, that is return on equity, debt level and dividend payout ratio and invest in blue chips.

Buying Shares

Lately we have read few articles on buying shares. We would like to share their views with you.

First, it is talking about timing your entry. Analysts point out that unless luck is on your side you're likely to be out of the markets when you should be in them. It is better to be in the markets all the time, and ride out the inevitable ups and downs.

The advice is that over the long term, share markets rise in value. So, invest in them and stay invested, and only sell when you need the money for urgent and worthwhile purpose.

They recommend the "dollar cost averaging' method of investing. You simply decide to invest a set amount on a set schedule into a set investment, and stick to it. So market timing becomes irrelevant. One important issue is how to construct 'a set investment'. You have to do research on what shares to invest. Blue chips is one of the consideration but you have to monitor the earning and management of the company you invested. (Next blog is discussing about undervalued shares)

A mathematical aspect of dollar cost averaging is that when markets are down, your set, regular investment will buy you more shares and markets are up, it will buy you less. Long term, this has the effect of averaging out the price you pay, you won't pay too much either. Through dollar cost averaging you will build up an investment portfolio without having to worry once about when to invest, how much to invest.