Net Worth Update (February 2013)

Assets	Jan-13	Feb-13	Change	% change
Savings Account 1	$5,596.71	$4,958.78	($637.93)	-11.40
Savings Account 2	$5,008.16	$1,570.66	($3,437.50)	-68.64
Savings Account 3	$11,035.04	$14,630.00	$3,594.96	32.58
Investment Linked Fund	$8,150.06	$8,111.76	($38.30)	-0.47
Schroders Commodity Fund	$10,485.42	$10,074.46	($410.96)	-3.92
Stock Holdings	$10,115.00	$9,910.00	($205.00)	-2.03
Phillip Money Market Fund	$10,004.18	$15,008.43	$5,004.25	50.02
Physical cash	$1,000.00	$1,000.00	$0.00	0.00
Market Value Of BTO Flat (to be built in 2016/2017)	$750,000.00	$750,000.00	$0.00
Total Assets	$811,394.57	$815,264.09	$3,869.52	0.48
Liabilities
Home Loan	$617,500	$617,500	$0.00	0.00
Net Worth (including flat to be built in 2016/2017)	$193,894.57	$197,764.09	$3,869.52	2.00
Investible Net Worth	$61,394.57	$65,264.09	$3,869.52	6.30

Down a little; Up a little

4th Quarter GDP was revised up today from a dismal -0.1 percent to a dismal +0.1 percent, confirming the stagnation character of the American economy.  All the fine rhetoric from the White House and its chorus of apologists cannot hide the fact that US economy is stuck in the mud.

This should come as no surprise of course.  Why should anyone expand their business or take on new employees in this environment?  Heaven forbid that anyone should make a profit or try to get rich.  That's the new sin.

So, what is left is stagnation.  An economy that rewards people for not working and punishes those who wish to employ capital is an economy that is going nowhere. 

Obama has managed to accomplish what few thought possible.  He has shut down the mighty American economic engine.

Study Plan For CFA Level 1

I have registered for the CFA Level 1 exam scheduled on 7 December and the much anticipated books arrived last week. I was quite astonished as I didn't expect level 1 to have as many as 6 books. On the first few pages of Volume 1, there is a part in the "Designing Your Personal Study Program" section which says:

"Successful candidates report an average of over 300 hours preparing for each exam. Your preparation time will vary based on your education and experience. For each level of the curriculum, there are 18 study sessions, so a good plan is to devote 15 to 20 hours per week, for 18 weeks, to studying the material."

The recommended plan requires me to study 15-20 hours per week, translating to 2-3 hours a day. As I will be working full time during that period, I don't think the recommended study plan stated in the book is feasible. 1.5 hours per day will sound more reasonable. However, by studying just 1.5 hours a day, I will need about 28 weeks in order to clock the recommended 300 hours. This means I have to start preparing for the CFA exam 28 weeks (7 months) in advance, which is at the start of May 2013.

The last paper for my university final exam is at the end of April and I have to start studying for CFA at the start of May. Moreover, I will be starting work full time in June 2013.

2013 is going to be a really hectic year!

New Fund: CIMB-Principal Enhanced Opportunity Bond Fund

They say that the only constant in life is 'change'. Well, not always. Hopefully, with this new fund, you will find comfort in its stability. Furthermore, it aims to provide more returns than the current Fixed Deposit rate, and is more stable than equities. Riding on the growth of the Asian countries, investors have the opportunity to diversity their portfolio and increase the returns. This fund is only available until 4 April 2013 !

What is CIMB-Principal Enhanced Opportunity Bond Fund?

It is a close-ended fund that aims to provide investors with total return through investments in a portfolio of debt securities primarily in bonds. The fund seeks to achieve its overall objective by providing total returns consisting of a combination of interest income and capital appreciation. 

Investment Strategy

Under general market conditions, between 70% to 99% (both inclusive) of the Fund’s net asset value (“NAV”) will be invested in non-ringgit debt securities primarily in bonds (including convertible bonds). Of the 99%, up to 40% of its NAV may be invested in unrated securities and high yield securities respectively while the remainder will be invested in investment grade securities. These investment grade securities are issued or backed by governments, government agencies, supranational organizations, corporate or other issuers. At least 1% of the Fund’s NAV will be maintained in the form of liquid assets such as bank deposits for liquidity purpose.

However, in the event of limited non-ringgit debt securities, the fund manager will have the discretion to invest in the ringgit debt securities primarily in bonds with yield at the prevailing market condition, if the fund manager is of the opinion that by doing so is in the best interest of the Fund.

While the Manager intends to adopt a buy-and-hold strategy for the Fund whereby the securities purchased will be held for the tenure of the Fund or to maturity of the securities,

the Manager reserves the right to deal with the securities in the best interest of the Unit holders in the event of a credit rating downgrade.

The Fund is suitable for investors who have three (3) years investment goals and are not planning to have access to their money in the next three (3) years. It is also suitable for investors who are seeking exposure to investment opportunities in debt securities.

Click here to download the fund prospectus

Source: Fund prospectus

The "Delay" Tax

Everyone knows, except Obama, that the entitlements are $70 trillion in the hole from an actuarial point of view.  This means that, in finite time, they will run out of money.

So that, it is very, very clear that future generations will get nothing at all from social security and medicare regardless of the amount that they pay in. Unless something is done.

This we know (except for Obama, of course, who seems to know nothing).

All of this means that sooner or later, social security and medicare will be fixed.  Running out of money is a fix. That does solve the problem.

A simple solution is to move out the age of eligibility for medicare (and index it).  Do the same for social security.  Means test both programs.  Raise medicaid eligibility requirements.  Doing these things would mean that social security and medicare will never run out of money.

So, a simple fix, can make things work.  If we do it now.  Delay means that when you do act, the actions must be much, more draconian.  By postponing action, even for only a single year, the size of the cuts and the postponement of eligibility must be far greater than what would be necessary if we acted today.

This is the Obama "delay" tax.  The longer you postpone dealing with the problem, the worse is the plight of future seniors.  Either Obama doesn't know this (which is probable, because he isn't very focused on real issues) or he knows it and simply doesn't care.

Why TUNE INSURANCE is Out of Tune?

Every wonder why we didn't cover the IPO for Tune Ins ? Other than CNY mood, it's because of the unexciting part of this new stock. Why? Please read on...

Tune Ins Holdings Sdn Bhd (TIH) operates 2 core businesses. First, it provides online insurance where insurance products are sold as part of the customer’s online booking process with their partners namely AirAsia, Tune Hotels and AirAsia Expedia. TIH also operates a general insurance business, through 83.26% owned subsidiary - TIMB.

Why invest in Tune Insurance Holdings?

1. Wide and cost effective distribution channels
2. Provide ease in buying coverage
3. Exclusive partnership with AirAsia
4. Ability to ride on AirAsia’s robust growth
5. Additional revenue and cost synergies from TIMB
6. Robust industry prospects

However, some of the above investing reasons had also became the disadvantages of TIH. It's reliant on AirAsia business is too important. TIH's success is very much depends on the success of AirAsia businesses, and because of its relationship with AirAsia, TIH would face difficulties in forging a partnership with other airline.

Meanwhile, for TIH domestic general insurance, stiff competition and the implementation of tighter capital requirement for insurance companies may affect its operations. It's in the industry where size does matter. I don't think TIH can cross-sell it's online clients easily on other general insurance, such as fire and car insurance.

Forecast and Valuation given by TA Securities Research

Going forward, we believe TIH’s gross earned premiums will be closely linked to increase in passengers carried on AirAsia. We estimate AirAsia’s passengers carried to increase at an encouraging pace of around 15% per annum. Tagging a 20% to industry’s targeted PER of 10x, we fairly value TIH at RM1.00.

Fair Value RM 1.00 ???

Hey dude, the IPO price is RM1.35 !!!

How Do I Choose Between a Fixed and a Floating (Variable) Rate Home Loan?

The following is a guest post by Property Buyer

People are almost always caught up with the decision of which Singapore home loanis best for them - within themselves, there is always the constant debate of whether one is better than the other. Will choosing a mortgage type depend on the person’s intelligence, instinct, bookkeeping skills, or attitude on sound money management? How does a buyer’s situation affect his or her decision to use either a fixed or a floating home loan?

Fixed-rate mortgage

Mortgage packages offering a fixed home loan rate provide a specific constant rate for a certain period of the loan.

For example, if you are buying a house now with a fixed rate home loan at 2.3% per annum, then the 2.3% per annum would be the interest rate for the fixed period which could vary between 3 to 5 years, depending on your package and its terms.

After the fixed period ends, the interest will convert to a 1) variable loan package rate, or 2) rate pegged at a discount below the bank's board rate.

The following illustrates an example of the rate structure for a fixed rate package.

Bank Y Fixed-rate Loan

Period	Interest Rate (p.a.)
First Year	1.15%
Second Year	1.35%
Third Year	1.45%
Fourth Year Onwards	0.50 % below the Board Rate

During this fixed period, if there are changes in the interest rate environment to a lower rate, the borrower will have a higher opportunity cost as he may be able to enjoy lower loan rates with a variable rate loan instead.

Floating (variable) rate mortgage

The interest rate for this loan type is dependent on the base rate and the spread or margin being used by the bank or lender. Borrowers who are savvy about interest rate movements often choose the floating home loan rate to obtain cost savings, especially those who are financially secure and in total control of their wealth as they will be able to afford the higher interest payments shall rates suddenly soar.

Most of the floating (variable) rate mortgages use a interest rate that is benchmarked against SOR (Singapore Swap Offer Rate) or SIBOR (Singapore Inter-bank Offered Rate), which is the variable component of the interest rate.

The bank will add a spread or margin to SIBOR or SOR. Together, the two will form the interest rate. For instance, the rate could be 3-Month SIBOR + 1% , where the 1% is the spread.
The spread is usually adjusted upwards after the first few years of the loan. An example of an interest rate structure for a floating rate loan follows.

Bank X SIBOR Loan

Period	Interest Rate (p.a.)
First Year	0.75% + 1-Month SIBOR
Second Year	0.75% + 1-Month SIBOR
Third Year	0.75% + 1-Month SIBOR
Fourth Year	1.00% + 1-Month SIBOR
Thereafter	1.25% + 1-Month SIBOR

What are the factors you should consider when deciding which loan type to use?

1. Understands market interest rate trend

Accuracy is very important in forecasting and tracking interest rate trend. If you are able to do so, you can derive significant interest payment savings from a floating (variable) rate loan during a low interest rate environment.

2. Financial and health uncertainties

If you are unsure about your financial capacity and health a few years from now, then the fixed home loan rate is best for you. You can lock in and secure the rate for the fixed duration.

3. Cash repayments

Paying your loan in cash every month with a fixed home loan rate makes financial planning easier. Use iCompareLoan home loan comparison system to learn the rates for the different loan packages to help you find the ideal mortgage package.

4. Tolerance for risk

Each type of home loan rate has its own benefits. The question is how far can you tolerate a higher rate?

Of course, no one will be sad to accept a lower rate, but, considering your financial capacity, can you afford  paying a higher rate for a certain period of time? If yes, you can consider a variable rate loan because with it you can have reduced interest payment when interest rates are low, but you will have to incur greater payment if rates climb.

Given the many factors you have to take into account when deciding between the two types of loans, you may prefer some professional help. Turn to the friendly and experienced mortgage brokers at www.iCompareLoan.comtoday.

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For more related articles, please visit the following websites:
www.PropertyBuyer.com.sg/articles
www.SingaporeHomeLoan.net
www.iCompareLoan.com

About Property Buyer
http://www.PropertyBuyer.com.sg/mortgage
We are a research-focused Singapore mortgage consultancy which helps you compare Singapore home loans either for new loans or refinancing. We use loan reports from Singapore's best loan analysis system (exclusive to us) at http://www.icompareloan.com/consultant/to serve our customers.
Our services are completely FREE to you as the banks pay us a referral fee upon loan disbursement.
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Email: loans@PropertyBuyer.com.sg