Four Key Financial Investment Planning Tips for Women

These days, financial education is imperative to acquire financial success. However, while some of us might be well-versed with financial theories, staying updated and accurate with the latest financial news is also important.

There are women who go the extra mile to provide for their family, both financially and emotionally -- as a professional, mother, daughter wife, friend. However, women also tend to get fondled by emotions easily. It is important for her to focus and make decisions logically and not emotionally when it comes to matters of financial planning. 

Here are some smart financial planning tips for women:

1. Choosing best option to invest:

It is not only important to invest, but also to choose your investment plans wisely. This stands true for everyone, not only women, but it is especially important in the case of women because they tend to have a longer life span. It is very important to start planning for retirement or for financial stability in the event of a partner's death. 

2. Take charge and make a budget:

Many women in India still depend on their husbands for financial decisions. With growing complexities in life, it is advisible for a woman to take charge of her financial life as she may be in a better position to predict her needs going ahead. For this, make a budget that fits your requirement with ease and is flexible enough to accommodate needs with time. It is advisible to start as early as possible and select investment options which will also help you save in taxes.

3. Research & Plan: Take a financial advisor’s help if needed:

Since the financial world is full of technical jargons and complexities, a thorough research before buying into a financial product, including considering factors like inflation, return on investments, market sentiments, and taxes while planning your finances. Seek advice from an expert if needed, but eventually make the final decision on the basis of your judgement and thorough research. Plan, calculate and research before investing.

4. Review your income & savings on a regular basis:

After carefully planning and investing, the next, and constant, step is to review your finances on a regular basis. You need to be on the top of your game when it comes to managing finances with respect to the changes in your life -- marriage, becoming a parent, career changes, moving abroad/shift, and so on. Then there are other changes that are beyond one's control -- changes in tax laws, interest rates, inflation rates, stock market volatility, recession -- so make sure you plan ahead of time and are always ready to accommodate these changes. - DNA India

A Value Investor’s Take on Diversification and Risk

The two key tenets of modern portfolio theory is that investors invest in well-diversified portfolios and that, in this setting, the only risk that matters is beta – a measure of a stock’s volatility in relation to the market. Finance courses at universities around the globe and the CFA program are embedded in these two concepts.

Value investors reject both parts of modern portfolio theory.

The notion of diversification

According to theory, in efficient markets, investors will not be rewarded for risk that can be diversified. A strategy that attempts to outperform the market based on stock picking – in other words, selecting stocks that seem to be underpriced – will lead to a poorly diversified portfolio and risk for which there will be no reward. Diversification helps investors minimize risk and, so doing, avoid losses.

The notion of diversification, however, assumes that all risk can be measured, namely, risk that we know we do not know and risk we do not know we do not know! This realization is not new. As early as 1930, John Maynard Keynes had indicated that some of the risk in the stock market could not be quantified and measured. Unfortunately for Keynes, English clergyman and mathematician Thomas Bayes had a different opinion of risk, that risk could be quantified and measured by a probability distribution (like putting bets on roulette and observing and plotting the outcomes in a bell curve). His views prevailed over those of Keynes and dominated modern finance theory. The notion that risk resembles a game of roulette has permeated modern portfolio theory and risk-management strategies. But the bell curve assumes that we know what we do not know. In roulette, the odds are known and what investors do does not affect the odds. Unfortunately, the stock market is not like roulette, but rather like a poker game in which the odds are affected by what we observe around us.

Adhering to this idea of measurable risk, investors over the years loaded up on risk, believing that risk is eliminated through diversification or diversification’s derivatives, such as securitization and structured investment vehicles. The problem is that adherents to this idea of measurable risk did not count on the likelihood that something we did not we did not know would occur. In recent years, a large number of mathematicians and finance PhDs working on Wall Street and their models were proven wrong because they put too much emphasis on bell curve probability distributions and diversification.

Value investors have concentrated portfolios, not because they reject diversification, but rather because they operate within the boundaries of their competence; they select only securities they understand; they prefer companies with stable cash flows and a history of steady earnings that can be reliably valued. “The right method in investment is to put fairly large sums into enterprises which one thinks one knows something about,” Keynes wrote. And Gerald Loeb, co-founder of E. F. Hutton, wrote in his 1935 book on The Battle for Investments Survival, “Once you attain competence, diversification is undesirable.”

Why beta?

Finance academics define risk as volatility or its derivative, beta. But is beta relevant? Is beta an appropriate measure of risk? TD Waterhouse reports that Intel Corp.’s beta is 0.88, while Sierra Wireless beta is 0.66. Based on beta, Intel is a riskier company than Sierra Wireless. But does anyone believe this? For value investors, volatility is not an appropriate measure of risk. Value investors see risk as the probability that adverse outcomes in the future will permanently impair the business’s potential cash flow and investor’s capital.

What is material for value investors is whether a company continues to have strong long-term prospects and fundamentals, be well managed and financially sound, as well as “cheap” – that is, its stock price is significantly below the intrinsic value (by a predetermined margin of safety). Value investors want to ascertain that a company has the ability, financial and operational, to withstand adverse states of the world and “sustain pain.” In the absence of the above, companies will have high probability of “permanently impairing their business’s potential cash flow and investor’s capital” during bad economic times. In this sense, value investors have implicitly aligned themselves with Keynes. That is why they developed the concept of margin of safety (MOS) – not buying a stock unless it falls significantly (about 30 per cent) below its intrinsic value. The MOS protects investors from the unknown unknowns. - The Globe and Mail

What Makes a Good Balanced Fund?

In the past, fund managers were predominantly stock pickers. Most of the money that went into unit trusts was invested in general equity funds that tried to maximise returns from the stock market.

While there is still a large element of this, it is no longer what investors demand most. The skill that they are most interested in these days is asset allocation.

“Especially in the current environment where we have had this big run up in equity markets post the financial crisis, multi-asset funds are definitely becoming more popular,” says Nadir Thokan, investment analyst at 27Four Investment Managers. 

“Investors are seeking to diversify their sources of risk and return.”

Put another way, investors have come to a better understanding of the benefits of using more than one asset class.

Three things investors want

Anthony Gillham, multi-asset portfolio manager at Old Mutual Global Investors, says that their customers consistently ask his team to deliver three things in terms of how their portfolios behave. They want consistent investment performance, downside cushioning, and diversification.

“Consistency in performance is about the smoothness of the ride,” Gillham explains. “It is not just about total returns, but the manner in which those returns are achieved.”

Blending together asset classes that will perform differently at different stages of the cycle is therefore essential. The big benefit to the investor is that this takes out the worst of the volatility and discourages the wealth-destroying behaviour of buying at the highs and selling at the lows.

The second key thing multi-asset funds need to deliver is protection against big draw downs in the market.

“It is incumbent on managers to try to mitigate the worst of market downturns,” says Gillham. “That means being sensitive to what is going on in markets and taking money off the table when the risks are high.”

While investors might rejoice when they see their portfolios outpacing the market when times are good, the most important time to seek out-performance is actually when markets go down. Minimising losses can have a major long term impact.

Consider, for instance, that if your portfolio loses 50%, it then has to gain 100% just to get back to where it was. If it only lost 15%, however, the growth required to recover would be just 18%.

Restricting the downside therefore not only means that returns are smoother, but you also don’t have to take as much risk on the way up again.

The third key component in multi-asset portfolios is diversification. This might sound obvious, but there is more to good diversification than just tossing different asset classes together.

“Diversification is about the ability to produce low-correlated returns,” Gillham explains. “That means a broad spread of assets, a range of different strategies, and also diversification in terms of position sizes. I don’t want a fund to be driven by just one or two economic views. I want lots of small active positions because that is going to help me produce the most consistent performance.”

Active asset allocation

While some investors might be happy to manage their own asset allocation decisions, the complexity of blending assets and styles together in the right mix is something many prefer to leave to a professional manager. That is why multi-asset funds have become so popular.

“The ultimate value added by good asset allocation decisions dwarfs the alpha that can be delivered in the underlying building blocks,” argues chief investment officer at Coronation, Karl Leinberger. “This is the big call and you need to get it right. I think it makes sense to leave the asset allocation decision to someone who has the appropriate skill set and then to hold them accountable for those decisions.”

He believes that this will become particularly important in the coming years in which real returns are likely to be much lower than they have been over the last decade and a half.

“Active managers are going to get some calls right and some wrong,” says Leinberger. “But in these unique times, I would rather have a team with skill and experience making bold and decisive decisions on my behalf.”

In essence, good asset allocators are most valuable in uncertain markets. That is when their abilities are most tested, but also when they are most needed.

“Diversification is the only free lunch you get in investing,” Thokan says. “You can achieve significant risk reduction by including more than one asset class without reducing your returns all that much.” - moneyweb

To Hold or Not to Hold Stocks?

A long investment horizon is good if portfolio has ample time to grow.

A widely regarded financial adage says that holding investments for a longer time increases the likelihood that the investment will yield a positive return. Take a long-term chart of 20 years of any stock market and you typically would find positive returns at the end of the period.

However, experienced investors have come to use the term "long-term investment" in a tongue-in-cheek manner when their stock or investment starts to perform poorly by saying that it would now go into their "long-term portfolios".

So is it true that holding equities "long term" always pans out well?

In October 2007, the Singapore Straits Times Index (STI) reached a lofty 3,800 before subsequently crashing 60 per cent, thanks to what is known today as the global financial crisis.

Many market players held onto their horses and waited for the STI to recover. An investor would have had to wait until 2013 to regain his capital if he had invested at the peak six years earlier .

Japan in the 1990s presents another example. More commonly known as the "lost decade", the Japanese Nikkei Index was trading close to 39,000 at its peak in 1990. Today, the same index, which has been one of the top performers this year, is trading closer to 18,000, less than half its value more than 20 years ago.

While it is not common to find another well-documented case of a market as big as Japan having gone through such a long and painful period of underperformance, there are hundreds, if not thousands, of stocks that have undergone similar horrific fortunes in recent years.

So the question that beckons is: Do we wait for them to recover? How long can an investor wait?

Consider an investor who decides to start investing at the age of 30 and targets to start drawing down on his nest egg by the time he is retired at 65. That is a good 35 years.

The reality is that many investors buy into the markets in chunks and, while they might have started at age 30, it is often not the bulk of what they were going to eventually put into their portfolio. If you look through the age group data of investors, you will find that the average age is closer to 45.

This suggests that most investors have less "investment time" for their portfolios to flourish than the hypothesised 35-year gestation period. That is cutting it quite close to the 15-year timeline that it took the Nasdaq to recover from the tech-led crash of 2000 to 2001.

The strategy of holding investments for the long term is not wrong; investors should try to plan their portfolios such that they can take advantage of a longer investment horizon.

One of the ways to do this is to have a very disciplined approach to investing at an early age. A regular savings plan, which helps you to systematically invest over a period of time by setting aside a portion of your income or savings to put into the market, is a tried and tested way of smoothing out volatile market conditions.

There are also other investment strategies to reduce your chances of being caught in a market crash.

The first has to be the most ancient saying in the oldest investment strategy book - "Diversify: Do not put all your eggs in one basket".

If one had invested his nest egg in a varied portfolio of investments - bonds and stocks in more than one sector or country - rather than all his money in technology stocks in 2000, the value of his investments would have held up much better. Aim for investments that are negatively correlated to get the best out of diversification.

On the day that the Nasdaq peaked on March 10, 2000, Mr Warren Buffett's Berkshire Hathaway was hovering at its two-year low. Mr Buffett had no interest in investing in technology stocks and had been widely criticised for missing out on the huge rally.

The subsequent collapse in the Nasdaq saw a 78 per cent crash from peak to trough over the next two years, while Berkshire Hathaway climbed 75 per cent over the same period.

Second, be forward looking. When I was still in university, I asked my father if I could do a review of his portfolio of stocks. To my surprise, his portfolio looked nothing like those that I had studied about, but rather just a mishmash of penny stocks. Not that penny stocks are poor investments but, over the years, my father had sold off all the stocks that made money, and kept all the loss-making ones.

He was waiting for the stocks to appreciate before selling them so that he would not crystallise his losses. He had unintentionally chosen to keep the loss-making stocks and sold off the best ones.

It was a lesson for me that when we invest, we need to be forward looking.

Our decisions to buy or sell should be made based on the future outlook of the company and not whether we had lost money on the stock.

These two strategies can be used in conjunction with a long-term investment plan. This way, you build a well-diversified portfolio that has ample time to grow. At the same time, you give yourself the flexibility to rebalance investments that no longer seem viable in the long run and replace them with those that fit your investment objective. - Straits Times Singapore

•The writer is head of investment advisory, strategy and managed investments at Standard Chartered Bank Singapore.

How to Make a Good Investment Decision?

It is time for people to move from traditional investment options to financial products in order to maximise the profitability and to increase the net worth. For which, one needs to understand the risk involved in the financial products and how to avoid the common errors in making effective and timely investment judgment.

Broadly financial instruments can be divided into two categories: listed and unlisted. While listed products can be traded on the exchanges and unlisted instruments shall be returned to the issuer after maturity of the instrument.

Unlisted instruments: Unit trusts and mutual funds, investment-linked assurance schemes, tax-free and structured investment products, mandatory and voluntary provident funds, retirement and pension funds, paper gold schemes, investment-linked deposits and unlisted shares and debentures.

Listed instruments: Exchange-traded funds, real estate investment trusts, close-ended funds (traded mutual funds), listed shares and debentures.

Let us discuss generally how one has to take an investment decision and issues considered to be vital for investment. However, the author is not explaining how to manage investment portfolio during volatile markets and also it is not an invitation for investment.

First, one should have a financial roadmap. It means, before taking any investment decision one should understand one’s financial situation, more so, if the prospective investor never prepared a financial plan earlier.  

Financial Roadmap

This is the first step while preparing for investment in any financial instrument. One has the figure out the investment goals and the capacity to withstand to risks. It is recommended to take the help of financial professional here. Mind you, there is no guarantee that one will make money from investments. Of course, by understanding the fact of investments and savings and draw an intelligent plant, one can able to secure the investment amount over the years and in the process manage in making some money.

Fixing the comfort zone

It is very vital task for the first-time investor. One should understand the risk involved in the invest option. If the intention is to buy shares or bonds or traded mutual funds – please understand that the investment in these instruments involve high-rate of risk including losing the amount in portion or full. Unlike fixed deposits with banks etc, the money invested in securities has no guarantees. One may lose even principal, leave alone interest.

But, if one is ready to take the risk, the return on this kind of investment is higher depending on period of the investment – long term investment options. And for the short term return options one can invest in cash-equivalent instruments.

Always try to find out appropriately a mix of investments with in one’s portfolio which will help against significant investment losses.

13 Everyday Habits That Destroy Your Retirement Fund

We all have habits — some good, some not-so-good and some downright bad. We typically realize that those bad habits are hurting us. Sometimes, though, it can be difficult to recognize that something we regularly do has become a habit or that it’s harming us. This can be especially true when it comes to preparing for retirement. Seemingly harmless habits might be sabotaging your retirement savings.

1. Spending Now Rather Than Saving for Tomorrow

It’s much easier to focus on the present than to think about the future, said Erik C. Olson, a certified financial planner (CFP) with Arete Wealth Management. After all, when bills are due now, finding room in your budget to save for retirement might not seem as important.

But if you take a good look at your spending, you likely can find ways to trim it so that you can set aside more money for the future and actually retire someday. For example, Olson said you could lower your monthly expenses by hundreds of dollars by dining out less, opting for a cheaper cell phone plan, cutting the cost of cable TV — or eliminating it — and getting rid of credit card debt.

“Maybe you’re thinking, ‘Well, that wouldn’t be as much fun,’” Olson said. But ask yourself how much fun it would be to work the rest of your life because you can’t afford to retire.

The sooner you start saving, the more time you’ll have to grow your money. “What you save and invest in your first five to 10 years can grow to be the majority of your portfolio at retirement, even if you keep saving and investing for decades more,” said Olson. “Compounding growth is that powerful.”

2. Underestimating How Much You’ll Need in Retirement

Maybe you actually are keeping your spending under control so you can save for retirement. But, your efforts might not pay off if you haven’t bothered to figure out how much you will need to live comfortably in retirement.

“To avoid being caught off guard when that day comes, get with a capable financial planner … to get a clearer picture and a plan in place,” Olson said. At the least, use an online calculator, such as Vanguard’s retirement income calculator or the Fidelity myPlan Snapshot, to get a general idea of how much you need to save.

3. Putting All Your Money in the Best-Performing Mutual Funds

CFP Michael Hardy of Mollot & Hardy said he often sees people pick the mutual fund in their 401k lineup that has the best performance record, hoping that it continues to climb as it has in the past. It might seem like a logical strategy, but it’s actually a mistake.

“What history shows us is that, over time, the best performers will become the worst and the worst the best,” he said. “You may jump in at the top and find yourself getting out of that fund as it is crashing.”

Instead, choose a target-date fund if your retirement plan offers them. These funds keep your money diversified among stocks and bonds and get more conservative as you get closer to retirement, Hardy said.

4. Confusing Owning Many Funds With Diversification

You’ve heard that your portfolio should be diversified. So, as you make your investment choices for your 401k, you might be saying to yourself, “I guess I’ll just spread my money out across the 10 best funds and call it a day,” Olson said.

However, those funds might have a good track record because they were invested in the same sort of stocks or bonds that performed well recently. “What you might have gotten was portfolio concentration disguised as diversification,” he said. So if one starts tanking, they all could, and you’d have a portfolio meltdown.

Avoid this by doing your homework, asking for help from your plan’s advisor and learning how to build a truly diversified portfolio that fits you, Olson said.

5. Saving Only When the Market Is Doing Well

If you’re only setting aside money in a retirement account when the market is up, it means that you’re paying a premium because stock prices are higher. “This is actually the worst time to put your money into your retirement account,” Hardy said.

Rather than try to time the market, Hardy said you should have a set amount deferred from every paycheck to your retirement account. Increase that amount as you can afford to do so.

6. Overreacting to Market Volatility

It’s hard not to be tempted to pull all of your money out of stocks when market downturns deal a blow to your retirement savings.

“It’s easy to get emotional when you turn on CNBC and see nothing but red,” said Shannon McLay, founder and president of The Financial Gym. “But you need to try to stop yourself before trading in your retirement accounts as a result. Even if you are close to retirement, you need to have patience. As long as you have the right asset allocation and a rebalancing strategy in place, you will be fine in the long run.”

History shows that the markets bounce back, she said. And so will your portfolio. It might mean you have to delay retirement by a few years. But that’s better than cashing out your retirement account after it’s taken a big hit because there’s no way it will bounce back if you’re not invested.

7. Setting and Forgetting Your Contribution Level

You don’t pull money out of your retirement account when the market’s down or only invest when the market is up. And, you also don’t want to set your retirement contributions entirely on autopilot, said Marguerita Cheng, a CFP with Blue Ocean Global Wealth.

If your retirement plan doesn’t automatically increase your contribution rate annually or you don’t increase it yourself, you might be at risk of not saving enough for a comfortable retirement. Most experts recommend saving at least 10 percent to 15 percent of wages annually. If you can’t contribute that much, make sure you’re setting aside enough in your 401k to get any matching contributions from your employer. Then, set aside more each year as your income rises.

8. Making Only Pretax Retirement Contributions

You get an immediate tax benefit by contributing pre-tax dollars to a 401k, 403b or similar plan because this lowers your taxable income. And contributions to a traditional IRA or SEP can be tax-deductible. “At first glance, it seems like this approach uniformly would be the smart move, since you’re immediately avoiding taxes, and therefore probably can contribute more,” Olson said.

However, it overlooks the fact that when you withdraw this money in retirement, it all will be taxed as ordinary income. If you think your tax bracket will likely be higher by the time you reach retirement, it makes sense to invest in a Roth IRA, Olson said. You don’t get an upfront tax break with a Roth, but withdrawals in retirement are tax-free.

9. Not Factoring in Rainy Days

If you’re channeling all of your savings into a retirement account but haven’t set aside money for emergencies, you could be putting your retirement savings at risk. That’s because you might have to raid your retirement account to keep yourself financially afloat if you lose a job, can’t work due to an illness or have a big, unexpected expense.

“To avoid being caught off guard, develop a rainy day emergency fund to cover the risks you can afford, and put some basic insurance policies in place for the ones you cannot afford,” said Olson. “This can help you not only get through the rainstorm — or hurricane — but may also help you keep your retirement plan closer to being on track.”

10. Putting Too Much of Your Income Toward a House and Car

If you own a car and house, you’re likely in the habit of making payments for them. But have you fallen into the habit of overpaying by buying more house or car than you can afford?

If so, there might not be much room in your budget to save for retirement. “Cutting your housing and auto expenses by 25 percent will have more of an impact on your long-term retirement savings than if you never bought another coffee or enjoyed a dinner in a restaurant for the rest of your life,” said Vince Wagner, CFP and president of Guide Tower Financial Planning.

You might argue that if your home is paid off by the time you reach retirement, that’s one expense you won’t have to worry about. But you won’t be able to afford the upkeep, insurance and utilities if you don’t have enough retirement savings.

So ,you might need to downsize now to a less-expensive home. Or, trade in a pricey vehicle for a used one that you can buy without financing. Then, boost retirement contributions by the amount you’ve saved on housing and car costs.

11. Paying for Your Kid’s College Education at the Expense of Your Retirement

It’s understandable that you want your child to get the best college education possible. “But many families overestimate the value of the more expensive schools and underestimate the deterrent to their own retirement savings stemming from either saving for these colleges in advance or saddling themselves with enormous student loans,” Olson said.

Making it a habit to save for your kid’s education is great if you’re not doing so at the expense of your retirement savings. But if you can’t afford to save for both, remember that there are no loans for retirement. “And don’t be ashamed or feel like you’re cheating your kids if you impart to them early in life an important lesson about weighing benefits and costs,” said Olson.

12. Tapping Your Retirement Account for Cash

If you’ve gotten in the habit of tapping your retirement account for cash — to pay off debt, buy a car or make a down payment on a home — you could  be putting a serious dent in your savings and taking on a big tax bill.

“First, your retirement savings is now smaller, and you forfeit all the compounding,” Olson said. Then, you’ll have to pay taxes on any withdrawals from a 401k or traditional IRA, and a 10 percent early withdrawal penalty if you’re younger than 59 ½. You can, however, withdraw contributions to a Roth IRA tax- and penalty-free.

For example, if you prematurely withdraw $25,000 and are in the 25 percent tax bracket, you’d owe $6,250 in federal income taxes and another $2,500 in early withdrawal penalties, leaving you with a net of only $16,250, Olson said. If you had left that $25,000 to grow for another 25 years with a 6 percent annual return, you would have more than $107,000.


13. Withdrawing Money Too Quickly in Retirement

Your savings might not sustain you through retirement if you’re withdrawing too much each month. If you’re withdrawing more than 3 percent of your nest egg each year, “you may be too optimistic about how generously both market returns and inflation will treat you during retirement,” Olson said.

To ensure your money will last, you might need to scale down your lifestyle expectations. Or, you might need to work more so you can funnel more into your retirement accounts and delay tapping your savings. - gobankingrates

China Boost for Ringgit and Malaysian Capital Market

China's Premier Li Keqiang attends a news conference in Putrajaya, Malaysia, November 23, 2015. Photo - Reuters

KUALA LUMPUR - China has given an undertaking to buy Malaysian government bonds and will also be providing a 50 billion yuan (S$11.9 billlion) quota for local institutional funds to purchase equities and bonds directly in the world's second largest economy.

In what are seen as measures that could boost Malaysia's capital market and the ringgit in the longer term, the Asian powerhouse said that it would buy more Malaysian bonds, an action that will lend support to the ringgit should foreigners sell down as they brace for an upcoming rise in US interest rates.

"We want to assume a market role by purchasing your treasury bonds," Chinese premier Li Keqiang said at the Malaysia-China High Level economic forum here yesterday.

He did not however say how much worth of Malaysian bonds China would buy.

The ringgit is one of the worst-performing currencies in the region year to date, shedding almost 20 per cent against the US dollar over the period amid political uncertainties and external weaknesses.

The stock market is down 5 per cent since January while Malaysian bond market investors have also suffered a negative impact since the beginning of this year.

On the 50 billion yuan new quota, Li said this would be given to Malaysian investors under the Renminbi Qualified Foreign Institutional Investor (RQFII) programme.

The RQFII essentially allows foreign investors to invest in China using offshore renminbi accounts. Without access to RQFII, foreign investment in China is largely curtailed.

In its response, Bank Negara said in a statement that China's decision to extend the RQFII programme to Malaysia would complement the renminbi clearing bank arrangement in Malaysia and collectively, the initiatives will support the growing trade, investment and financial flows between China and Malaysia as well as position Malaysia as another offshore renminbi centre in the region.

It said with this framework, Malaysian qualified institutions would be able to mobilise offshore renminbi funds to gain direct exposure to the Chinese financial markets and contribute to the development of the renminbi market in Malaysia.

Notably, Malaysia's closest neighbour Singapore said recently that China had doubled its investment quota to 100 billion yuan.

Li said the measures announced were part of China's plan to help boost Malaysia's economy while strengthening ties between the two countries which have long enjoyed a good working relationship.

In spite of the positive news, the ringgit ended lower at yesterday's close finishing at 4.3010/3050 against the US dollar from 4.2830/2880 last Friday.

Li also said yesterday that China was keen to work with Malaysia to help it achieve its goal of becoming a high-income nation by 2020.

Among ASEAN countries, Malaysia has been doing the most trade with China since 2008, Prime Minister Datuk Seri Najib Tun Razak said earlier this year.

Trade between both countries had reached a historic high last year totalling more than US$100bil (S$141.7 billion).

China, the world's second largest economy after the United States, is also Malaysia's top trading partner.

In terms of Chinese manufacturing projects implemented in Malaysia as of Dec 31, 2014, these totalled 182 worth US$2.83bil.

More recently, Malaysia has seen the setting up of the Xiamen University Malaysia Campus in Salak Tinggi, Sepang which will take in its first batch of students in February.

The collaboration between Malaysia and China in setting up this overseas campus is expected to contribute to the creation of skilled manpower in both countries.

Li said that in the next five years, China was expected to import foreign goods worth US$10 trillion.

Meanwhile, Bank Negara said in its statement that the Securities Commission would further collaborate with the China Securities Regulatory Commission to implement the newly-announced RQFII programme. - Asia One Business

Systematic Transfer Plan: Better Way to Play Volatility

It not only allows you to invest at regular intervals but also enhances returns as the cash is invested in liquid funds, which generally offers better returns than savings bank account.

As a mutual fund investor, what do you do when you have large sum in bank account and equity markets become attractive day by day, a scenario that we are going through for almost last three months? Some of you may want to write a cheque immediately. 

The wiser lot will opt for a systematic investment plan (SIP) to benefit from ongoing volatility but the bit smarter lot opt for systematic transfer plan (STP).

STP allows an investor to invest lump sum amount in a scheme and periodically transfer a fixed or variable sum into another scheme. 

It is quite similar to SIP which is more widely known and popular of the two among the mutual fund investors. While in a SIP you invest a specified amount in a scheme at pre-specified intervals and the investment amount for every SIP tranche comes directly from your bank account, in STP the investor first invests a lump sum amount in a scheme and out of that amount a sum, usually fixed, is transferred (invested) into another scheme of the same fund house at pre-specified intervals. STP is mostly used to transfer the amount from debt funds to equity funds but can also be used vice versa. 

Different types of STP

The STP facility comes with different frequencies of transfer and various types. The most frequency of the transfer could be on monthly and quarterly intervals depending on the fund house offering such facility. 

The main types of STP are as follows. 

• Fixed STP - In fixed type of Systematic Transfer Plan the amount that needs to be transferred from one scheme to another scheme is fixed and decided by the investor at the time of starting STP. 
• Capital Appreciation STP - In capital appreciation STP only the profit part is transferred periodically from the source fund to the target fund and the principal part remains unchanged and does not get transferred. 
• Flex STP - Flex or Flexi Systematic Transfer Plan is a facility wherein the investor can opt to transfer variable amount linked to the current value of existing investments under Flex STP on the date of transfer at predetermined intervals from one scheme to the another scheme. In Flex STP the fixed amount is the minimum amount to be transferred, specified at the time of enrolment and the variable amount changes depending upon current value of the existing investments in the scheme. By using Flex STP you invest more money when markets are falling and consequently you buy more units in such markets and invest minimum amount in rising markets. Thus Flex STP enables you to take advantage of bearish phases in the market by accelerating your investments automatically during falling markets. 

Advantages of Systematic Transfer Plan

• Like SIP, STP ensures the investor the advantages of dollar cost averaging. Similar to SIP, STP makes sure that more units are bought when the equity markets are down and consequently NAV are low and fewer units are bought when the equity markets are high and NAV are high. 
• In an STP your initial investment in a debt/liquid scheme enhances your total returns as liquid fund brings you better return than a saving account in the bank. 
• STP Enables you to rebalance your portfolio. By using an STP you can rebalance the portfolio through transferring investments from one asset class to another asset class. For example if the value of your equity portfolio exceeds the targeted allocation, you can transfer the excess amount from equity to debt through STP and if value of your debt portfolio exceeds the targeted allocation, amount can also be transferred from debt to equity through STP.
• You enjoy the benefit of power of compounding. 

A few scenarios when STP can be an ideal option for investment

• When you want to enter the equity markets when they are highly volatile and wish to reduce your risk. 
• When you have a large sum in your bank account and you want to invest it in an equity fund systematically, then you can use STP to generate higher overall returns than what you will get through SIP and saving bank account. In such case you can invest a lump sum in a liquid or debt fund and can simultaneously give the necessary instructions to transfer a fixed sum from liquid/debt fund to your chosen equity fund over regular periods. 
• When the investor want to invest lump sum amount in schemes with stable returns and wish to take a small exposure to equity schemes in order to benefit from higher growth potential of equities.
• When you are not sure of the uptrend continuing in the market going forward or when in the near term the potential upside in the market looks lower than the potential down side. As regards to STP, it is noteworthy that you can switch between two schemes of same fund house only. Moreover, please also keep in mind that any switch transaction under STP from one scheme to another scheme attracts capital gain tax. - moneycontrol

The New Rules for Early Retirement

Do you dream of leaving full-time work behind at 60 or even sooner? Plenty of Americans do, of course. But the real question is whether you can afford to clock out early. It may require tradeoffs, such as moving to a smaller home or picking and choosing your hobbies. Yet it may not be as big a stretch as you think. Here’s what you need to know.

1. You need not fear losing health insurance

Until recently, health insurance was one of the biggest obstacles to early retirement. Few employers offer coverage. And buying a policy on the private market before you qualify for Medicare has been a challenge: A condition like diabetes or heart disease can leave you uninsurable, while even healthy 50- and 60-year-olds pay far more than young people for the same coverage.

Health reform changed that. Regardless of your health, you can buy a comprehensive insurance policy through the state online exchanges. Your age will still push up your premium, but a 60-year-old can’t be charged more than three times what a 20-year-old pays, as was once the case.

What to do: Start at healthcare.gov to find options in your state. Keep in mind that the premium is just the sticker price. About half of those who buy insurance on their own today will qualify for a subsidy, estimates the Kaiser Family Foundation. And since that help is based on how much of your income must go toward insurance, an early retiree with a high premium has a good chance of qualifying for a break, especially if retirement means living on less.

Obamacare means you can’t be turned down or charged more for health reasons, but it may not be cheaper than what’s available on the private market. Price out both options before you buy.

2. Early retirement means tradeoffs, now and later

Finding relatively safe sources of retirement income, never a breeze, has become tougher in this economy. Interest rates are hovering near historic lows, and some experts think relatively low rates may persist for decades. What you can earn on low-risk cash and bonds will remain paltry.

What to do: The most straightforward solution is saving more or living on less. You can catch up with bursts of savings — often easier once big expenses like college or a mortgage fall away. According to retirement research firm Hearts & Wallets, saving 15% or more of your income for eight to 10 years — early or late in your career — can ensure that you save enough to retire comfortably at 65. Such power saving is common among early retirees too, says Hearts & Wallets cofounder Laura Varas, but the rate is 25% or more.

To get away with saving less, commit to living on less. Planners typically suggest you aim to replace 70% to 80% of your preretirement income, which doesn’t amount to a dramatic lifestyle change once you eliminate the money you were saving, Social Security taxes, and commuting costs. If you can make it on 50%, you need to save about 12 times your income by age 60, versus 17 times if you hope to live on 70%, says Charles Farrell, CEO of Northstar Investment Advisors.

3. Moving can make all the difference

The housing market’s recent recovery may be one of the things giving you the confidence — and the wherewithal — to retire ahead of schedule. Alas, you can’t count on a housing boom to keep padding your net worth. You need to set realistic expectations for what your home can do for you and plan prudently with what you have. That might mean leaving your old digs behind.

What to do: Lose two bedrooms. By selling into a strong market now and buying a smaller house, you can lock in your good fortune, letting you add to your savings or wipe out any lingering debts. Plus, if retiring early means learning to live on less, there’s no better way to do that than to cut your housing costs, which typically eat up a big chunk of retirees’ budgets.

Better yet, consider moving to a town with lower property taxes and lower living costs, as well as cheaper homes. Caveat: Whether you downsize locally or across the country, it’s crucial that you don’t simply trade maintenance costs for steep association fees. “I see a lot of people who move into a new home for retirement, and their cost of living goes up, not down,” says Colorado Springs financial planner Linda Leitz, national chair of the National Association of Personal Financial Advisors.

4. Don’t blow it in the first decade

Early on in retirement, you tend to spend more freely, as you can finally do all the things you were too busy to do when you worked: travel, eat out more, or indulge a costly hobby. After you hit your mid-70s, your outlays start to drop, even when you take healthcare spending into account. People 65 to 74 spend 37% more than those 75 and older do, according to the Consumer Expenditure Survey. Retire young and you’re starting those free-spending years early.

At the same time, crafting an income is trickier. Not only can’t you take Social Security until age 62, you’ll lock in a higher payment if you wait until full retirement age to claim (67 for those born in 1960 or later). If you’re eligible for a pension and collect before 65, you’ll have to settle for as much as 30% less. So you’re especially dependent on your investments for income.

What to do: Be prudent about withdrawals. With bond yields low, a portfolio withdrawal rate that starts at 3% and adjusts for inflation is considered safer than the traditional 4% rule, says Wade Pfau, professor of retirement income at The American College. And that’s for 30 years, not the 35- or 40-year time horizon of an early retiree. For that, a safer rate dips to a measly 2.6%.

When you’re living entirely on withdrawals, 2% to 3% won’t cut it (unless you’ve saved a lot of dough). Simply boost your withdrawal rate, though, and you run a high risk of running out of money. To improve your prospects, get by on less.

Crucially, if you allow yourself a higher withdrawal rate early on, you must cut back when Social Security kicks in. And since your spending patterns and market returns will undoubtedly vary, reassess your plan at least annually.

5. A second paycheck does come in handy

No question, picking up a part-time gig after you walk away from 9-to-5 work will ease the pressure on your finances. And that’s the plan for many. Trouble is, many would-be retirees are often unrealistic about landing meaningful part-time work, says Colorado planner Leitz. Lining up a 15- to 20-hour-a-week job sounds great, but there aren’t too many stimulating and well-paying jobs in professional fields that allow that. “Flexibility is great for you, but not really for employers,” says Leitz.

What to do: Go for projects, not a job. Even when firms don’t want a 20-hour-a-week senior staffer, they still may have high-level work that needs to get done. Set yourself up to be the consultant they hire, says Dick Dawson of CareerCurve, a coaching firm for 55-plus workers. Start where you’re known: your old workplace and your network. Keep going to industry events and seek out contractors who do similar work and may hear of jobs they can’t take. Visit elance.com and peopleperhour.com, which match employers with freelancers in fields such as marketing, writing, and design.

Even if you don’t work out of the gate, keep yourself employable. That means maintaining professional credentials, following changes in your industry, and staying in touch with former colleagues. - businessinsider.com

Give Yourself the Gift of Retirement

Readers of my articles know that I am a huge fan of compound interest. With the holiday season already entrenched in retail stores and online, it seems that everyone wants to sell you something as a gift for your friends or family. But for most people, you’re not being given the opportunity to enjoy a worry-free retirement. So in the spirit of the holiday, give yourself the ultimate gift of a hassle-free retirement. Over time, those retirement accounts will yield interest and compound interest, amounting to sums that are larger than you might think.

How to begin? 

For people just out of school and beginning their career in the workforce, the dominant debt in their lives are student loans. With debt at it’s highest point in most of their lives, many believe it is best to pay off school debt before planning their retirement. This is a terrible decision.

Did you know that around 60% of people who retire in the United States do so on Social Security alone? Many of these folks wanted to wait to begin retirement planning until they paid off school loans, college acquired credit card debt, or other financial obligations and were never able to get caught up enough to plan for their retirement.

Outliving your money is never a good thing. Putting away just $50 a month into an interest-bearing account keeps your money safe and growing. If your employer matches part or all of your IRA or 401K contribution, this is the place to begin - because this essentially means you get free money from your employer. Between interest that compounds, and contributions from your job, growing your money can be easy. Just remember that as your income increases, that your contributions should keep pace.

If you are in your late twenties or older and have not started saving towards your retirement, there is no time like the present to start. You can begin by making a contribution with your employer's plan at least to the company match.
However—depending on age and personal retirement goals—you may need to augment your retirement plan with further options. - The Morgan Hills Times

Maturing Yuan Becoming a Player in Investment Products

Within the space of about a decade, the yuan has gone from being little used outside of China to becoming a major player in trade financing, payments and in the forex markets.

Now the currency is starting to make inroads into another sphere – joining the set of possible investments for clients looking to diversify their portfolios.

But many savers have yet to fully understand the benefits of investing in yuan products. As the yuan continues to mature, that looks set to change.

Since the first yuan-denominated bonds were issued in Hong Kong in 2007, the market for so-called “dim sum bonds” has expanded massively. Just 12 per cent of China’s trade was settled in yuan at the end of 2012. By 2020, the percentage is expected to be about 50.

These trends will continue as Beijing pushes to restructure its economy and integrate it more into the global financial markets. The Chinese authorities have been actively encouraging mainland companies to invest more overseas.

As more companies and investors use the yuan for trade, hedging, cash management and financing in different parts of the world, the differences between the renminbi and other major global currencies are starting to diminish, and more and more yuan-denominated investment products will become available to ordinary savers.

The recent decline in the yuan has dented short-term sentiment, but does not change the overall picture. The currency remains backed by strong fundamentals and government support. Changes to the way the official daily reference rate is arrived at, announced on August 11, were designed to make the exchange rate more market-orientated, and were a key development in the yuan’s evolution, rather than a step towards sustained falls.

As the yuan is becoming more popular for investment purposes, offshore markets are expanding their offerings of yuan-denominated products.

Canada, Australia and the UK currently only offer yuan savings. They plan to launch more sophisticated products, such as unit trusts or bonds, in the near future to better satisfy the needs of its customers.

Singapore, Malaysia and Taiwan, however, already offer a full range of investment products, and are working on deepening product lines.

For now, the yuan is not yet fully convertible, and China’s capital markets are not fully open. Over the past few years, however, Beijing has been gradually relaxing restraints on the currency, opening the doors to more capital flows into and out of mainland China.

Despite recent market jitters, more initiatives are in the pipeline, including the Qualified Domestic Individual Investors scheme, which will allow some retail investors in mainland China to invest overseas, and could unleash billions of yuan in Chinese savings on to global stock, bond and property markets.

For retail investors around the world, this means greater direct access to a broader range of Chinese asset classes and investment options, and a widening range of ways in which they can buy into what is – despite the slowdown – still the world’s fastest growing major economy. - The National

Ringgit extremely undervalued, says StanChart

The ringgit will probably get stronger towards year-end, says StanChart group chief investment strategist Steve Brice. The Reuters photo shows customers counting their ringgit notes outside a money changer in Singapore.

KUALA LUMPUR: The ringgit is extremely undervalued - by 15% to 20% - and expected to make a turnaround in the second half of next year, Standard Chartered analysts said.

Standard Chartered group chief investment strategist/wealth management, Steve Brice, said the ringgit would probably be weaker in the next three months, by three to five per cent from where it was now.

“But when it rebounces, it will be better than its regional peers. It is not the time to get excessively concerned over the weakness of the ringgit as it will probably get stronger towards year-end.

“We have seen significant weakness in Asian currency in the past two years but not looking at something similar in the coming 12 months,” he told reporters at a briefing on currency investment outlook in Kuala Lumpur on Friday.

Brice said the Malaysian market was badly affected by sentiments due to commodity prices such as crude oil and palm oil plus the US Federal Reserve interest rate move.

“Once the affecting factors stabilise, Malaysia will start seeing money coming back and it will give a strong impact and support for the ringgit. For now, it is a little bit far away from that point,” he said. 

On the equities market, head of managed investments and product management (Malaysia) Danny Chang Choon Hing, said the FBM KLCI was expected to be at 1,700-point level at year-end.

“It is going to be a flat year, as it started about the same level early this year. However, it is relatively good considering current various headwinds facing the equities market,” he said.

Chang said when there were headwinds against the currency, commodity prices and other related economic issues in Asia, all of these factors would have an impact on Malaysian equities.

He said to foreigners, the market was currently underperforming but was in line with its regional peers with the earning growth at a pedestrian level of 5%.

“That is strong but not growing fast enough from a foreign point of view and if the stocks are flat and the ringgit gets hit, they will be losing money hence making Malaysian equities looking less atrractive.

“If the ringgit stabilises, valuation on the stocks gets more atrractive and growth improves, then the turnaround for KLCI might come,” he said. 

Chang said assuming the ringgit rebounced back to the mean/average, which was about 15% from 4.4-level, the local note would be just under RM4 versus the greenback. - Bernama

Invest for Retirement With Market Volatility in Mind

A written plan can help investors withstand the short-term ups and downs of the market.

During the past few months, investors have been flooded with headlines warning of market swings and extreme volatility, threatening major companies and Main Street portfolios alike. With eyes still fixed on emerging markets overseas and speculation around regulatory changes at home, many investors may find themselves uncertain of how to best manage their portfolios to ensure that the money they've been working hard to save for retirement remains safe.

The most important thing to keep in mind as the final quarter of 2015 plays out is to keep thinking in the long term. Since the financial crisis, the markets have generally been performing well for everyday investors. Contraction is a normal part of the market cycle and, with the right strategy, it should not have a major effect on your retirement savings.

Create a solid plan. According to the Voya Retire Ready Index study, only 17 percent of working Americans have a written financial plan in place. With that in mind, one of the first basic steps to avoid the consequences of market volatility is to create a solid plan.

Consider meeting with a financial advisor to map out your financial priorities, for both now and your future, in order to determine how you should be allocating funds and diversifying risk within your portfolio. Your goals and your age are important factors for guiding how active you should be in the market, as well as the types of risk you should assume with your investments.

When the market tumbles as it did this past August, your portfolio may see some fluctuations. Understanding your risk tolerance will allow you to better manage through these unsettling times. Working with an advisor can help you hedge your investments in a manner that keeps your portfolio — and your nerves — steady over the long term.

Buy low, sell high. When you do see changes in your portfolio during a market downturn, don't assume it's immediately time to start selling. In fact, this could actually be an opportunity to take advantage of lower prices and add new stocks to your portfolio.

The old investing tenet says to "buy low and sell high." Many investors tend to see stock tickers turning red on their television screens and assume they should unload any "unpopular" or poor-performing investments. Before making any major buying or selling decisions, however, it's best to consult with your advisor again to get his or her perspective on how any volatility might impact you. Your retirement plan should be built with a long-term investing strategy in mind, so that it is able to withstand any unexpected turbulence.

Do a quarterly checkup. Often when the markets take a sudden dip, many of us become instantly glued to our computer or television screens in order to make the most educated investing decisions possible. Take advantage of this time to actually evaluate your current strategy. For most people, I'd recommend checking in on your investments about once a quarter.

You can also meet with your advisor or use an online planning tool, such as Voya's myOrangeMoney, to track if you are on the right path to meeting your future monthly income goals in retirement. Market volatility shouldn't necessarily be driving any changes to your strategy, but it may help to remind you to rebalance, adjust your plan, or revisit some important calculations. A market correction is a good excuse to think about potential portfolio corrections.

With a 24-hour news cycle telling us that markets are down day after day, it's easy to worry that the money you're working so hard to save now may not be there tomorrow, when you need it most. That's why it is important to create a holistic plan — one that you stick to — that can weather the short-term ups and downs and keep you on the straight and narrow to a financially secure retirement. - money.usnews.com