CARTOON TIME

Hi! I am Stoogie. I am a material created by Vijaya Devan, a.k.a. Dave.

  Dave is spreading and sharing his 'mind' via me. He uses me as a  bridge  in connecting viewers to all his scriptures  posted in his blog. I don't mind of being used by Dave, as long as he keeps me alive. If you like me, please write something in the comment box provided below. Bye!

CARTOON TIME

When passing an important message to your subordinates at work place or  trying to convey some salient points of the investment products you are promoting, the targeted recipients of your messages would go nuts if you speak languages that only you can understand.  STOP!!

Re-engineer your spoken words, put it in simple English and avoid too many bombastic words.

Amanah Saham Malaysia (ASM)

The unit trust funds that Permodalan Nasional Berhad (PNB) distributes had vastly attracts many malaysians into owning a certain portions of units. To some, Amanah Saham Malaysia (ASM) funds is the golden opportunity they could not resist purchasing, as it generates a promissable stable and high return with contrast to other unit trust funds distributed by Unit Trust Management Company (UTMC). In fact, the returns outpaced the one year tenure of any prevailing Fixed Deposit schemes offered by local financial and banking institutions. Therefore, seeing a sight of long curving queue of people waiting infront of selected distribution agents of PNB ready to purchase the 'Dana' ASM is not a surprise to many.

But wait!! Think first before you decide. Is ASM the right fund to buy?

Below, i have pen down some salient points that you might not have known or told of about the characteristic of this ASM, in contrast to the other funds of UTMC's.

There are 2 major points which an investor should weigh prior to decision-making, and they are the fund's published selling unit price and secondly the fund's ability to declare distribution. Investors make a placement judging on this two sources of income.

1. UNIT PRICE

Amanah Saham Malaysia(ASM)

It is high and it is fixed!! The unit price stays throughout the life of the fund. And because of the price is high, the number of units purchased are always low.

With an initial capital of Rm1000, and if the selling price is Rm1.00, you will be given only 1000 units.

If you purchase a unit of ASM that cost Rm1.00, that fund will remain valued at Rm 1.00 at anytime in future.

We refer this as NO CAPITAL GAIN.

Other Unit Trust Management Company (UTMC) funds.

In contrast to ASM, other UTMC's funds carry a much lower selling price and the price does not remain stagnant indefinitely. The unit trust prices are quite volatile and it fluctuate based on the principle of demand and supply factor. As a result of this changes in price, the feature provides an investor the possibility of reaping capital gain, i.e. the growth of unit prices. In the same token, an investor may also face depleting unit prices, i.e. the fall in unit prices.

Suppose you buy an unit for Rm 0.2500 now, and the fund's price has the potential to move upwards. Lets say if it moves to Rm 0.3000 a unit, the difference of Rm 0.0500 a unit will be the gain for you! We refer this as CAPITAL GAIN!

If an investor with a capital of Rm1000 purchases a unit trust fund that sells at Rm 0.2500 (ignoring the sales charges), he/she will be earn 4000 units, which is 4 times more than ASM units of the same initial investment. Is not this great?

So, with regards to unit price, ASM scheme does not stand out to funds of other UTMC.

I will write about the other source of income, i.e. Distribution, in the next web blog soon.

Regards,
Dave

4 stages of Financial Life

Do not get alarmed to hear of me mentioning of the term " Financial Life"! We all have only one single life to live on and that is the very life you and i are 'sailling' through at this very moment. The reason behind the usage of this term is none other than to help us to observe matters differently from the norm, thus hoping to shed some light in solving real financial problems in our everyday life.

With the advent of globalization for one instance, our cost of living skyrocketed exponentially and this imposes a serious repercussion to our purchasing power. Basically, in everything that we see and hear, the value of money diminishes over time. As a result it attracts serious attention in fighting over the problem and many people in the financial fraternity have emulated the principles of austerity and thrifty in handling money related matters. With regards to this, one cannot deny to ignore the emergence of the concept " The 4 stages of Financial Life".

Stage 1: The Wealth Creation Stage

It is a period where one exposes themselves to the challenging world of seeking their preferred career prior to comfortably settling down in their later life. Numerous jobs were to have been put in test until the right one clicked, and matches the skill and ability of that individual. This is also a period where a stable income is created and a great flow of anticipation is expected in an individual that promises a potential to support them financially, going forth. This stage reckons to give 'birth' to the importance of strengthening the base of wealth creation prior to moving up to the next value chain of financial stage i.e. The Accumulation stage. Although there is no hard and fast rule, generally the duration of this stage lasts from the early age of seeking a job until at about 28.

Stage 2: The Accumulation Stage

Hopping out from the first stage into the second, one is expected to start saving their money for the unexpected financial obligation in the future. To some, the saving process would have begun in the first financial stages. Here, the importance MUST be channelled to saving their hard earned money in various financial institutions in order to use it at a later part of life, especially for financing education or for retirement usage. While saving is a popular way to accumulate wealth, it is also known as the least effective way to let wealth accumulate. Why do i say so? Primarily, it is because savings will not hedge inflation, thus will only provide a marginal real return,or in most cases a negative real return. Money saved in savings account will deteriorate over time, and the effect of inflation will tear down the value of money indiscriminately. With a little bit of risk taking, money should be put in a save investment scheme that generates an interest that hedges the ugly sight of the inflation rate.

I will deal with the types of investment one shall indulge in my next blog. Having said that, we will move on to the next stage - The Preservation Stage.

Stage 3: The Preservation Stage

As mentioned earlier, the dreadful act of the merciless inflation rate could bring down the value of our accumulated wealth, thus making us poorer and poorer, than before. A total paradigm shift in rational thinking must take place within us. Besides the correct psychological frame, one must also remote themselves from thinking of saving when talking about accumulation and preservation of wealth. Saving money means putting our money in an interest bearing instrument, regardless of the effect of the inflation. On the contrary, investment concept puts importance of saving money in an interest bearing instrument that hedges inflation rate. Investment provides potential opportunity to accumulate and preserve our wealth. Unexpected debt, lack of financial support during daunting life, medical claim and education cost are some of the causes that may be a threat to us if we fail to implement the wealth preservation activity. A sound wealth preservation excercise is a tool that upon which if not implemented, accumulated wealth will be depleted in value and disasterous consequences might befall in the later period of life. The tools that can be used in this stage will be dealt with in my next blog. Let's go to the next and final stage.

Stage 4: The Wealth Distribution Stage.

Mortals like you and me will eventually 'kick-the-bucket', and when that day comes our dependants will mourn the loss of us, who have been supporting them financially. What happens to them after our demise? Who will look after them, how will they get the money which we left (estate)? How will the children be educated and from where will the spouse get the money to support the education cost?

The wealth that we created, accumulated and preserved, MUST be passed to the rightful beneficiary. Only upon this, the 4 stages of financial life will be complete. Wills and Trusts are used in estate planning to transfer wealth to the beneficiaries. It is a tool to transfer estate to whom we wish them to inherit, thus ensuring that the wealth is passed on to a preferred beneficiary, and not to anyone whom we do not want to be in possession of it.

A holistic approach in handling matters relating to personal finance shall encompassess the 4 stages briefed above. Get to know it,understand it and embrace it so that the new landscape change will benefit you financially. Happy trying!!