Is It Time To Invest Now?

After the global financial crisis, many investment portfolios were badly hit and many fortunes were greatly dented. However, there were people who made a big pile of money when they started to invest around March 2009. Nobody knew that it was the bottom of the bear market.

So how do we decide when to buy low and sell high? What do we look at before we decide to invest our hard earned money?

We at IPP, use the acrynom “VEST” to study the markets.

V is for VALUATION. The market valuation tells us whether it is is under valued, over valued or reasonnably valued over the a 6 to 12 months period and over a three year period. This valuation will indicate the probability of the equities returning above, at or below the historical average.

E is for ECONOMIC DATA. The Economic Data tells us the health of the countries that we are investing in. We can look at GDP figures, unemployment rates, inflation figures and interest rates. These figures will generally affect overall sentiments in the markets.

S is for SENTIMENT. Market sentiment will generally react negatively when economic data is discouraging. High inflation rates will hit consumers pockets affecting sentiment. Weak but recovering sentiment will boost the markets in the absence of any sudden shocks like terrorist attacks, civil wars or great natural disasters.

T is for TECHNICAL ANALYSIS. Using various technical charts to plot the trend of the investment markets does help but it is not a fail safe method. It does gives a general guideline of where the markets are heading in a trend up or trend down situation. Good and reliable technical charts does help fund managers make wise decisions which we the layman do not have access to.

Do not gamble your money away by listening to friends who tells you to buy certain stocks and shares for a quick profit. Yes, sometimes they may be right, but when they are wrong, can you afford to lose?

Investment is about returns versus the risk taken. Be aware of your risk appetite before you invest, Your tine horizon is also very crucial in deciding whether to invest or not.  Keep liquid cash of at least 6 months of your income to buffer any financial storm in your income.

Most importantly, consult your trusted independent financial advisor before plunging head on into the investment market hoping to make a fast buck.

No independent financial advisor? No worries, just give me a call at 90011082 for a non obligatory discussion on whether you should invest or not.

Regular Savings Programme

Happy Deepavali to all my Indian friends!

Asians are known to save much more than their Western counterparts. Even at the national level, Asian nations have billions of dollars in their national reserves. Only during severe financial crisis will these nations reluctantly dip into their national reserves to save their economies from disaster.

What about the common Asian people on the streets? Do they have these “resources” to dip into when they encounter a “personal disaster” ? I believe many young graduates when they start work after leaving university, do not have the mindset to start saving for their “financial reserve”. Many are not aware of the financial responsibilty that will come before they start their young families. They will only start thinking when they are going to get married, a baby is coming their way, face a medical crisis or their own parents falling critically ill.

Must we wait till these “financial disasters” happen before we start saving? No!

Parents and the educational institutions should start educating the young about financial planning when they are in secondary schools, Polytechnics or University level. They must be financially trained before they step into the corporate world. The importance of being financially literate is as important as being educated in their field of expertise. They should score an “A” in financial planning too!

Many people are in debt with credit card debts up to their nose and they are not even aware that they are sinking into a death trap if they don’t stop using the credit card without the responsibilty of repaying the bill at the end of each month. Paying just the minimum amount each month is a financial death trap! It is like quick sand, sucking you deeper into financial hell.

Ignorance is not bliss, it will kill you.

So let’s wake up to the fact that we must save first and spend whatever is left rather than spend first and save whatever is left. Start your regular savings programme now. Don’t procrastinate anymore!

Start with $50, $100, $150, $200, $500 a month, whatever amount that is comfortable for you now. Saving money is a habit, just like brushing your teeth, You were not born knowing how to brush your teeth right? It must be taught, learnt and practised till it becomes a habit for life.

Target to save up to 6 months of your monthly expenses, then you can start investing in other financial instruments like stocks and shares, unit trusts in equities and bonds etc…

But what if you are already in debt?

Answer: Start paying off the highest interest bearing debt, especially the credit card ones first. Negotiate with the banks to reduce the interest rate or get them to convert it into a term loan with a lower interest rate. The bank does not want to see you go bankrupt, they will be more than happy to work out a repayment schedule that suits you. Finally terminate your credit card accounts, cut the credit cards into two and throw them away, leave just one or two for emergency use, just in case you are without cash at the petrol station. Using the credit card to get discounts is fine but make sure you pay the bill when it arrives in the mail.

Money management is very simple, even my late illiterate father who came from Shanghai many years ago knew how to save every cent from his hard earned job as a carpenter many years ago. He saved and saved until he became a boss of a furniture company and purchased his own landed property. He was well known as a miser but when people had difficulty during their financial disasters, he would help them with his hard earned money. He had a heart of gold even though he was very prudent with his hard earned cash. He passed away when I was 21, and he left behind not only financial security to my mum and siblings, he left behind a legacy where one should have compassion for the poor too.

So start your financial security journey by starting your regular savings programme. I can help you design one that suits your need if you need my help.

Happy Deepavali to all my Indian friends! Have a happy holiday and enjoy this long weekend with your family and friends!

Are we entering into a bull run?

Are you ready for a bull run?

Message from IPP’s Investment Director, Mr. Albert Lam

Since the beginning of 2010, IPP has maintained a view of the overall equity markets that is in favor of a broad sideway consolidation. Indeed, most major indices have been moving within a range. 

In more recent times, however, a more optimistic change appears to be revealing as India, Korea and Singapore have begun breaking out of said sideway patterns and are resuming bullish uptrends. There is a good possibility that other stock markets will follow this pattern in the months ahead.

 Fundamentally, we see strong Asian and Emerging Markets economies though the US and Europe are still enroute to recovery. Equity valuation around the world is reasonable and definitely worth investing in for the long term. While unemployment in the west is still disappointing, we realise that the unemployment figure is a very lagging indicator.

 Companies refuse to resume hiring until they see a couple of years of good earnings andprofits. Thus, when we finally see unemployment figures improving, markets should have already run up quite significantly. As such, we should not place too much emphasis on the weak employment data.

 It seems likely that we may be seeing the commencement of an uptrend and long-term investors should take advantage of the situation.

IPP Capital Watch October 2010 Click here for a copy of IPP’s Capital Watch October 2010 Newsletter.

What is “Dollar Cost Averaging”?

"Gold"ilocks and the 3 bears?

3 October 2010, Sunday Times article “How To Make Your Money Work Harder” by Ms. Lorna Tan talked about where we should place our hard earned money besides the bank which offers a measly 0.1% to 0.45% p.a. She also stated that the average inflation rate in Singapore is expected to be around 2.5 to 3.5% for year 2010. That means you would have seen your money lost it’s purchasing power by about 2 to 3% this year.

No big deal for now but if it carries on for 10, 20 years you will definitely feel the pain!

Structured deposits, bonds, bond funds and stocks which pays good annual dividends were mentioned as better investment instruments to beat the annual inflation. I agree with her and I would like to bring up this term called “Dollar Cost Averaging” (DCA) for your consideration when you invest in stocks or unit trust funds.

DCA can be used effectively at any time when given a long time horizon and investing in strong Asian economies. DCA is an investment strategy to invest a fixed amount of money ($200/month) at fixed regular intervals  (eg. monthly) regardless of the market condition. If you have started DCA in your investment in 2006 through to 2010, you would have weathered the financial crisis in 2008, bought in at very low prices when others were selling in panic.

Studies have shown that DCA works. Just read any financial magazines or financial articles, you will be able to find data and charts to prove it so I will not repeat what others are doing now.

So if you are looking for a place to put your hard earned cash to work harder, just meet up with me soon so that I can help you get started with your DCA strategy?

No Such Thing as High Returns, Low Risk – Straits Times 4 Aug 2010, Page A2

Low Risk, High Returns???
This Straits Times article by Ms. Lorna Tan, showed up the greed of Singaporeans again when so many people were being conned by Sunshine Empire, run by James Phang, his wife, Neo Kuon Huay and his partner Jackie Hoo. James and Jackie have been sentenced to nine and seven years jail respectively. James and his wife were both fined $60K each.

This saga will go down in Singapore history as the largest ponzi-like scheme drawing $180 million of funds from thousands of people. It was set up in July 2006.

The article goes to teach us how to identify potential scams…

1) Beware of promises of quick gains – Just sign up and recruit others, sit back and enjoy the quick gains.
2) Know your financial scams – it happened before during the 1970s, the Gemini Chit Fund which wound up in 1972.
3) Deal with regulated providers – Ask if the company is regulated by the Monetary Authority of Singapore (MAS).
4) Check MAS’ Alert List at
5) Questions to ask:
a) Is the financial product provider regulated?
b) What are the returns dependent on?
c) When will the returns be paid?
d) How long must you stay invested?
e) How can you monitor the performance of the investment?
6) Risk-Return Trade Off – If anyone offers you high returns and zero or low risk, warning bells should ring: SCAM ALERT!!!

IPP Investment Commentary

IPP Investment Digest
Weekly roundup of headline news.

For the week ending 9 Nov 2008

 Equity Markets: The US indices perked up on Fri after two sessions of loss, following the US Presidential election. European indices also edged higher on Fri on news of rate cuts, after sharp drops on Thu. Some of Asia’s indices closed the week up, with STI, Hang Seng and Nikkei moving up 3.86%, 1.97% and 0.07% respectively.

 Commodities: Crude oil prices remain low on pressure of Opec’s rising spare capacity by 1.6m barrels a day, and recession fears. Crude oil Nov contract (Nymex Nov West Texas Intermediate) at one point fell to $60.16 a barrel. Gold often seen as an inflation hedge also saw low prices as inflation risk abate.  Currencies: US$ weakened (-2.45%) against £ over the week, while gaining marginal strength against the € (+0.83%) and ¥ (+0.13%). S$ weakened by 0.60% against the US$ over the week.

 Economy: IMF forecasts growth to be -0.3% and -0.2% in advanced economies and Japan for 2009. China, widely counted on to sustain global growth is forecast to grow at 8.5% in 2009. US reported Oct job loss to be at 240,000, economists had forecasted loss at 200,000. US unemployment in Oct was 6.5%.

 Interest Rate: Bank of England cut interest rate by 150 bps to 3% – lowest level in 50 years. Swiss National Bank and ECB both cut interest rate by 50 bps to 2% and 3.25% respectively. Reserve Bank of Australia cut interest rate by 75 bps to 5.25%, with more cuts expected. LIBOR rates have come down versus a month ago, with 3-month, 6-month and 1-year rates at 2.71%, 2.97% and 3.17% respectively (as at 5 Nov).

 Banks/IMF: IMF approved a US$15.7 bn loan for Hungary, the approval makes US$6.3 bn immediately available and the remainder will be available in five installments subject to quarterly reviews.

 Corporates: Toyota Motor reported Q2 net profits that fell 69% and warned of possibility of zero profits in 2H. Ford Motor cuts salaried expense by another 10%, further to a 15% cut earlier in the year. Goldman Sachs cut 3,000 jobs, while Fidelity Investments plan to cut 1,290 jobs. Mattel announced 1,000 job cuts worldwide. DBS is expected to cut 900 jobs; its Q3 net profit of S$379m is sharply lower on a year-on-year basis (S$610m last year).

 Politics: US elected its first African American President (44th), letting the Democrats take lead in the White House beginning next Jan. Three terrorists, who set off bombs in Bali in 2002, killing hundreds of people, were executed in Indonesia.

This material is prepared by IPP Investment Division (IPP) and is provided for information purposes only. IPP does not warrant the
adequacy or completeness of such information. Accordingly, no warranty whatsoever is given and no liability whatsoever is accepted for
any loss arising whether directly or indirectly as a result of you acting on this information. Reference to specific securities (if any) is
included for the purpose of illustration only and should not be construed as a recommendation to buy or sell the same.

IPP House View

Commentary by IPP Investment Division
14 Oct 2008

Financial Markets

The world’s financial markets went on a wild roller-coaster ride over the past 2 weeks. With the concerted efforts displayed by G7 and European leaders, we are optimistic that this coordinated approach is likely to provide stability to the present extremely volatile market.

Deleveraging will reduce global liquidity considerably and the global economy is likely to slow. The global economy will need time to work out the excesses but will emerge stronger in the recovery process.

Asia ex-Japan & Emerging Markets
•Present valuation of Asia-ex Japan and emerging markets continues to look attractive. With the likely slowdown in global economic growth, we expect growth in Asia ex-Japan and emerging economies also to slow but still grow at a higher rate as compared to the developed economies.
•We continue to favor and over-weight Asia ex-Japan and emerging markets. We hold our views that investing into Asia Ex-Japan and emerging markets is likely to provide better potential returns when financial market recovers, as Asia ex- Japan and emerging markets remains the world’s growth engines.

US & Europe
•While the financial markets went into a tailspin over the past week, the governments around the world acted swiftly and took concerted actions to “calm” the markets. G7 has pledged “no more Lehman-type failures” in an attempt to restore confidence in the market.
•While the concerted efforts by US and European governments are likely to help stabilise the financial markets in US and Europe in the short-term, we do not see this as a quick fix to the present financial crisis. Nonetheless, it is a very encouraging start.
•Deleveraging will take some time and US/UK/Europe economies will need time to work out the excesses. Liquidity will not be as plentiful as in the past and economic growth is likely to stall during the early phase of the recovery process.
•Hence, we do not see an end to the present problems in US/UK/Europe in the short-term and will continue to underweight them.

•Commodities will still remain volatile going forward. However, the demand for commodities will be there as long as the emerging markets continue with strong internal consumption demand. The mid- to long-term trend in commodities prices is still positive.
•We think that an allocation to commodities is important to the portfolio as commodities generally provide a hedging mechanism to inflation, which will better manage volatility in a diversified portfolio.

Australian Dollar Denominated Fund
The Australian dollar weakened suddenly and sharply over the past 2 weeks. The primary cause is the unwinding of yen-carry trade. When the RBA cut interest rate on 7 Oct, yen-carry traders had to reverse their positions, selling Australian dollar which now has a lowered yield at 6%. The selling pressure weakened the currency.
For clients who have invested in funds denominated in Australian dollar, we think staying invested is appropriate at this current juncture.

Position For Recovery
In current market environment, we see opportunities for the medium to long term investors in these investment themes: Asia, commodities, Middle East & North Africa and BRIC that have sound fundamentals and are poised to recover quicker and stronger in the future.
•It is probable for markets to see sharp rebounds as investors cheer over the initial coordinated efforts of governments and central banks. However, the initial euphoria could dissipate as the real economy works out the impact of the initial financial markets fall out. We must expect volatility.
•For equity investments, we reckon that this is not a good time to cash out as markets have fallen drastically. For clients who have longer-term investment horizon, we believe this is good time to accumulate more units through RSP.
•For fixed income investments, focus on those with shorter duration. For clients that are jittery and are looking for absolute safety, consider switching back to cash/CPF and start a 24-month RSP programme to invest in equities.
•For clients who are losing sleep due to the volatile markets, consider shifting to safer investments such as money market funds or switch back to cash/ CPF and start a 24-month RSP programme.
•Own a diversified portfolio. This is not the time to take concentrated bets on specific investments or sectors as recovery in financial markets is unlikely to be immediate.

This Investment Commentary is intended for general circulation only and does not take into account the specific investment objectives, financial situation or particular needs of any particular person. Opinions expressed in this commentary are subject to change without notice, and no part of this publication is to be construed as an offer to buy or sell any securities or financial instruments whether referred to herein or otherwise. The information herein was obtained from various sources; we do not guarantee its accuracy or completeness. We will not accept any liabilities whatsoever whether direct or indirect that may arise from the use of information in this publication. The company, its directors, connected persons or employees may from time to time have interest in the securities mentioned in this publication. Past performance is not necessarily a good indicator for future returns. Please consult your IPP FAR for any intended implementation.

Asian Indices Heavily Sold Down ( 6 Oct 2008 )

Asian indices plunged today, anywhere from over 3% (Australia, New Zealand) to 10% (Indonesia). As of 1615h, Singapore and Hong Kong sank by over 4% each. Despite the approval of the US$700b Troubled Asset Recovery Plan package (“TARP”, which I dub “Trashed Assets Rollover Plan”), market players sense that the US (and the world for that matter) needs to do a lot more than drip-feed to the Sick Man of the World.

The Fed may consider an aggressive rate cut (50bp?), ECB is also considering rate cuts, but those may not solve the problem of the current deleveraging. You could tell the level of distrust among banks by the sharp spikes in LIBOR spreads, in any currency, you name it. Tight credit conditions also affecting borrowers – businesses and individuals. From Elm Street to Wall Street to Main Street, Halloween 2007 could continue with the next sequel this year, and across to Europe.

The US Elections, on 4-Nov-2008, is just another month away. I hear (American, of course) opinions that try to talk up the US market for a rebound circa “Super Tuesday”. The situation in the US is still serious, so that bounce could be short-lived.

Last Friday, investment legend, Bill Miller, who runs Legg Mason Value Trust that has beaten S&P 500 for 15 years straight until the fund was humbled since 2006, repeatedly said that US equities are good value. To an audience of 500, Legg Mason emphasized market recovery. During a small group lunch last Friday, I told Bill that he may be too early with his call, given the on-going deleveraging. He countered that he was “too late to go defensive”. Legg Mason expects recovery within the year, or best case within 6 months. Keep your monthly RSP rolling.

Is the Oracle of Omaha a harbinger of recovery in equities? Warren Buffet is the only non–Arab-, non–Mandarin-speaking savior of two American icons. From his war chest of US$38b, the investment guru bought preferred shares of Goldman Sachs (US$5b) and GE (US$3b). Even Anthony Bolton, a top Fidelity fund manager, also invested his own money in equities. I expect another <15% more downside. China could be one of the first equity markets to recover. Three stockbroking reports alluded to more (aggressive) rate cuts by Chinese government which could be equity-friendly. But the possible deluge of shares held under moratorium and tainted milk scandal could restrain market exuberance. Several pundits expect up to one-third of the world’s10,000 hedge funds to collapse. Year-to-date, 350 shut down, against 563 in the whole of 2007. The stronger ones could be cannibalizing the weaker ones. Even if this is not the case, the more able ones stand to gain market share (and that goes for banks, too). Some US$600b of the US$1.8t global fund under management sought safety in cash (US$100b in money market funds). Several private bankers have been advicing their high networth clients to switch to gold. Hedge fund strategies that continue to work well include managed futures and macro. Our hedge fund partners are still in good shape; we have been communicating with them more frequently these days. Best is to employ multi-strategy funds, with capital guaranteed notes providing peace of mind. Even in hedge funds, you should plan to invest in a diversified portfolio, if possible. While paper redemption continues to pressure gold value (or some could be switching to physical?), ordinary folks have been gobbling the physical. The US ran out of Buffaloes, Eagles and Kruggerands. In Singapore, a local bank ran out of 1-ounce gold coins, although smaller coins/ wafers are still available. While fears of global recession pressures crude oil (US$90), the value of gold appears to be holding steady above US$800. As the US and Europe inject hundreds of billions of dollars & euros, fears of fiat money to feed the gold-buying frenzy. Buy physical gold, in tranches, for hedge against disaster, and not for making obscene returns. A bounce in equities could trounce gold value; buy another tranche. And speaking of cash, even if you plan to overweight cash, then are your banks safe? Hong Kong almost suffered a run on one of its banks until an influential investor sang a comforting lullaby. Singapore government sang its tune, too. Diversify, diversify, diversify. Investment is not about seeing positive return in all your investment instruments each time you look at the statement. Market conditions are extreme this time, we need time to see a return of confidence in the market. From the Investment Desk
Eddy Tan
Head, Analytics & Asset Allocation
IPP Financial Advisers Pte Ltd