Tuesday, December 25, 2007

Learn to Attract Money

You already know that the best way to learn about creating wealth is from people that have built their own fortunes. When you learn how they think, you will be able to create the fortune you desire.

To equip yourself, below is another resource that you may want to browse through to learn about some proven techniques that you can apply to your life.

Just click on it.

Holiday Money Package

Happy Reading!

Reading Material (not to be missed):
How to set Goals? Click Begin with an end in mind,
Importance of Saving: Click Power of Compounding, Power of Saving,
How to grow my wealth? Ways to Invest

Thursday, December 20, 2007

Wealth Creation Mindset

Do you know why you are not rich? Would you like to know what it takes to be wealthy?

Financial Abundance and Wealth Creation is a real and tangible idea but there is a critical condition to it. In order to grasp the idea of wealth creation, one must take the view of the rich and the wealthy. Want to know the mindset of a millionaire?

Here it is:
a) Find optimism. View each failed attempt as a learning experience. Take the feedback and change the strategy until results are achieved.

b) Find encouragement in defeats. Do not give up easily.

c) Find opportunities when it is most invisible. Everything happens for a reason and that adversity is often opportunity in disguise provided you learn from your experience and continue to take consistent action.

d) Exceed own expectations in whatever you do. Adopt an adaptive mindset that creates value wherever you go.

e) Be Proactive. Take initiative to make things happen. When problems get in the way, take action to solve it.

f) Do what you love. This is the only way you can become totally obsessed and committed towards something.

g) Delay gratification. Saving is involved in wealth creation, and that means forgoing what we can spend now for later. Spend Less and Invest More. Have patience to allow your money to grow and compound through investing.

h) Moving forward. Improving oneself in every aspect and knowing that there are different ways to be a better person is a mindset that can help you to improve in the long run.

Are you now ready to revamp your current lifestyle? Changing your mindset is the key towards the life you desire.

For more reading materials, click here.

Sunday, November 4, 2007

Easy, Effective Way of Holding Bonds

Newbie investors who have a sum of money and want to invest into bonds can consider this easy and effective method. It is called the Bond Ladder.

Click Here to find out more

Other Topics (not to be missed):
How to set Goals? Click Begin with an end in mind,
Importance of Saving: Click Power of Compounding, Power of Saving,
How to grow my wealth? Ways to Invest

Saturday, October 20, 2007

Risks in Bond Investment

Despites its conservative nature, Bond investment has risk too. As an investor. you should be aware of the degree of risks you carry in order to invest prudently.

Bonds can be subject to credit risk. This is the risk of default which means that the issuer is unable to pay the interest or the principal of the bonds to the investor. Hence it is important that you find out the credit rating of those corporations that you intend to invest in. You may refer to rating agencies like Moody's and Standard and Poor's to determine the credit worthiness of corporations and governments. Government Bonds are fully backed by the full faith and credit of the government. As such, the risk of default can be little or negligible

It is not necessary to hold bonds till maturity. There is a secondary market where bonds can be sold before it matures. However, you will be subject to interest rate risk if you do so. As you have learnt in the earlier post, bond price can fluctuate due to changes in interest rate. In fact, a bond price has an inverse relationship with interest rate. This means that if interest rate rises, bond price will decline and vice versa. If you were to sell a bond before it matures and the price has fallen, a part of the prinicpal investment would be lost together with any future income stream. Generally, bond investors are more concerned with receiving income instead of capital appreciation, and principal investment at maturity.

Due to its safe and stable nature, returns from bonds are generally lower than high risk investment like equity. In an inflationary environment, the total return may not keep pace with inflation. Hence you may be subject to inflation risk. This means that though the return is postive, you may actually see a decline in investment in real term.

Lesson to be learnt:

Never put all your eggs in one basket. No one investment is totally safe and that includes fixed deposit because you would not be able to hedge against inflation. Diversification is the way to go to grow your money.

Other Topics:

How to set Goals? Click Begin with an end in mind,

Importance of Saving: Click Power of Compounding, Power of Saving,

How to grow my wealth? Ways to Invest

Sunday, September 23, 2007

Uses Of Bonds

As you have already learned, bond investments are interest earning and its value can appreciate or depreciate in relation to interest rate changes.

Bond is generally a safe investment. However, except for bonds from the government, bonds do carry the potential risk of default, no matter how remote that risk might be.

Bonds would appeal to those who want to receive interest income or to preserve and to accumulate capital. If you want regular returns of a certain amount of money, a bond will fit the bill very well.

Bond is a better alternative to savings and fixed deposits. If you wish to invest your money safely for a longer period of time, bonds serve this purpose better than fixed deposits. You can beat inflation and enjoy higher returns than fixed deposit rates.

Due to the conservative nature of bonds, it is one of the investment tools that could be added in any phase of your retirement portfolio. Your holdings in bonds would vary depending on your risk tolerance and investment time horizon.

If you are young and have many years away from retirement, you are most likely to build your nest egg by taking a fairly aggressive stance. However, it would be unwise to put everything into equity as it is a very volatile instrument and are generally the most risky. You would probably have a diversified investment portfolio that consists of bonds, equities and cash in varying allocation. Diversification offers some protection for your portfolio as the rising value of certain assets could help to offset the assets that are facing a negative impact. By adding bonds in an equity portfolio, it would enhance stability and reduce risk exposure as your capital in bonds would likely to be protected from equity market fluctuations.

If you are a few years away from retirement or have retired, you need to protect yourself from possible steep equity declines. You can shift from an aggressive stance to a moderately aggressive one by adding more bonds. As you receive a fixed amount of income that is paid regularly over the lifetime of the bond, the predictable cash flow from bond investment adds a necessary element of stability to the retirement portfolio.

As lower risk often leads to lower returns, the emphasis of investing in bonds generally does not lay in capital appreciation, but in, income generation and capital preservation. If you invest in bonds of good credit ratings, you will most likely get back your principal upon maturity. As it is possible to incur a capital loss if you were to sell before the bond matures, you will need to consider when you want the principal to be repaid and the kind of returns you seek, and take into account your risk tolerance.

Saturday, September 1, 2007

Bonds - Fixed Income Instrument

Having talked about bank deposits and forced savings through insurance product the past few weeks, today I shall cover another investment instrument that one can consider and that is Bonds.

What is Bonds?
When investing in bonds or fixed income/debt securities, you are actually lending money to finance a corporation or the government's operation, becoming a creditor of the corporation or government.

Bond investments are interest earning. It has a coupon rate which is the interest earning element and a maturity date. During the initial issue, a bond is sold at par value, or 100% of its face value, and the return (yield) is the coupon rate. Once a bond is issued, the coupon rate or interest is fixed and will not change throughout the term of the bond. However the price of the bond will change. This is because bonds can be bought or sold on the secondary market before they reach maturity. There is hardly a time when a bond is sold at par value. When a bond sells below its par value, it is said to be selling at a discount. On the other hand, if it sells above par value, it is selling at a premium.

A change in the price of the bond is caused by changes in interest rate. When interest rate rises, bond prices will depreciate. This is because new bond issues will have higher coupon rates than existing bonds. Therefore, bond prices will fall to compensate for the difference between the existing yield and the current market yield. Hence, an investor considering the purchase of the existing bond can earn additional interest by paying less (< $1000) for each bond and getting the same coupon rate. The opposite is true when interest rate in the market falls and new bond issues offer a coupon rate that is lower than the existing coupon rates. Bond prices will increase because whoever buys the bond at par value would be earning a coupon rate that is higher than market rate. This will result in excessive bidding for the bond due to its attractive yield. The price of the bond will then be bid up to the level where the bond offers a comparable yield as the current market yield, usually higher than the par value.

In summary:
When bond is sold at par, return = coupon rate;

When bond is sold at discount, return > coupon rate;
When bond is sold at premium, return < coupon rate

Henceforth, when investing in bonds, not only will you earn interest but also get the opportunity to sell at a premium when bond price increases. You can also choose to hold it till maturity should bond price decreases.

Saturday, August 18, 2007

Retire? Not so soon, say many Singaporeans polled

Below is an excerpt from an article taken from the Straits Times dated August 11, 2007.

Retire? Not so soon, say many Singaporeans polled.
"Singaporeans are in no hurry to retire and most want to work beyond the official retirement age of 62, some even into their 70s. It is a case of "CPF not enough" for many of these workers.

Seven in 10 polled last month in a Straits Times Insight survey on CPF said they do not think their savings in the national pension fund will see them through old age.

The survey of 636 Singapore residents aged 30 and above found that apart from CPF, 77 per cent expect to be able to draw from other sources of retirement income, mainly savings, investments and insurance. But a significant minority of 23 per cent had nothing else set aside.

One cause for concern is that only one in two Singaporeans has done any financial planning for retirement.

Even fewer, three in 10, have done their sums on how much they need to squirrel away.

What may mitigate against any resulting savings shortfall is their willingness to work beyond the retirement age of 62."

Hi Friends,
Where do you think you stand in this area? Do you have a sense of security over your retirement finances? Would you be happy with just a lifestyle of S$789 per month when you retire? If not, are you willing to work beyond your retirement age of 62?

These are real issues that one cannot ignore. At the national level, our government is studying ways to tackle the ageing population and one of the ways is to help Singaporeans work longer.

Which do you prefer?
a) I need to carry on working because of worries over insufficient savings; or
b) I like to carry on working because it adds meaning to my life.

I believe everyone wants to be given a choice. And who can give you this choice? It is yourself. So start planning early for your retirement. Grab a copy of the financial plan template to get an insight on how to do your financial planning for retirement.