057 Looking for new CFP Students

We are going to start a new CFP class, in Johor Bahru, soon. Now we still need a few more students to complete the number. It will be held at selected Saturday and Sunday. The actual dates has yet to be fixed.

There will be experienced lecturers to conduct the class. Most of them are planners or agents in their field that may be able to provide practical guidance and sharing.

Prerequisite for students must be a degree holders.

We hope to look for candidates that may be interested to venture into Financial Planning industry. Students need not necessarily become our planner, although we sincerely hope so though.

To be a financial planner, one must possess a CFP or RFP. CFP is recognized worldwide while RPF is recognized in Malaysia only.

To know more about CFP, please go to www.fpam.org.my, as for RFP, please visit www.mfpc.org.my.

Please email to sateo7689@yahoo.com if you want to enquire more.

056 Do you TRADE or INVEST: A reminder from a fund manager

I attended PhillipCapital 6th Annual Conference last weekend. This is my third time there. Normally we would do day travel but this time around, we went a day earlier and spent a night there.

It was a great event. Roughly 2000 people were there.

We listened to market views and outlooks from various fund houses. It pays to do so because, then only, we know how each fund house views the market. To be a good investor must first be an informed investor. Ultimately, we are responsible to our investment results.

Mr Ang, CIO of PhillipCapital, gave his talk on TRADE or INVEST. I think he pointed out some common errors of retail investors. He jokes many people wanted to TRADE for quick gains but as the stock price falls, they keep the stock for long term investment instead.

His explanation was true. One can trade or invest. But the qualities to be able to do so are different. Traders must not be emotional but only carry out their trades like programmed robot. Investors should study their stocks well.

(Debate between Trade or Invest never end. Likewise, debate between Technical Analysis and Fundamental Analysis is on going.)

He is also honest in his talk. He admitted he is not God who knows everything. He makes mistakes, and sometimes silly mistakes. He said he can only be right 70% of the time. When he is right, he wants to maximize the gains. Frankly, I have not seen any fund manager admitted their mistakes. Perhaps because I met too few of them.

I can feel it's very tough to be a fund manager. Managing other people's money should be more pressure than managing owns.

It's tough to see investment goes into red. But in the long term, stock market is on rising trend. All investors know Buy Low Sell High, but most of the time we want Buy At Lowest Sell At Highest. Thus, when market goes lower we don't want to buy. But when market goes higher, we all jump in. Mistakes, mistakes.

Do you want to join the Conference next year? Or you may be interested to listen to monthly fund house briefing, in JB? Drop email to sateo7689@yahoo.com. 

055 Maintain your insurance coverage with cash flow management!

The rise of medical costs in Malaysia plus the implementation of GST let us see the upward adjustment of premium. This makes the insured public to feel the sudden increase of insurance premium.

People who bought medical card issued by general insurance companies feel the burden of new insurance premium. People who bought medical card packaged within investment-linked policies do not feel it, although the cost of insurance is adjusted as well.

Well, this happen to my client recently. His medical card, under general insurance company, is due for renewal soon. His new premium plus GST comes to RM1053 as compared to RM800+ the previous year.

His reaction is, obviously, sad to see the increment of RM200 in his premium. For this, I have to explain his amount is actual premium plus GST. The rise in premium part is actually RM100+ or so. All insurance companies has adjusted their premium to factor in medical costs and GST.

Then he complaint his wife's investment-linked policy doesn't have to say more. For this, again, I have told him before and have to explain again the reason behind the no hike.

So he feels his premium is too burdensome for him. He wants to downgrade his coverage. He is the sole breadwinner. He has to feed a family of 8 persons. He should have the biggest coverage.

I do not agree he should reduce his coverage. I suggested hecan rearrange his payment method to monthly payment so that he can keep his coverage, and reduce his burden of forking out a big sum of money.

However, he totally doesn't want to consider monthly payment option. He feels his current monthly commitments is high enough. He only to pay in lump sum but the new amount is too high. He would rather reduce his coverage.

For me I would rather break the RM1053 into about RM90 monthly so that I can maintain the same coverage. In desperate time, paying RM90 monthly is less burdensome than paying RM1053 one off. The trade off is a little bit of interest charge. But what is more important is the coverage.

I believe many other people may actually surrender their coverage totally. So worrying. The medical costs is rising too fast. And this coincide with the newly implementation of GST has make public to feel the pressure of rising price. People is cutting down spending.

The only comforting thing is we still have Government Hospital to turn too at very affordable prices.

Folks, let's plan our insurance coverage properly.

054 China (Greater China) shares rally - To go or not to go?

Quietly quietly, China (Greater China) shares has rallied, against skeptics.

Shanghai Index. Rallied from 2,000 points end of last year to current 4,480 points, a whopping 124%.

Hang Seng China Enterprise Index. Rallied from c.10,000 points to 14,459 points, an increased of c.45%.

Hang Seng Index. Rallied from 22,500 points to 28,123 points, an increased of c. 10%.

Taiwan Weighted Index. Oops, broken the peak ten years ago.

It seems like A shares and H shares are still below their last peak.

Well, many investors jumped into China (Greater China) funds during the 2007 rally and saw the price to plummet in 2008. Thereafter, China funds investors has suffered. Most, I guess, has thrown in the white towel.

However, for the past 6 months or so, China funds has fought back, it seems. Referring to MorningStar's fund performance tracking page, year to date top spots almost taken by China funds.

Once bitten, twice shy. Do we dare to put our money in China funds again? We see commentators discussing the direction of China shares, we even heard China citizens are crazy about trading shares now.

As I read the comments by JP Morgan and Barings, in FundSuperMart HK, those two fund houses opined China H shares still has legs. FundSuperMart Malaysia shown the market valuation for Hong Kong and Hang Seng Mainland 100 are having low PE.

I also read in newspaper (can't remember which newspaper) that, according to plan, Shenzhen-Hong Kong Connect will be implemented in second half of 2015. The previous Shanghai - Hong Kong Connect has succeeded to push Hang Seng Index and allowed foreign funds to buy into Shanghai A shares.

So, is it worth a try? China shares has been the cheapest for the past few years right until the current rally. Which market is cheap now? FSM Malaysia says it is Hong Kong and HSML100. FSM HK says H shares still has steam.

To go or no to go? I have my preferred fund in my mind. I will put in little bit lah.

053 Income Tax YA2015 and PRS tax relief

It's May 4 today. Another 11 days for taxpayers to file their BE income tax return, for YA2014, by May 15. For those still filing using BE forms, you should have submitted your forms with the payment done.

Have you used up your tax reliefs, especially the RM3,000 granted under Private Retirement Scheme (PRS)? This tax relief is valid from YA2012 to YA2021. Hopefully, the Government will extend the period.

If you have not contribute in PRS to claim the tax relief, you should seriously consider so. Besides the tax relief, PRS also allows all individuals to save more for retirement years. Money put in PRS, especially in sub-account A, cannot be taken out before reaching age 55. This feature will help contributors to save because one just cannot simply take out.

For YA2015, it makes more sense to contribute to PRS because the tax rate will be lower making you save more. For the tax rate, you may refer to LHDN website (http://www.hasil.gov.my/goindex.php?kump=5&skum=1&posi=2&unit=5000&sequ=11) to view it.

Append below is the comparison for YA2014 and YA2015. The last column shows the savings for each categories. As the chargeable income gets higher, the more the taxpayers saved.

When this lower tax rate coupled with PRS relief, taxpayers will save more. If you can't imagine how much, let's use a hypothetical example. We use an example with RM100,000 gross income; relief claimed restricted Personal Relief and KWSP relief for simplicity sake.

A taxpayer with RM100,000 gross income will have Chargeable Income of RM85,000 or RM82,000, and thus a tax payable of RM10,250 and RM9,530 for with and without PRS relief respectively. With PRS relief, taxpayer saves RM720.

For YA2015, the table will be as below. Tax payable has further reduced to RM8,750 and RM8,120 for scenarios with and without PRS relief.

If we compare the tables, the difference is quite big. The extreme case will the saving between YA2014_w/o_PRS and YA2015_w/_PRS relief. That means RM10,250 - RM8,120 = RM2,130. That's a lot of saving.

PRS is essentially an investment scheme. You may go to PPA website (www.ppa.my) to learn more about the providers, features, etc.

If you are interested to know the performance, please go to link provided in PPA website (http://gllt.morningstar.com/e6qvxuu98r/fundquickrank/default.aspx?LanguageId=en-GB&tab=ShortTerm).

Sample page below is sorted by "Core (Growth)" and ranked by "1 Yr Ansld %". By this you will see the performance for the passed One year for Core Growth funds provided by different fund house. Do not simply choose based on performance alone. You need to know your risk tolerance first.

For me, PRS is, besides KWSP and SSPN, the best tax relief because we get tax saving and we see the money grow right from now till we reach age 55. How wonderful!

Oh yes, mentioned of SSPN, just remind that SSPN tax relief of RM6,000 will carry on till YA2017. If original tax relief was RM3,000. So, if it is not extended, I think it will revert to RM3,000.

For those taxpayers between the age of 20 to 30, please remember to contribute to PRS because Government, through PPA, will top up a one off RM500 once you contribute RM1,000 into a single provider.