Archive for April, 2008

Stay on top of your expenses

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Pfiou - what a mess ! We just spend an hour yesterday tracking our expenses for the current month. We enjoyed some EPF withdrawal which directly lowered our mortgage principal - it is great, but we did not anticipate the additional work we would have to track it! It kind of messed up all of our calculation. It took us 30mn to get a hand on things. We ended up revamping our excel file - the new one is way better! - and sipping a few beers to help our thinking.

What is important here is that we now are back on tarck. We know how much we spent last month, and can better prepare ourselves. Tracking ones expenses can be difficult; especially when you start doing it. What you need is a few easy tricks and some dedication. You’ll find hereunder a few I found useful:

  • Keep all your receipts
  • Take a piece of paper and write the figure down when you forget or lost the receipt
  • Update your tracking file every 2 days – it only take 5 minutes
  • Keep your excel file with you all the time - a USB key is the idea companion
  • Print your budget and stick it somewhere visible (fridge, mirror, TV…)
  • Do it with your spouse / fiancée / GF / BF – doing it together will help you stay on track

Got any other? Please share :-)

“The Whistle” - Benjamin Franklin

No need to introduce Benjamin Franklin here I guess. He simply was one of the greatest statesman ever. But he was more than a statesman, diplomat, scientist or US of A founding father. He was a great author and satirist. One of his most famous piece is about his childhood whistle and the tough lesson of learning when to quit paying too much for something. The Maestro:

I received my dear friend’s two letters, one for Wednesday and one for Saturday. This is again Wednesday. I do not deserve one for to-day, because I have not answered the former. But, indolent as I am, and averse to writing, the fear of having no more of your pleasing epistles, if I do not contribute to the correspondence, obliges me to take up my pen; and as Mr. B. has kindly sent me word that he sets out to-morrow to see you, instead of spending this Wednesday evening, as I have done its namesakes, in your delightful company, I sit down to spend it in thinking of you, in writing to you, and in reading over and over again your letters.

I am charmed with your description of Paradise, and with your plan of living there; and I approve much of your conclusion, that, in the meantime, we should draw all the good we can from this world. In my opinion we might all draw more good from it than we do, and suffer less evil, if we would take care not to give too much for whistles. For to me it seems that most of the unhappy people we meet with are become so by neglect of that caution.

You ask what I mean? You love stories, and will excuse my telling one of myself.

When I was a child of seven years old, my friends, on a holiday, filled my pocket with coppers. I went directly to a shop where they sold toys for children; and being charmed with the sound of a whistle, that I met by the way in the hands of another boy, I voluntarily offered and gave all my money for one. I then came home, and went whistling all over the house, much pleased with my whistle, but disturbing all the family. My brothers, and sisters, and cousins, understanding the bargain I had made, told me I had given four times as much for it as it was worth; put me in mind what good things I might have bought with the rest of the money; and laughed at me so much for my folly, that I cried with vexation; and the reflection gave me more chagrin than the whistle gave me pleasure.

This, however, was afterwards of use to me, the impression continuing on my mind; so that often, when I was tempted to buy some unnecessary thing, I said to myself, Don’t give too much for the whistle; and I saved my money.

As I grew up, came into the world, and observed the actions of men, I thought I met with many, very many, who gave too much for the whistle.

When I saw one too ambitious of court favor, sacrificing his time in attendance on levees, his repose, his liberty, his virtue, and perhaps his friends, to attain it, I have said to myself, This man gives too much for his whistle.

When I saw another fond of popularity, constantly employing himself in political bustles, neglecting his own affairs, and ruining them by that neglect, “He pays, indeed,” said I, “too much for his whistle.”

If I knew a miser, who gave up every kind of comfortable living, all the pleasure of doing good to others, all the esteem of his fellow-citizens, and the joys of benevolent friendship, for the sake of accumulating wealth, “Poor man,” said I, “you pay too much for your whistle.”

When I met with a man of pleasure, sacrificing every laudable improvement of the mind, or of his fortune, to mere corporeal sensations, and ruining his health in their pursuit, “Mistaken man,” said I, “you are providing pain for yourself, instead of pleasure; you give too much for your whistle.”

If I see one fond of appearance, or fine clothes, fine houses, fine furniture, fine equipages, all above his fortune, for which he contracts debts, and ends his career in a prison, “Alas!” say I, “he has paid dear, very dear, for his whistle.”

When I see a beautiful sweet-tempered girl married to an ill-natured brute of a husband, “What a pity,” say I, “that she should pay so much for a whistle!”

In short, I conceive that great part of the miseries of mankind are brought upon them by the false estimates they have made of the value of things, and by their giving too much for their whistles.

Yet I ought to have charity for these unhappy people, when I consider that, with all this wisdom of which I am boasting, there are certain things in the world so tempting, for example, the apples of King John, which happily are not to be bought; for if they were put to sale by auction, I might very easily be led to ruin myself in the purchase, and find that I had once more given too much for the whistle.

Adieu, my dear friend, and believe me ever yours very sincerely and with unalterable affection.

How To Select Your Financial Adviser?

Everyday I meet people who want get their money to work for them. Most of them realize they need help and they are looking for the right adviser to guide them. They are looking for someone who will listen, understand their needs and objectives, and help them achieve their dreams. Sometimes the dreams are reasonable; other time they are quite grand. What is common is the fear of making the wrong decision - especially when it comes to choosing an adivser. How should one go about selecting his adviser?

A little market research

It all start here. It certainly is not the fun part, but you need to go out there and start checking the current market - selecting the good apples from the bad ones. I’m currently working in Malaysia. I can say that the Malaysian offshore industry has a crap reputation. There are many many advisers out there who are in for a quick buck. Not all apples are rotten though - if you look carefully and ask around you can find some good advisers who will give sound advice and work with you over the long run. To find such a gem you’ll need to (A) Be Lucky - (B) Do the following

  • Ask around and get recommendations - This is the single best piece of advice you will find in this article. The best recommendations always comes from your friends & trusted ones. It will help you narrow things down quite a bit.
  • Meet a few advisers before making your decision - by sitting down with more than one you will tremendously improve your chances of finding a good adivser. This also is a good learning process.
  • Ask questions and check their market knowledge - you’ve got many blogs around with very sound financial advices. By taking an hour or two browsing them you should be able to get your basics up to standard and start asking questions.
  • Never sign straight off. The hard-closing ones usually are in for a quick buck. They tend to listen very little & just talk about how much money their method made them (usually on their clients’ back).
  • Do a quick search online to check if the adviser you met has some kind of track record. Most of them won’t - but it is worth a try.

A personal relationship

At the end of the day, investing is all about the strategy you set in motion. A good adviser will help you define your strategy by listening to your goals and objectives, helping and guiding you through this process, and then work his magic. You will need to trust him/her with very personal stuff - sometimes things you don’t even tell your loved one. It is a very special and personal relationship - so take a bit of time to select the right financial partner !

The Oracle of Omaha’s on the American Economy

When markets are tumbling, people usually turns to Oracles. Some will be optimistic, some will be pessimistic, and Warren Buffett will be down to earth. His “Oracle of Omaha’s” nickname comes from his long term success, witty comments and letters, and he lives in Omaha Nebraska.

Mr Buffet gave us another golden nugget of wisdom in a recent Fortune Magazine article What Warren thinks….

The American economy is going to do fine. But it won’t do fine every year and every week and every month. I mean, if you don’t believe that, forget about buying stocks anyway. But it stands to reason. I mean, we get more productive every year, you know. It’s a positive-sum game, long term. And the only way an investor can get killed is by high fees or by trying to outsmart the market.

Vanguard 500 Index Fund - Funds Review

Funds are my favorite way of building a diversified portfolio. Many people are afraid of funds ’cause they do not know how they work or what their strategy is. There also are so many it becomes a pain to make a choice. In this category I will review will be the ones I personally like and recommend; hoping to convince a few recalcitrant and help others cherry pick their funds. Good read!

The Vanguard 500 index fund (code:VFINX) is, as its name indicates, an Index Funds tracking the Standard & Poor’s 500 index. It was launched in 1976 and has since been a portfolio’s favorite of many investors. Its success boils down to its investment philosophies - and some say its very good customer services.

Vanguard 500 Philosophy

John Bogle, Vanguard founder, built his company and index fund based on his Princeton undergraduate thesis findings. Mr. Bogle used the Standard & Poor’s 500 index to compare the performance of mutual funds in the past. He soon realized that three out of four of the managers were not performing better than a passive investor holding a basket of the 500 largest public companies in America. Their performance were eventually below par as investors still needed to pay their expenses, and active trading incurred taxes.

Mr. Bogle then decided to create a fund following the S&P’s 500 index with extremely low expenses. They achieved those low expenses thanks to a no-load strategy - the buyer do not pays sales commission (also called “load”) when buying or selling fund shares. All this no-load explanation may sound a little complicated. It simply translates into an incredibly low 0.18% expense ratio. Thanks to this sane and sound strategy, the Vanguard 500 Index Fund has grown to become one of the largest mutual funds of any kind. It now has more than $100 billion in assets - and growing!

What does this means to you?

It simply means that the Vanguard 500 is to be present in your portfolio. It is a very safe, cheap, and rewarding fund to hold - for Americans and non-Americans alike. Some may be afraid to invest in American funds right now. They may be right should you consider a lump sum investment. But for those considering cost-averaging, then now is the time to start building your position. What are you waiting for?

Vanguard 500 Market Data
Yahoo Finance
MSN Money
Google Finance

“Be greedy when others are fearful”

Interesting read from the Economist - I know I am becoming a fanatic! - Hung, drawn and first-quartered. It may not be their most enlighten or thought challenging article; it simply is a good overview of the current market & the Reader’s comment will be very interesting to follow!

After a painful period, investors face a stark choice

OWNERS of risky assets suffered agonies in the first three months of the year. Almost without exception, stockmarkets lost ground while the price of corporate debt fell sharply (or to put it another way, spreads widened). Only those who bought the unlikely combination of government bonds and commodities will be looking fondly at their portfolios.

For dollar-based investors, it did not matter much what kind of equities they owned. The MSCI World index was down 9.5%, the American market 9.9%, Europe 9.2% and emerging markets 11.3%. The supposedly uncorrelated Tokyo market (it has tended to go down when others went up) decided to become correlated again at the least helpful moment, dropping 7.7% in dollar terms. And even those numbers are flattered by the decline of the greenback; in local currency, Japan was down 17.8% and Europe 16.2%.

“Be greedy when others are fearful” is one of Warren Buffett’s aphorisms and it is possible that this is one of those times. After all, most people are convinced that the American economy is in recession, and sentiment is depressed. The demise of Bear Stearns could mark the bottom of the crisis, and the cavalry are finally on their way: the Federal Reserve and the American Treasury are supplying both a monetary and a fiscal stimulus.

Read more by following this link.

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