The Best Personal Finance Summaries – 11 November 2019

We're excited to introduce a new part to More Money Malaysia and that is a weekly video.

This will be a test that will run the rest of this year but each week we will introduce a video. These videos will be summaries of some of the best personal finance books. So instead of having to read them yourself, we've broken it down for you.

From Us

[VIDEO] Book Summary: Total Money Makeover (part 1)
Do you know someone who's in debt and can't seem to get out of it? If so, this video will really help.

Reply to this email to let us know what you think or what you would like us to summarise in the future!

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Money in Daily Life

Don’t Save Too Little, or Too Much

Finding the balance between financial security and enjoying life is tricky. Here are some suggestions for how to do it.

The New York Times recently posted an article regarding the tricky balance between overspending and underspending. According to one report by the Center of Retirement Research at Boston College, about 50% of retirees are underspending – sacrificing the quality of life to be more well-prepared for sudden expenses.

The trend was prevalent amongst many retirees who shared their similar viewpoints. The habit of saving is great, but the behaviour can become sticky which will then lead to problematic scenarios.

The phenomena where retirees were reluctant to make withdrawals from their savings were observed by the financial experts as well as researchers. They have voiced their worries mainly regarding the status of social well-being and physical health of fellow under-spenders.

Underspending was not an exclusive occurrence amongst the Boomers, but it was observed in Millennials as well. Millennials who experienced 2008 financial crisis and generally burdened by student loans were exhibiting the behavioural underspending.

One way to deal with this problematic behaviour is by defining financial goals. By updating the financial plan at least once a year, the irrational fear which ultimately caused underspending could be eradicated. By making small adjustments over time, everybody could logically find the balance between financial security and enjoying life.

There are many more interesting points being dissected throughout the article. Make sure to check the original article to know more!


Debt Payoff Methods: All About the Blizzard Approaches

While you might be one of the millions mired in debt, how you go about paying off that debt is unique to you. In a perfect world, you’d ideally be able to metaphorically take a bazooka and obliterate your debt in one fell swoop.

The reality? You’re most likely juggling a bunch of different financial commitments — paying rent, putting food on the table, saving for an emergency fund or a down payment on a home — making it harder to focus on crushing your debt.

Realistically, you want to tackle your debt one at a time. But there are many debt repayment methods available, what is the best option for you?

Debt Avalanche Versus Debt Snowball

Conventionally, the two main debt repayment strategies are the debt avalanche and the debt snowball.

Characteristics:

Debt Avalanche Debt Snowball
Pay highest interest rates first. Pay the smallest amount first.
Save money on interest fees. Psychological boost when clearing off debt early.
Systematic. Prevent debt fatigue (exhausted from paying off debt for long periods).

Debt Blizzard Approach: the Basics

While both debt avalanche and debt snowball have their respective advantages, one could consider debt blizzard strategy as well. Debt blizzard approach combines the two methods into one. Paying off a small debt from the get-go, reap the momentum and then switch to paying the debt with the highest interest.

How Do You Know It’s Right for You?

Some might argue that you should always do the avalanche method to save the most money overall, but motivation is essential to getting out of debt. Debt blizzard is worth a shot if you are unsure, and you could always switch to your preferred style if you felt it is not suitable for you!

How to Get Started

As with any debt repayment method, tally your debt. Figure out the balance, interest fees, and monthly minimum payments. Know the fine print, such as late penalty, pre-penalty fees, and so on.

Next, organise your debts based on different metrics. For instance, list them in order of smallest to the most considerable amount, the lowest interest rate to the highest interest rate, and vice versa. From there, you can go about prioritising your debts and implementing your repayment strategy.

Visualize Your Payoff and Treat Yourself Along the Way

Consider visualising your debt payoff by drawing a repayment thermometer, Pacman-esque video game grid or little checkboxes. Reward yourself when you achieved a checkpoint can keep you stay motivated.

You Do You

Whether you try the avalanche, snowball, or blizzard method — or devise something different altogether — the important thing is that you stick to your payoff plan. Find a technique that jives with you, and you’ll have an easier time making headway on your debt.

8 Malaysia-Based Personal Finance YouTube Channels to Follow

I’ve compiled Malaysia-based personal finance Twitter accounts to follow, and Malaysia-based personal finance Instagrammers, so now it’s personal finance Youtubers and Youtube channels’ turn!

Ever wonder who are the top personal finance Youtubers and Youtube Channels in Malaysia? Fret not, your question has been answered in a recent post by Suraya from Ringgit Oh Ringgit.

Youtubers and Youtube Channels on Personal Finance in Malaysia
1. Suyin Ong
2. My Personal Finances
3. Mr Money TV
4. KCLau.com
5. CF Lieu
6. [RinggitPlus] (https://www.youtube.com/user/AskRinggitPlus/videos)
7. iMoney
8. Hu$tlr

We have also have our own Youtube channel so check us out 🙂

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Grow Your Wealth

Two Things for Creating Wealth without Financial Capital

The common myth among the poor is that you need financial capital to be wealthy. Pure logic is that it takes money to make money. But you need to look further and deeper, so you can see through the misconception. Unless you are born with a silver spoon, it takes more than money to create wealth.

If you need thousands to make hundreds, millions to make thousands, billions to make millions, then how come the wealthiest people on earth today can do it in such a short time? Of course, you need financial capital to generate income, but that’s not the only ingredient.

KC Lau, the author from KCLau.com wrote a post on his blog spot on the two things for creating wealth without financial capital. He started with an anecdote of his own, which tells the stories of how he realised that money is not the main ingredient to make more money.

Creating wealth takes more than financial capital. You also need the mental capital and relationship capital

Most of the time, the money problem is due to the lack of the latter. From the author’s experience of organising webinars, KC Lau explained his points on the reasons why mental capital and relationship capital are the two most crucial elements in building the business. He did not pay the trainers, but he only spent a minimal fee for the operating cost. When he first started, he relied on his close friends to help produce the content. In return, he contributed by referring more business to them and elevating their reputation in the industry.

How to create wealth when you don’t have much financial capital yet?

According to the author, this is simply an excuse. Funding could be obtained from many sources: crowdfunding, P2P financing, angel investors, venture capitalists, bank loans, equity funding, etc. For the writer, the smarter way is to invest in ourselves to increase our mental and relationship capital. The problem of funding will take care of itself.

How do you do that starting today?

To start venturing into a specific field, begin by reading the books in that topic. Study how the successful people did it. Find mentors. Subscribe to any courses to accelerate your learning curve.

For relationship building, learn social skills. Can you provide value to the people who can help you? Give them something first before asking for anything in return.

As quoted by the author, It never stops. Even Bill Gates and Warren Buffett, arguably the wealthiest men in the world, still read regularly to improve themselves!


Unit Trust

The areas of financial planning include cash management, risk management, investment planning, tax planning, retirement planning and lastly, estate planning. This article will focus on Unit Trust as an investment planning option and will discuss basic concepts of what it entails.

What Are Unit Trust Schemes (UTS)?

Unit Trust (also termed as Mutual Fund in the United States) is defined as an unincorporated mutual fund structure that allows funds to hold assets and provide profits that go straight to individual unit owners through increased redemption price when the units are redeemed after a period or through dividends. In simple terms, it is an investment scheme funded by many investors and managed by professional fund managers.

How does UTS Operate and whom are the parties involved?

There are 3 main parties:

Party Description
Investors or Owners of Unit Trusts (Unit Holders) Invests money into the fund.
Unit Trust Management Company (UTMC) or Fund Manager Administers the operations of UTS through a diversified portfolio of authorised investments.
Trustee (bank or insurance company) Holds the assets of UTS, ensures UTMC invest the assets in line with the terms of the deed, safeguards the interests of Unit Holders.

Units

The number of these units are never fixed in a unit trust. More units can be created to meet the demands.

The value of the unit is dependent on the value of the overall fund. Each unit trust has an individual price called the Net Asset Value (NAV) which reflects the value of the whole unit trusts’ assets, like the investments the fund manager has made with the fund. The Net Asset Value can be calculated by dividing the value of the unit trust assets by the number of units issued.

Capital distribution arises from dividends, which, if any, will be distributed based on the total units held at the end of the fund’s financial year. Capital appreciation is the increase in the value of the assets of the portfolio.

Advantages and Disadvantages of Unit Trust

1. Professional Management vs Loss of Control

UTS is run by experts who have access to the massive dimension of resource and undergone sufficient financial training. This is promising for investors who lack the time, knowledge and expertise to manage their investments.

However, Unitholders will have no say and control over the decisions of the fund manager. Investors should critically evaluate whether the fund manager is the right person to manage the fund.

2. Diversification vs Risk

UTS has the portfolio effect because the investment assets are diverse. As a result, the risks of loss are minimised, and the returns are less volatile. However, it is unable to extinguish all possible risks despite its diversifying character.

3. Investment Costs

UTS can provide the costs advantages for smaller investors to access the exclusive institutional rates of return. But the professional fees imposed by UTS can reduce the gain of investors.

End

Investing is about minimising risk to engender wealth in the long run rather than generating short-term profits. UTS is one investment option which notably sprouts the same principle.


Which PRS Funds to Invest in 2019/2020

Find out what are the best Malaysian Private Retirement Schemes (PRS) to invest in 2019/2020. Save, invest and retire well!

In one informative article by MyPF.my, the performance of Private Retirement Scheme in Malaysia is being ranked according to rating, CAGR and category.

Quick Overview

Private Retirement Schemes (PRS) were introduced in 2012 as a voluntary long-term investment scheme to help accumulate funds for retirement. PRS benefits include a RM3,000 annual tax relief. Budget 2020 is also expected to waive PRS pre-retirement withdrawal 8% penalty for healthcare and housing purposes. Generally, there are 3 categories, namely growth, moderate and conservative with different asset allocation for equity and bonds respectively.

PRS Top Performers 2019

Ranked by:

1. Rating:

Rating
Overall 5.0 Rating
Affin Hwang Aiiman PRS Shariah Growth, AmPRS PRS Conservative, AmPRS PRS Islamic Fixed Income, Kenanga Shariah OnePRS Equity, Public Mutual PRS Equity
Overall 4.7 Rating
Affin Hwang PRS Conservative, Affin Hwang PRS Moderate, AmPRS PRS Islamic Balanced, CIMB Islamic PRS Plus Moderate, Kenanga OnePRS Moderate, Kenanga Shariah OnePRS Growth
Overall 4.3 Rating
CIMB Islamic PRS Plus Growth, CIMB-Principal PRS Plus APAC Ex-Japan, CIMB-Principal PRS Plus Conservative, CIMB-Principal PRS Plus Moderate, Kenanga OnePRS Conservative, Public Mutual Islamic PRS Islamic Growth
Overall 4.0 Rating
AIA PAM PRS Moderate, AmPRS Asia Pacific REITS, AmPRS PRS Tactical Bond, CIMB-Principal PRS Plus Equity, CIMB-Principal PRS Plus Growth, Public Mutual PRS Conservative, Public Mutual PRS Moderate

2. Compounding Annual Growth Rate (CAGR):

CAGR
#1: CIMB-Principal PRS Plus APAC Ex Japan: 7.71% (2018 #1: 12.19%; 2017 #1: 14.21%)
#2: AmPRS Growth Asia Pacific REITs: 7.34% (2018 #3: 7.83%; 2017 #2: 11.96%)
#3: CIMB Islamic PRS Plus APAC Ex Japan: 6.11% (2018: #2: 8.02%; 2017 unranked)
#4: AmPRS Tactical Bond: 5.96% (2017-2018 unranked)
#5: AmPRS Islamic Equity: 5.37% (2017-2018 unranked)

3. Category:

Growth Moderate Conservative Islamic
CIMB-Principal PRS Plus APAC Ex Japan: 7.71% AmPRS PRS Tactical Bond: 5.96% AmPRS PRS Conservative: 4.62% CIMB Islamic PRS Plus APAC Ex Japan: 6.11%
AmPRS Growth Asia Pacific REITs: 7.34% Affin Hwang PRS Moderate: 4.87% CIMB-Principal PRS Plus Conservative: 3.61% AmPRS PRS Islamic Equity: 5.37%
CIMB Islamic PRS Plus APAC Ex Japan: 6.11% CIMB-Principal PRS Plus Moderate: 4.52% Kenanga OnePRS Conservative: 3.60% AmPRS PRS Dynamic Sukuk: 4.88%
AmPRS PRS Islamic Equity: 5.37% CIMB Islamic PRS Plus Moderate: 4.34% Affin Hwang PRS Conservative: 3.55% CIMB Islamic PRS Plus Moderate: 4.34%
AmPRS PRS Dynamic Sukuk: 4.88% AmPRS PRS Islamic Balanced: 4.03% Public Mutual Islamic PRS Islamic Conservative: 3.29% AmPRS PRS Islamic Balanced: 4.03%

Apart from the detailed sharing, the author of the site also made some brief analyses and comments on the general performance of PRS funds. Do check out the original article from the link above!


Robo-Advisors vs Online Brokers

Today we have a title fight between Robo-advisors and online brokers.

In one corner, we have the fresh rookie looking to shake up the investing world. Their speciality is automation and giving you an end to end experience to save you time and stress. Put your hands together for… Robo-advisors!

In the other corner, we have a seasoned veteran. They’ve been around a few years and know how to deliver a customizable portfolio for cheap. That is, if you’re willing to put in the work. Give it up for… online brokers!

What is an Online Broker?

A brokerage account acts as a middle-man between you and the investing market. Online brokerage accounts allow you to buy and sell investment vehicles easily and quickly on the internet.

What is a Robo-advisor?

Robo-advisors are online investing platforms that do 99% of the work for you. They gauge your risk profile and investing goal via a series of questions. Then, they will automatically open an account and suggest the suitable investment vehicles for you. Robo-advisors also buy and manage your investments by employing their algorithm.

The Pros and Cons of Both Online Brokers and Robo-advisors

The following table summarises the pros and cons for both investing means:

Online Broker Robo-advisor
Pros Pros
Low Fees. Easy to set up.
Customisable, full control over personal investment allocation. Automation assisted by algorithms.
Large variety of investing options. Simplified tax optimisation.
Cons Cons
Oversight required. Need time to set up and monitor. Higher costs. Funds are more expensive and they charge a management fee.
Human error. Miscalculation might occurs. Restricted investments. Limited options.
Lack of control.

So, Who Wins? Robo-Advisors or Online Brokers?

It is clear that both Robo-advisors and online brokers have their unique pros and cons. Ultimately, it depends on what style of investment one prefer.

In the same article, the author also dissected two examples where Robo-advisors and online brokers might give you different returns based on different variables (starting investment, annual addition, stock market returns, management fee, expense ratio and tax loss harvesting). Make sure to check out the link above to know more.


Should I Be Investing My Money In The Stock Market?

Investing in the stock market is risky. How do I choose which stocks are profitable and able to generate higher returns in the short-term? Should penny stocks be considered since they are lower priced and highly speculative? I know that trading penny stocks can wipe your investment out easily. Or, is it better for me to invest in blue chips where they are more established and are financially secured?

Ian Tai from KCLau.com in his latest article discussed on the true meaning of what is meant by investing in the stock market.

1. Investing in the Stock Market is Risky.

While investing is not risky, buying shares without knowledge is. Without doing your due diligence, you are not investing; instead, you are merely gambling and speculating.

2. Higher Returns in the Short-Term.

Stock investing is a systematic way to build a long-term wealth. Investors hold their preferred stocks for a long period of time and do not look to profit within a short time frame.

3. Considering Penny Stocks because They are ‘Low-Priced’.

Stock investors want to buy good stocks cheap. But, cheap does not mean affordable. A high-priced stock can be cheap but not affordable. The key is reasonably priced. Stock investors would compare prices of stocks with their earnings, book value, and dividends by calculating valuation ratios to know their reasonable pricing.

4. ‘Trading’ Penny Stocks can Wipe Your ‘Investments’ Easily.

Trading is not the same as Investing. They are different in terms of thinking and reasoning. Traders buy rising stocks even if they are not necessarily priced low; while investors want to buy good stocks at low price.

5. Blue Chip Stocks are more Well-Established.

It is a mistake to assume that all blue-chip stocks are stable investments. Some blue chips are indeed decent investments; but some do not perform well financially.

Then, What Should I Invest Into?

If you were to invest, do your due diligence to understand the business model, finances, management, future plans and valuation of the selected stocks. There are plenty of books or articles online which you can learn from, but this summary should serve as a decent guide for stock beginners.

Cool Opportunities

A way for females to get free insurance
We were talking to our super humble financial advisor friend one day and she started talking about some insurance product for females that provides coverage for all these female related illnesses. But more importantly, the contract also states that all the premiums will be returned at the end of the contract.

Seriously something for all females to consider!