Friday, September 21, 2007

Dollar Cost Average

Dollar Cost Average is the purchasing of a fixed dollar amount of a particular investment or fund on a regular basis, regardless of the fund price.

You have to buy an initial amount of around $1,000; varies in different countries and depending on the fund house you are investing in. After the initial investment, you can then decide to put a certain amount into the fund, minimum usually is around $100 per month or more depending on your budget.

You are allowed to do this monthly payment by way of bank transfer which keep the task of monthly investing very convenience.

Dollar Cost Average means that your money is going into a fund at a set date monthly or weekly and you are investing at both the high points and the low points. Therefore, the share price or NAV (net asset value) you invest at averages out. Theoretically, you are investing equally when stock or fund is up as when it is down.

Naturally, you hope the stock or fund will keep going up, but either way you continue to put in the same amount of money with the theory that despite the ups and downs, you are headed for a long-term positive gain.

Rule of 72 - The Power of Compounding

The Rule of 72 is to divide the number of 72 by the interest rate or the average earning rate and the answer will be how long it will take for your money to double. For example, a $10,000 investment paying at 9% (without reinvesting the interest) would double in 8 years (72 divide by 9 = 8, this is the number of years for your $10,000 to double to $20,000.

Principle to double from $10,000 to $20,000 @9% takes 8 years
Principle to double from $10,000 to $20,000 @12% takes 6 years

This Rule of 72 applies to long term investing which is where it will be leading us to discuss.....
Mutual Fund Investing. Why Mutual Fund investment?? Because "Mutual Funds Offer Greater Affordability Than Individual Stocks". It is often easier to select an amount of money you are willing to invest and find a fund with that minimum investment amount than it is to find stocks that fit your budget. Many of the best-performing stocks and the biggest companies will have high per share prices. A stock price at $5.00 per share means your $5,000 investment will buy you 1,000 units . The same $5,000 in a $0.50 NAV (net asset value) will buy you 10,000 units and the stock you wanted that was priced so high may be one of the stocks in the fund. Additionally, you will own hundreds of stocks for the same investment. So not only greater affordability but also diversification.

What a Wonderful World

Wouldn't it be nice.........

if we have a job we enjoy doing,

if we earn enough to have a comfortable living

if we have enough to put aside for a nice comfortable retirement

if we have enough for our children to go to the best college


if we are healthy, happy with no stress

I wish to share with you this video on "Shadow Puppetry" by Raymond Crowe accompanied by Louis Armstrong "What a Wonderful World"

It would be a wonderful world

I see trees of green........ red roses too
I see em bloom..... for me and for you
And I think to myself.... what a wonderful world.

I see skies of blue..... clouds of white
Bright blessed days....dark sacred nights
And I think to myself .....what a wonderful world.

The colors of a pretty the sky
Are also on the faces.....of people ..going by
I see friends shaking hands.....sayin.. how do you do
Theyre really sayin......i love you.

I hear babies cry...... I watch them grow
Theyll learn much more.....than Ill never know
And I think to myself .....what a wonderful world



If you have invested in a business and in order for you to make your products or services more valuable, you have to work harder, work smarter, work longer. This is to ensure that your business will start creating wealth for you faster.


A contrarian trading strategy is based on the assumption of negative serial correlation of prices: a predictable pattern such that if prices have gone up, they must come down eventually, and vice versa. This view of contrarians focuses on the important role of fads: rather than acting independently, investors exhibit herd-like behavior, following waves of mass optimism and pessimism, whereas a contrarian thinker /investor goes against the masses.


Buy things that CAN make money like mutual funds, stocks, bonds, properties and businesses. Buy them at the right time. You would want to buy into investments after the masses have sold, then sell when the bubble develops and before the bubble burst. You can buy the shares of excellent companies with good fundamentals during a recession or a meltdown. Or if you think that recent change of top management will turn around a troubled company.


Take advantage of the traffic jam, put your travelling time into good use, listen to all the motivating audio programmes like the “Rich Dad Poor Dad” series. Fill your mind with “can do” daily. Read books that will put you in a positive mood. Just think, a simple idea from all these positive “vehicles” might just make you a millionaire.


If you have to work to earn a living, find a job that you love and enjoy. “When you start doing what you really love to do, you’ll never work another day in your life”

said BRIAN TRACY, author of the book called The 21 Success Secrets of Self-Made Millionaire”. Here while you are doing what you love and earning your salary, put a portion of which into your investment portfolio to create wealth.


“Birds of a feather flock together”, this is a saying to determine what type of person you are in relations to the type of people you mix around with. About 90% of your success will be determined by the people with whom you habitually identify and pass the time. Your success and happiness in life is going to be determined by the quality of the relationships that you develop in your personal and your business activities. Find a few people who can mentor you, who can keep you focused and motivated.


Thinking positive is the key… Feed your mind with what you want, not what you do not want. Magnetise you mind to attract on what you want to do. Positive mind enhances the effect of belief and once you believe, you will be successful in all your endeavours.


Write down your goal, what do you want to achieve says in 10, 20 or 30 years then work towards achieving it. Long term goals should be permanent and specific. It has to be realistic to avoid changes, remember it is harder to hit a moving target. Then work towards you goal every day with persistency. Daily, weekly, monthly, set your short term goals to help you achieve what you want in life.

Thursday, September 20, 2007

How to know to invest in the right business?

If you know yourself that you are ready to invest, you should start right away because time wait for no one. Also, there is never a right time to start to do something. For me personally, anytime is the right time ..... most important is not the time, is yourself..... are you ready?

We have talked about "Investing In Yourself first" and if you have done that, learn all you can and continue to learn, you are on the right track. Of course, nobody can be perfect in investing, sometimes the experienced and the experts make mistakes too. Just make sure that you learn from

According to the book "The New Buffettology", the 4 areas in which Warren Buffet discovers companies with hidden wealth are 1) businesses that have a repetitive consumer need with products that wear out fast or are used up quickly and have brand appeal 2) the advertising business 3) businesses that provide repetitive services that people and businesses are consistently in need of 4) products that most people have to buy at some time in their life.

These 4 areas are very closely related to consumer demand and expenditure. In summary, they are a business simple to understood, with good managment, attractive prices and has long term prospects.

The above guidelines will show you
these mistakes and grow with them. Always stay positive."How to invest in the right business"? There are many avenues for investing but what categories are for you.... you have to decide that base on your disposables and your risk levels. Lets analyze the options we have .......

  • invest in one business by oneself, be an entrepreneur
  • joint venture with some friends or business associates
  • join a reputable direct selling company; multi-level marketing
  • invest in the stock market
  • invest in property
  • invest in mutual fund
  • invest in Fixed Deposit
invest in one business by oneself, be an entrepreneur
joint venture with some friends or business associates
There are lots of successful businesses out there for you to emulate but for a business to be worth your money and effort, you must be able to leverage your time, money and location. Also, the ROI must be quick and the income you are going to derive from this business must be able to beat inflation. Not to mention the facts that you have to know the business you are going into and for option2, you need to be in business with trustworthy people.

I always believe that "there is never a free lunch" so do not expect to throw in your money and your partners will work their butts out to earn a steady income for you.

join a reputable direct selling company; multi-level marketing
Lets look at option3, direct selling. This option is good if you really have very little capital to start with because in this case, you leverage human power by multi-level. Ensure that you join a reputable company with proven track records. Another point to note is that the products you are selling are repetitive consumable products. If you are successful in this line of business, the compounding factor works.

invest in the stock market
Buying stock are like buying businesses, you have to know how to buy into the right business for the long term returns. If you are a working person and are buying into stock on a part time basis, go for the good fundamental stocks, one that give you good dividend returns. The value of the company is dependent on the present value of its future cashflow, a business that you buy must be simple and have predictable future cashflow. A company with a turnover of RM500mil a year is considered one of the key players in the market.

Sometimes companies with new technologies look like a good opportunity to earn quick and big bucks but I would rather advise that it is safer to rule out this great opportunities if you do not understand how these businesses generate their cashflow. Avoid going with emotion when investing in stock. Used the head not the heart.

invest in property
Buying houses and shoplots are a good investment but this require some capital. If its a new property sometimes you can get good deals with the property developers who has tie-in with the banks for a zero-cost deal, meaning they (bank and developer) will absorb the legal fees and other related costs. Buying a property is a permanent deal, your cash are tied in for long term. It will take time to liquidate, therefore it is important that you do your homework before venturing into this type of investment. Ensure that your property is in demand for rental or sales with a good return. It is not easy, but if you are intending to rent out your property, to be worthwhile you need to get around 8 to 10 percent return per annum.

invest in mutual fund
nvesting in trust or mutual funds is similar to buying stocks....the only difference is it removes the emotional strain from you because you are employing some investing expert to study the stocks and make the decision on what company is best to invest in. Other advantages are you get to diversify, you can start invest as little as RM1000 and your money are being compounded.

invest in Fixed Deposit
Fixed deposits is good for "parking" your fund for temporary measures, for the "just in case" scenario. Meanwhile, your money is earning money for you.

Sunday, September 16, 2007

How to create wealth?

Wealth Creation...........its the most talked about topic in the financial arena. Is it only for the Warren Buffets or the Bill Gates of the world? Or is it for ordinary working people like us? Are we ready to invest, to create wealth?

The questions that comes to mind are:

  • "What shall I invest in?"
  • "When shall I start to invest and create wealth?"
  • "Where shall I invest?
  • "Who do I invest with?
  • "How do I know to invest in the right business?"
It all depends!.............first....... are you ready to invest???

Ask yourself the following questions:
  • "Are you out of debts?"
  • "Have you checked your risk level?"
  • "Have you put aside available cash for the "rainy days"?"
  • "Have you started to learn the basics?"
  • "Are you willing to take advice?"
If your answer is "yes" to these 5 questions, you are more than fact it is never too young nor too old to start but you just have to be ready to avoid any unnecessary disruption.
Remember, Warren Buffet said in his interview with CNBC news that

"He bought his
first share at the age of 11 and he now regrets that he started too late!!"

With this statement in mind you should be more than
comfortable to start your journey to creating wealth................

Saturday, September 15, 2007

Invest in yourself first

If you have been following this blog since the start and if you are new to investing or if you are working for others, you will probably think I am crazy......"why do I have to invest in myself first"?, you would ask. At the start I talked about "Pay Yourself First", now I want to talk about "Invest in Yourself First". Yes, before plunging yourself into the share market or dumping your hard earned money into some deal which some good sayers told you its a money churning wheel, you have to master the trick of the trade first.

If you are an employee, which majority of us are and if you are still trading time for money, you are on the single line earning power - linear power. Do not be mistaken, I am not against working for others, in fact for the "baby boomers", most of us only know how to earn a living by trading our time for money. We were brought up to "Go to school, get good grades to get a good paying job" and that is the way we are being conditioned. And that is the way the Y Generation are being brought up too. Thats why I am saying "Invest in Yourself First".

Be patient, do not be in a hurry to put your money to work for you. Learn all you can before deciding on what you want to do.

I have kept my postings simple and easy to follow with keywords relating to investing and if you seriously read, take action on the simple to-do steps you will eventually be resetting your mind to be an "investing mind".

Wednesday, September 12, 2007

Exponential Growth ..... the Wonder of Compounding

The Power of Exponential Growth
1 + 1 is 2

2 + 2 is 4

4 + 4 is 8

8 + 8 is 16

This is how the dictionary explain the phrase "Exponential growth"

  • (microbiology) The period of bacterial growth during which cells divide at a constant rate
  • extremely fast growth. On a chart, the line curves up rather than being straight
  • growth of a system in which the amount being added is proportional to already present; the bigger the system, the greater the increase
  • in everyday speech, exponential growth means runaway expansion

The surprising characteristics of exponential growth have fascinated people through the ages. Lets see what the story of the chessboard, borrowed from a dictionary, can teach us.............

Rice on a chessboard

A courtier presented the Persian king with a beautiful, hand-made chessboard. The king asked what he would like in return for his gift and the courtier surprised the king by asking for one grain of rice on the first square, two grains on the second, four grains on the third etc. The king readily agreed and asked for the rice to be brought. All went well at first, but the requirement for 2n - 1 grains on the nth square demanded over a million grains on the 21st square, more than a million million on the 41st and there simply was not enough rice in the whole world for the final squares. (From Meadows et al. 1972, p.29 via Porritt 2005)

Second Half of the Chessboard is a phrase, coined by Ray Kurzweil, in reference to the point where an exponentially growing factor begins to have a significant economic impact on an organization's overall business strategy.

The total number of grains of rice on the first half of the chessboard is 1 + 2 + 4 + 8 + 16 + 32 + 64 + 128 + 256 + 512 + 1024 ... + 2,147,483,648, for a total of exactly 232 − 1 = 4,294,967,295 grains of rice, or about 100,000 kg of rice, with the mass of one grain of rice being roughly 25 mg.

The total number of grains of rice on the second half of the chessboard is 232 + 233 + 234 ... + 263, for a total of 264 − 232 grains of rice. This is about 460 billion tonnes, or 6 times the entire weight of the Earth biomass.

On the 64th square of the chessboard there would be exactly 263 = 9,223,372,036,854,775,808 grains of rice. In total, on the entire chessboard there would be exactly 264 − 1 = 18,446,744,073,709,551,615 grains of rice.

The Chessboard story, which is mind boggling, is to simply illustrate the power of compounding...... no wonder it is dubbed as "The 8th Wonder of the World". Now that we understand how powerful compounding is, lets us look for ways to make use of this principle to multiply whatever money we have..............if you are saying you don't have, relook at your expenses, read again Point No. 2 of my initial post...... get out of debts and start saving now, no matter how small, to start with. Put your plan into ACTION.

Tuesday, September 11, 2007

Linear Growth

of, or relating to, or resembling a straight line
only one dimension

Linear Growth was what I was talking about when I posted on "Income Creation" where you work for money; either in your own business or as a professional or working at a job for others. In linear income growth you get out what you put in, nothing more, nothing less. If you work for others, you wait for the year long increment and bonus which sometimes can be a disappointment. If you provide services for others, you wait for the project to come and worked hard for the fees paid to you. In these 2 scenarios, your life would probably be....
  • you get one day a week to spend with your family
  • you might not get more than $40,000 a year (more for professional) no matter how hard you work
  • you get your hard earned annual leave of 14 or 21 days but you are too broke to take the family for a rewarding holiday and for professional if you take off, your income stopped
  • you seldom get time off and when you do you are either exhausted or broke to enjoy it
  • you get your paycheck end of every month, and you have to be back on the time-for-money treadmill again the next month
Of course there is a way out. We can break this time-for-money trap with leveraging. In my last post, I used the Coca-cola story to illustrate the power of leveraging. Now there are lots of way to leverage..... big corporation leverage by using their employees. By copying the right kind of leverage in the right situation you can literally grow bigger and faster........ which takes me to the next subject..........EXPONENTIAL GROWTH

Saturday, September 8, 2007

The Power of Leveraging

The concept of exchanging "Time for Money" is really limiting. There is that much we can do with our 24-hour, so we will have to look for other ways and means to add to our income, to achieve the goal we have set for ourselves to create wealth.

If we can find a way to leverage our time and effort our goals will be achieved faster and easier.

The dictionary explains the word "Leverage" as the mechanical advantage of a lever. Lever, an old French word means "to make lighter" and................Leverage in financial dictionary
means - "Use of borrowed funds to increase purchasing power and, ideally, to increase the profitability of an investment."


If Investor A wishes to invest in real estate. The property costs $100,000 and produces
Net Operating Income of $10,000 per year. If purchased with all cash, Investor A's annual Rate of Return is 10% ($10,000 ˜ $100,000). If she leverages the investment by borrowing $75,000, her return on equity may be higher. If the debt cost is 8% ($6,000) annually, the leverage results in a return of 16% ($4,000 ˜ $25,000). However, if the debt cost is 12% ($9,000), the leverage is negative because it reduces the return on equity to 4% ($1,000 ˜ $25,000).

Leveraged Growth
Working Smart Not Working Hard



In 1885, Dr John Pemberton developed the now all famous Coca-cola, a carbonated drink. Both small town and big city dwellers enjoyed carbonated beverages at local soda fountain or ice cream salon. Often housed in drug stores, the soda fountain counter served as a meeting place for people of all ages. But.......this is limiting time, effort and location.

In August 1888, Asa Candler paid $2,300 in cash to buy over the rights of Coca-cola. Two young attorneys from Chattanooga believed they could build a business around bottling Coca-cola. In a meeting with Candler, they obtained the exclusive rights to bottle Coca-cola across most of the United States....... for the sum of $1. By 1909, nearly 400 Coca-cola bottling plants were operating.

By 1920, the ideas and zeal of the 2 young attorneys fueled steady growth. Six-bottle cartons were a huge hit in 1923 and by end of 1920s, bottle sales exceeded fountain sales. Before bottling people had to go to a local soda fountain to order a coke - or there is no coke. Bottling changed all that, consumer need not go to a soda fountain to enjoy a coke because they could buy a six-pack and bring the fountain home with them. It has created a world of convenience...this is leveraging of time, effort and location.

Friday, September 7, 2007

Wealth Creation versus Income Creation

"Go to school, get good grades to get a good paying job" is our way of life and we ended up working for money. This is Income Creation....... trading our time for money by working for others or ourselves. Now... is this the only way we know how?? Lets analyze and see what we can get out of this so ever famous term called WEALTH CREATION.

What is Wealth?
To different people it means different things and to me W E A L T H means....

Having enough money and enough time
with great health
to do what you want,
when you want and how you want

An American survey states that you are only considered rich if you have a monthly income of USD 50,000 without having to spend time earning it. That is TRUE WEALTH. Ultimately, I can suppose that all we actually want is FREEDOM. Not having to get up early, go to work, be exhausted and stressed and come home to the end of another day....

J Paul Getty,
millionaire says...

If you want to be rich,
just find someone
making lots of money
and do what he's doing.

Wednesday, September 5, 2007

Income Creation

Ethan...... he is soooooo cute. A 6-year old acting so adult.

I stumbled upon this little video and I thought "Wow, it will say a lot for my next post". Little Ethan performing in his concerts will make him very very rich but if he does not put a certain percentage of his income into some kind of investment, he might just end up like all of us (the 95% of the population) trading our time for money.

We are all slave to temporary income!!! Its the time-for-money trap. We worked 9 to 5 from Monday to Friday whole year round for the salary paid to us. All money will be used to pay for our dwelling, food, clothing, transport, furniture, utilities, entertainment etc......... At the end of the day, what do we have left? For Malaysian, we retire and claim our EPF money for our retirement, but is it enough? Of late you read a lot of news topics like "Most Malaysians not saving for retirement". ARE YOU READY FOR YOUR GOLDEN YEARS?? Maybe if you live frugally and don't get sick..... your retirement money will take you to the end of your days but........................

Monday, September 3, 2007

Are your suffering from “EXCUSITIS” disease”?

You have just done your annual medical check up and your medical report seems fine except that you have to take care of that cholesterol level which is on the borderline. Or that blood pressure of yours which is on the borderline. But your medical examination will not be able to detect the EXCUSITIS disease.

Excusitis disease is very easy to diagnose…… have you been postponing putting that 20% of your earnings into an investment account? Or have you been telling yourself the following:-

I am too old

I am too young

It is too late

I don’t know how to invest

It is not easy to get rich

You have to work very hard

It is not easy/It is too difficult

I will wait for the right time

I can’t do it

I am not good in handling money

I don’t have time

At anytime if you have utter or even thought of one of the above negative statement, you are sick…. no matter what is stated in your medical report…… YOU ARE SUFFERING FROM THIS DISEASE CALLED “EXCUSITIS” disease.

S T O P ……. stop making excuses, stop procrastinating……. Put your thoughts and feelings into a plan…… put your plan into action……. start now.