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Saturday, February 11, 2017

The Most Important Lesson From Becoming Warren Buffett

"Becoming Warren Buffett", the HBO documentary that aired in 30 January 2017 tells the story as well as dives deep into the daily life of Warren Buffett, the legendary successful investor and also one of the world richest person! #YourFinanceDoctor has always been a big fan of his, so surely, I would watch it right away. 

The Most Important Lesson From "Becoming Warren Buffett"

Surround Yourself with the Right People

Parents (Okay, maybe you didn't get to choose this one)
Growing up as a child, Warren Buffett was being influenced by his father, Howard Buffett, the most. He was a stock salesman and then went on to start his own business, then finally a congressman. He taught Warren Buffett that money isn't important, he believes very much in having an "Inner Scorecard" and never worry about what other people are thinking about you. You know what you are doing and why you are doing and that's good enough. When Warren Buffett ran away from home, his father not only did not scold him but rather just said "You can do better than this." His father never taught him by telling him but taught him by example even when he screwed up. 

Then he met the Father of Value Investing, Benjamin Graham, who shaped his professional life. Which is why Warren Buffett came out with 2 Rules for Investing, Rule 1 - Never lose your money and Rule 2 - Never forget Rule 1. Value Investing is all about careful scrutiny of a company's financial report, and if you bought value, it will eventually prove out. So basically the investing philosophy of Warren Buffett centred around Benjamin Graham's Value Investing. 

Later on, Warren Buffett met Charlie Munger, who formed partnership with and became the Vice Chairman of Berkshire Hathaway. Charlie Munger is an important partner to Warren Buffett, who Warren Buffett relied heavily on. Charlie Munger also ended Warren Buffett's "Cigar Butt" era where he bought a lot of cheap stock regardless of the company with lousy management. Then, he taught Warren Buffett to look for "Wonderful Company with Fair Price" rather than "Fair Company with Wonderful Price".  From there on, Berkshire Hathaway skyrocketed. 

The chains of habit are too light to be felt until they are too hard to be broken.” Warren Buffet used to be terrified of public speaking, he could not do it with his stage fright but he knew that if he didn't cure it then, he will never be able to do it. So he attended Dale Carnegie course, which works on developing the ability to speak in public. Warren Buffett knew that if he didn't attend the course, his whole life would be different. Which is why you will not see his degree certificate nor his master certificate on the wall of his office, but just the course certificate he gotten from Dale Carnegie. 

Warren Buffett's late first wife, Susie, played the most important role in his life and how invaluable she was to him. Warren Buffett was raised a Republican mainly because of his father, Howard Buffett. But because of Susie's actively involvement in the civil rights movement, and often brought him along to speeches and meetings, Warren Buffett became an active Democrat. Warren Buffett and Susie love each other very much, they admire each other and were totally in sync of what each other is doing. He also said that "Susie really put me together and she believes in me. Not only I turned out to be the person I turned out to be but I actually would not have a successful business without her, she made me more of a whole person. "

In conclusion...
"It's kind of crazy to spend your life painting if you're painting a subject you don't want to look at." Warren Buffett chose to work with a group of people that would make his life easy and take good care of him. So the people you surround yourself with, those you interact with regularly, will have a huge impact on you. They provide the opinions, ideas and even points of views that your mind is continuously subject to, both consciously and subconsciously. The good news is... the people who can help you succeed may already be around you, you just have to identify them! 

Till then. ;)
Enjoy watching the show. 

Thursday, January 5, 2017

How to Cope with Weakening of Currency

In the previous post of "How to React in an Uncertain Economy", expose to foreign currency is one of the way. This is especially true when most of your assets are denominated in a weakening currency, for example, the Malaysian Ringgit (MYR) which breeds anxiety among Malaysian.

Taken from

Ringgit has breached the psychological mark of 4.50 against the US dollar, as foreign investors continued to pare down their holdings of Malaysian government bonds. Not just against the greenback, it slipped against the Singapore dollar to 3.1096; against the British pound sterling to 5.5163; against the Euro to 4.6837 from 4.6892; and against the Australian dollar to 3.2680.

Historically, the Ringgit reached a record low of 2.10 in October of 1978 and an all time high of 4.71 in January of 1998. So where are we now? Is Ringgit weakening to the all time high? How high can it goes? Will the government peg the ringgit to stop any further decline? These are all the uncertainties that made us fear.

Are you feeling the same too?

Parents with kids studying abroad would feel the pinch the most with the ringgit continue to slide. Some are also planning to shorten the study period of their children to cope with the extra costs incurred, while there are also those children that might need to take up part time jobs to help finance their education. Meanwhile, many are looking at other destinations for their children’s higher studies.

From consumer point of view, one may argue that the impact would be minimum so long as all spending are done in Malaysia and avoid imported product, right? No! Even domestically produced items may use parts and components or even expertise from foreign countries. Weaker currency can drive inflation up as well! Travelling overseas may required to cough out more money too!

So what can you do with your money?

To safeguard your finances, the only way is to diversify your asset into different foreign currencies. Whether you are an average investor who just wants to mitigate currency risk or a more experienced one who wants to take advantage of currency fluctuations, here's how you can do:

1. Stocking Up Foreign Currency in Foreign Currency Account (FCA)
This is the easiest and straightforward way to mitigate the currency risk. Whether it is a Foreign Currency Savings Account (normal account) or Foreign Currency Time Deposit Account (like FD), you can maintain a foreign currency in a local bank account as well. While mitigating the currency risk, you can also enjoy potentially higher interest rate. FCA is eligible for PIDM protection up to RM250,000 too!

2. Buy Overseas Properties
One way to hedge against a weaker ringgit before it falls is to buy property in countries where the currency is more stable, which would be an indirect way of hedging. However, this method is only suitable for investors who qualify as high net-worth individuals. This method would be very helpful if the property is invested in the country where the children will be going for education.

3. Invest in Foreign Stock Market
Investing in foreign stock market can be fruitful especially in stocks such as Google, Apple, Microsoft, Amazon and so on! If you have purchased any of these stocks 10 years ago, you would be seeing a double figure annualized return! (Google-15%, Apple-28%, Microsoft-10%, Amazon-37%) However, investing in these foreign stocks is only suitable for those who have the skills and time to manage and to choose the right stock.

4. Expose to Currency-Hedged or Foreign Currency Denominated Unit Trust Fund
Besides mitigating currency risk, you may want to invest into currency-hedged unit trust fund whereby the fund would remove the currency risk for you thru hedging. Subsequently, you can also opt for unit trust fund denominated in different currency such as USD, AUD and so on. However, the downside is that when you sell, it will be converting back to ringgit. So it may not be ideal for those who actually needed to use the foreign currency like travel or children study abroad.

5. Invest in Capital Protected Foreign Index Investment  
Capital Protected Foreign Index Investment can be suitable for those who doesn't have the appetite to take the risk and the time to do research like those in Method 2, 3 and 4. It gives the opportunity to hold stronger currencies while making potential gain in foreign index such as S&P 500, MSCI Emerging Market, MSCI World and so on. Most importantly, it is principal protected without having to fear of losing your capital.

Now you have known all the possible way to cope with weakening of currency. The question is...

Are you going to do it now or wait to drop further?

The best time is always now as nobody can really time the market. If you have any other methods, feel free to share in the comment section below too!

Take control of your finances by taking the first step: Hire Your Finance Doctor today

Wednesday, December 21, 2016

Two People With An Apple, How to Share Fairly?

The question may sounds like typical IQ question, but I find the answer interesting and immediately reminds me of the common situation in estate planning and distribution, which is why I thought to share it here. So let's try to answer this.

How would you do?

Take it simple...
Mathematically, you would be thinking how to cut it into halves, how to make sure that the cut passes through the precise center of the apple and even the angle of the knife cutting through. 

Try to be smart...
IQ question cannot be that easy! So the best way you can come out with is to make them into apple juice and divide equally. That's much more quantifiable compare to cutting it. 

The answer is...
Cut and Choose method or also known as "I Cut, You Choose". Basically it means one person divides the apple into what they believe are equal halves, and the other person chooses the "half" they prefer. Thus, the person that cutting the apple would want to divide as fairly as possible, so that he or she will not be left with an undesirable portion. 


Envy-Free Fair Division.
Thru cut and choose method, both party would be satisfied without complaints, so this is an envy-free fair division. Fair division relates so much to the real life problem such as the divorce settlement or even estate distribution, which causes a lot of family dispute

Taken from one of the slides in my "Estate Planning for Greater Family Happiness" talk. 

Through the above example, you can tell fair might not be equal and equal might not be fair. So most importantly, it is the Envy-Free Fair Division solution that is needed to avoid all the complications in the future for estate distribution. No amount of money can compensate for a shattered family. So it is important for you to do your estate planning well now!  

If you didn't get the answer right for the apple distribution,
what about all of your assets which is much more complicated?

Till then. 
Happy planning! ;)

Wednesday, November 16, 2016

Why Warren Buffett's Investing Tip for LeBron James May Not Works in Malaysia?

As you may know, Warren Buffett is also friends with NBA superstar LeBron James and he has been giving regular investing tip to the 2016 NBA Finals MVP, whom leads Cleveland Cavaliers to NBA title and ends 52-year drought.

Apparently, given that Warren Buffett is one of the richest man in the world, he is probably right about everything he said, and certainly, it could applies to everyone else too! So let's look at some of the investing advice that the billionaire investor gave to the multi-millionaire basketball star.

“Owning the United States, a diversified piece, at a decent average price bought over time, held for 30 or 40 years, it’s bound to do well. The income will go up over the years, and you really can't go wrong with that.” - Warren Buffett

In Warren Buffett's context, owning the United States as a diversified piece means investing in S&P 500 index which includes the 500 large-cap U.S equities that captures approximately 80% coverage of available market capitalization. He always recommends his follower to just stick to S&P 500 index fund by Vanguard 500 Index Fund (VFINX)

So if you have invested $100,000 in VFINX around 20 years ago (1997, max data available), by now, it would turn into $280,000 (180% return)! A lot higher than keeping in bank! So, Warren Buffet is certainly right about this that you really can't go wrong with it. 

What about Malaysia?

Let's take a look at the comparison of KLCI vs S&P 500. Given the same period of time (1993-2016), the growth of S&P 500 (390% return) is much more higher than KLCI (150% return)! Which means with an initial investment of $100,000, S&P 500 would turns into $490,000 and KLCI would turns into $250,000.

Given roughly 24 years of period, the annualized return for S&P 500 will be 6.8%, which is still acceptable. However, the annualized return for KLCI is only 3.9%. So, it is safe to say that investing in index fund of Malaysia KLCI may not be workable

Another investing advice from Warren Buffett was...

“Through the rest of his career and beyond, in terms of earning power, [he should] just make monthly investments in the low-cost index fund. Somebody in his position ought to have a significant cash reserve."

Warren Buffett is certainly right that everyone should be disciplined enough to make monthly investments, especially for those with significant cash reserve. As per recommended by Warren Buffett, Vanguard 500 Index Fund (VFINX) is certainly low-cost index fund whereby there is 0% purchase fee, 0% redemption fee and a 0.16% expense ratio.  

What about Malaysia index fund?

There are only 6 index funds in Malaysia, namely: 
  1. AMB Index-Linked Trust - tracks the performance of the KLCI
  2. Manulife Investment Equity Index - track the performance of the FBM KLCI
  3. Manulife Investment Syariah Index - track the performance of the FBMS (EMAS Shariah)
  4. PMB Shariah Index - invest primarily in the major stocks constituent of the FBMSHA
  5. Public Index - attempting to outperform the FTSE Bursa Malaysia Top 100 Index
  6. RHB KLCI Tracker - correspond to the performance of the KLCI

So actually there are only 3 funds that tracks KLCI, while the rest like Public, PMB and Manulife track or just benchmark other index in Malaysia. 

Date taken from Morningstar

Besides PMB, the rest of the funds' initial sales fee/purchase fee is outrageous with as high as 6.5%! That's totally out of the league of  Vanguard 500 Index Fund (VFINX)! So once again, it is proven that index fund may not works in Malaysia

I have came across a lot of articles supporting the same thing whereby index fund is recommended over mutual fund/unit trust fund. However, one should take note that the article is referring to U.S market rather than Malaysia market which is less efficient

In conclusion, whatever you read in the articles, even if is by Warren Buffett, to multi-millionaire LeBron James, you should never follow blindly

So here comes the most important question. If not index fund, then what?

I hear you! And I have been mentioning a lot through out my previous post, so here you go:

Till then. ;)
Happy Investing!

Tuesday, October 11, 2016

3 Ways to Protect Yourself From Bad Financial Advice

Throughout our lives, we often get approached by friends or family to tell us all sorts of “KangTao/Lubang”(tips). However, more often than not, the "KangTao" is usually in the best interests of themselves.

3 Ways to Protect Yourself From Bad Financial Advice Fiduciary

Unlike in the U.S, whereby the Department of Labor will be implementing the Fiduciary Rule next year, which will help to put the other’s needs before anyone else, otherwise they can get sued if they wrong them. In Malaysia, there's no such a rule yet except having "Avoid Conflict of Interest (BNM)" or "Integrity (CFP)" as one of the code of conducts and ethics. 

So how do you protect yourself? 

Here are the 3 Ways to Protect Yourself From Bad Financial Advice:

1. How Are They Being Compensated? 
Be it an introduce-r, agent or advisor, the person should put in writing all the fees and commissions he or she will be receiving from all sources. Do they get certain percentage from the money you invest? Do the products they recommend contain charges that they will receive? Part of the problem with them is that they will make you focus on your potential return and not telling you exactly how much money they make in what they’re selling you. Put everything (written form) on the table.

2. Is Their Advice Conflicted? 
They should give a “reasonable basis” for the advice they are giving you. If they recommend a product or service, you should know if they are getting a commission or other fee through the transaction. Also ask if they will receive bonus or incentive trip for making recommendation. They should always make recommendation because it’s in your best interest (which they always claim to be), not theirs.

3. Are They Qualified to Give You the Advice You Need? 
Learn from the right people, not just anyone. You need to know if they can give the advice that’s tailored to your financial situation and not like anyone else? (Others have it doesn't mean you should have it too!) Are they qualified or in the right position to give you the right financial advice? You’ll probably need to find a licensed financial advisor with CFP or RFP certification. Again, you need to know if your advisor can provide un-conflicted advice in these complicated areas.

3 Ways to Protect Yourself From Bad Financial Advice Fiduciary

Keep in mind that without the Fiduciary Rule in force in Malaysia, you’re on your own! There is no government body forcing the fiduciary rule on anyone. So in the meantime, seek out advisers who abide by the fiduciary standard. They are generally certified financial planners, chartered financial analysts, certified public accountants and licensed financial advisers.

Avoid those who are merely introduce-rs, agents, brokers, “registered representatives” or “wealth managers” who are not fiduciaries, whereby they probably not going to find you anymore after the sales. So the next time any KangTao comes up to you, remember to ask these questions to protect yourself from bad financial advice! 

Till then. ;)
In supporting of upholding ethical conducts!

Tuesday, October 4, 2016

Hire Your Finance Doctor Today!

#YourFinanceDoctor Clients:

You care about your future and you want to know where to start. You want to work with someone who you can relate to and someone who understands you. You realized the importance of financial planning and after all, it was not in the syllabus for us to learn during high school or even university. So now it's time to put it all together

Hire #YourFinanceDoctor for 1 Year!

You will receive:
  • A 50-page financial plan with a series of "To-Dos-List" 
  • Financial plan includes recommendations in all the following areas: cash flow planning, debt repayment planning, insurance planning, investment planning, retirement planning, estate planning and tax planning.
  • Recommendation of asset allocation on your EPF and PRS are included as well.
  • A recommendation of the credit card that fits your needs based on your spending.
  • Unlimited mobile phone and email support for ONE WHOLE YEAR to help you reach your financial goals even faster.
  • Quarterly meet up for monitoring and reviewing financial plan 

This is the right one if you are ready for actionable financial planning advice which can certainly help you find clarity around your money. It’s time to stop making the bad/impulsive decisions about your finances and instead talk to a CFP® who can help you get on track so you can reach multiple financial goals simultaneously.

Fees will be charged according to your annual income category.
RM200,000 and below : RM2,000
RM200,001 - RM350,000 : RM3,000
RM350,001 - RM500,000 : RM4,000
RM500,001 and above : RM5,000

This will be the first best investment you have ever made!  

If you are thinking that maybe you are not quite ready to work with #YourFinanceDoctor on an ongoing basis, but you still have a few pressing financial questions that you would like help on. What can you do?

Quick Start 1 Hour Session!

You will receive:
  • A 60-minutes face to face meeting
  • An in-depth discussion of your few pressing financial questions.
    • Popular questions:
      • Can you help me summarize my insurance policies?
      • How much is my current total investment return?
      • Can you help me with a budgeting plan?
      • How can I fully utilize my EPF?
      • What can I invest with XXX amount of money?
  • A follow-up email with recommendations and "To-Do-List" to solve your pressing issues within 24-hours so that you can take action immediately!

Friday, September 30, 2016

EPF Increases Minimum Basic Savings to RM228,000 At Age 55 (With Example!)

The Employees Provident Fund (EPF) has announced that the basic savings at age 55 will be increased from RM196,800 to RM228,000 effective Jan 1, 2017. The increment will also be made across all ages accordingly, refer to the table below. 

What is Basic Savings?
The basic savings is a pre-determined amount set according to age in Account 1 to enable members achieve a minimum savings at different age, for example, when they reach age-55, they should have at least RM228,000 to retire. The amount in excess of the Basic Savings can also be invested in products offered by appointed Fund Management Institutions approved by the Ministry of Finance.

Why Do I Need That?
The rationale for the implementation of this basic savings is to ensure that members have sufficient savings when they retire in order to support their basic retirement needs for 20 years from age 55 to 75, in line with Malaysians' life expectancy. The new quantum is benchmarked against the minimum pension for public sector employees, which has been raised from RM820 to RM950 per month from age 55 to 75. (I don't think RM950 per month is enough either!)

How Does It Affects Me?
Well, it doesn't if you did not opt to withdraw for the Members Investment Scheme (MIS). But if you do, then the withdrawal amount for MIS will be reduced

But thankfully, EPF also revises the Maximum Investment Withdrawal Percentage from the current 20% to 30%, effective Jan 1, 2017 as well. 

Any Example?
As of today (30th July 2016), RM100,000 in Account 1:
As of 1st Jan 2017, RM100,000 in Account 1:

With the increment in Minimum Basic Saving and Maximum Investment Withdrawal Percentage, members can now withdraw more money for investment. In other words, there will be more money available to be controlled by you. So if you think you can outperform EPF Dividend, then this will be a good news to you! Otherwise, it doesn't affects you at all. 

To find out more about it, feel free to contact #YourFinanceDoctor at
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Earn, Save, Invest, Repeat!
Till then. Happy Investing! ;)

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