How much is “enough”?

“How much money do you actually want to earn?” is a very common question. And the typical response is “Until I’ve earned enough”.

But how much is “enough”? 50k? 200k? 1 million? or just $1 more than the amount you need? Without defining what does “enough” mean to you, it’s very difficult for you to set your financial goals. So the first thing that you need to know before doing any financial planning is your definition of “enough”.

I’m not going to guess what is your answer. :) So I’ll just assume you are like most people I know, and your definition of “enough” is to be able to retire comfortably, without having to worry too much about money when you’re no longer working.

If that’s your definition of “enough”, then I have a few tips which might be able to help you achieve your goal.

I think these 3 simple rules will be able to help you in achieving your “enough” and enable you to live comfortable upon reaching your retirement age. I can’t say that it’s going to work 100%, but I really believe it WILL help you to move closer towards that direction. But bear in mind that, these 3 simple rules are not going to make you rich…. they will only be able to make you achieve “enough”…. just enough for you to live comfortably.

p/s….. conclusion, if you are looking to achieve “enough” (as in enough to live comfortably upon retirement), you should avoid going to risky investment types such as property and stocks, and also avoid spending too much on services such as those incurred by mutual funds.

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Property investment: business vs residential units

For those who are new in property investing, this is perhaps one of the dilemmas that they always face – whether to invest in business premises or to invest in residential units.

Normally people would invest in residential units because they tend to be cheaper (generally speaking) and there are also more options for them to choose if compared with business premises (shop lots, office units, etc). However, they may change their mind once they realized that the profit margin tends to be higher for business premises.

Yes, you CAN earn more by investing in business premises, sometimes significantly more than investing in residential units. But, as with everything in this world, there are pros and cons to each of them.

Business premises

+ A good tenant can easily helps you to pay off your loan and at the same time, helps look after your unit for a long period of time. For example, banks, and franchised outlets.

+ If you happen to buy the unit in a very good location, you can expect to earn more than 40%. For example, those who bought a shop lot in Kota Damansara when it was first launched could easily earn a 200-300% profit now.

- Most anchor tenants like banks are pretty hard to get. Most of the time, it is the property developers themselves who are able to engage them as tenants.

- Business premises tend to be priced higher than residential units.

- Maintenance fees and the utility charges are also priced higher for business premises.

- A lot of speculations are involved when investing in business premises. You invest in one place at a cheap price, and hoping that the location will become popular in the near future.

Residential units

+ Priced lower than business premises.

+ Maintenance fees and utility charges are sometimes lower (certain properties fall under the commercial rates though).

+ Easier to find tenants as the demands are higher for residential units, as long as you don’t ask for ridiculous rental price.

- Your tenants are easier to run away especially for those renting out their apartment or condominium units. I’ve seen tenants moving out in the middle of the night (just spent 2 or 3 hours) without their landlords knowing it.

- Although demand is high, the supply for residential units is also very high especially when most of the units are controlled by property investors.

I’m not sure if this gives you a clearer picture of which type of property investment you should go into. I sure hope it does. Anyway, there could be more pros and cons to each of them. But in general, all I can say is that investing in residential units is for the beginners and perhaps those more reserved type of investors. If you have the financial backing and are okay with high risk, then go for business premises. High risk, high yield. Just be aware that if the location you’re investing in failed up pick up momentum, then your investment is as good as gone.

As for me, I’m not that big a risk taker. I prefer to have a slow and steady growth, with minimum speculation. That’s why I personally feel that investing in residential units is more suitable for me.

Hope it helps.

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Fixed Deposit (FD) rates of banks in Malaysia (November 09)

In August, I compiled a list of Fixed Deposit rates in Malaysia HERE. Here’s the update for the month of November 2009.

Bank

1 month

3 months

6 months

9 months

12 months

Affin Bank

2.00 2.10 2.20 2.30 2.50

Alliance Bank

2.00

2.00

2.00

2.00

2.50

AmBank

2.00 2.10 2.20 2.20 2.50

Bangkok Bank

2.00

2.05

2.10

2.20

2.50

CIMB Bank

2.00 2.10 2.10 2.10 2.50

Citibank

2.00 2.00 2.00 2.00 2.50

EON Bank

2.00 2.00 2.00 2.00 2.50

Hong Leong Bank

2.00 2.00 2.00 2.00 2.50

HSBC Bank Malaysia

2.00 2.00 2.00 2.00 2.50

Maybank

2.00 2.10 2.10 2.10 2.50

OCBC Bank (M)

2.00 2.00 2.00 2.00 2.50

Public Bank

2.00 2.10 2.10 2.10 2.50

RHB Bank

2.00 2.00 2.00 2.00 2.50

Standard Chartered Bank (M)

2.00 2.00 2.00 2.00 2.50

The Bank of Nova Scotia

2.00 2.00 2.00 2.00 2.50

The Royal Bank of Scotland

2.00 2.00 2.00 2.00 2.50

United Overseas Bank (M)

2.00 2.00 2.00 2.00 2.50

If you refer to the previous rates in August 2009, you will notice that there’s no change to the rates at all. But many people are saying that our Bank Negara will increase the interest rate soon, considering the fact that our economy is slowly recovering. I’ll post up an update to this list of FD rates once there’s any changes to the interest rate.

Hope it helps.

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Budget 2010 Real Property Gains Tax (RPGT)

Note: this post was written purely based on my personal opinions.

The Malaysia government has recently announced Budget 2010. To be honest, there are not much good news for this time’s budget. But whether there’s bad news or not, it is really up to you to decide.

Anyway, for this post, I will talk about one of the most talked about changes – the reintroduction of the Real Property Gains Tax or RPGT.

From BERNAMA:

The real property gains tax (RPGT) will be fixed at five percent on the gains from the disposal of real property effective 1 January 2010.

Reiterating this on Sunday, Second Finance Minister Datuk Husni Hanadzlah said that the rate imposed is irrespective of the holding period and the category of the owner.

However, exemptions to the individuals are given as follow;

* The level of exemption is increased from RM5,000 to RM10,000 or 10 per cent of the chargeable gains, which ever is the higher;

* Gifts betwen parent and child, husband and wife, grandparent and grandchild; and

* disposal of a residential property once in a lifetime.

To be honest, there are pros and cons here.

Pros:

Cons:

Many people say that the reintroduction of the RPGT is not really helpful but I believe there are pros and cons to everything. The main question here is whether the cons far outweigh the pros and whether this RPGT is really able to achieve what the government is trying to do – to make homes more affordable to the middle and lower income groups.

Feel free to post up your opinions on this. Again, this is based purely on my opinions and views.

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Should you switch your mutual fund often?

Some people always wonder whether they should switch their mutual funds often. In other words, trade them often. Well, I think it depends really. I know there are people who are very much into mutual fund trading just like the way stock traders trade their stock units. And with the help of online system, trading your funds has never been this easy before.

But irregardless of how easy and simple trading it can be, the sole question remains – should you switch (or trade) your mutual fund often? For me, it’s not recommended. But this is just my personal opinion. Don’t come after me if things end up differently for your case.

Anyway, here are the reasons why I do not switch my fund often.

So yeah, those are the 5 reasons why I don’t like to switch fund often. Most people I know have the same reasons of not switching their funds often. And there are also those who don’t like to trade at all, be it stocks or funds. To them, it requires too much time. But either way, there are more people who do not like to switch their mutual funds often, as compared to those who always switch around. Yes, there’s no doubt that you might be able to earn more by switching around – it’s the same with short term selling in stocks. But the risk is also there.

At the end of the day, it depends on your objectives to invest in mutual fund. Are you looking to earn some quick cash and are willing to face some risks? Or are you just treating it as some sort of a savings account? The answers to these few questions will determine whether you should switch your mutual fund often.

Hope it helps.

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