Going on a trip, added 6k before I leave (16 Sep 2009)

Next Wave Started, Looking at Laggards (11 Sep 2009)

It looks like the next wave up has started. Things were quiet up till yesterday when the STI index breached 2700 intraday. Concerns about the China market is subsiding as economic data from China continues to impress. The latest August data topped analyst’s forecasts. News that lending by Chinese banks rebounded in August (up 34.1% YoY) and that money supply rebounded gave much reassurance to fears that China’s banks would rein back lending.

China’s industrial output also grew 12.3% Yoy, the fastest rate of growth yet in the last 12 months, showing that it was well on track to its official target forecast  growth of 8% for the economy for the year of 2009. Asia is well on track to recovery, and while there are lots of detractors and people who refuse to believe that Asia can recover so fast. They fail to look at history.

Asia has always bounced back and recovered quickly from slumps.  And the bigger the slump, the stronger the eventual recovery. For 2008, we are talking about one of the biggest slumps in history, something that will be written in history books. A mega slump of massive proportions. Such global massive slumps where literally all markets fall by 40% to 50% are once in a lifetime occurrence. While the drop is very painful, the rebound is usually equally spectacular. The rise in stock markets over the last 6 months was not a freak event, and the trend will continue. It is backed by economic data that is starting to show that gradually, the developed countries are picking themselves up from their feet, and Asia economies are leading the way out of this recession.

I am in no hurry to sell. This rising trend based on the full global economic recovery has not been played out. Lately, I have been monitoring laggards as well. Europe for example, as the region is paying catch up. Many European funds have shown up on the top performing funds list over the last one month. I already hold Parvest Europe Alpha and FLF Eq Europe Emerging both of which have also surged recently. I will be monitoring Europe markets for bargains. I also have to admit I probably have too much in Asia at this point, and while it has certainly rewarded me over the last 6 months as Asian markets have outperformed most other markets quite conclusively. But from a diversification point of view, at some stage, I will need to rebalance away from Asia even though I remain very bullish on it. As always, it’s extremely difficult to follow what you tell others, and striving to remain diversified is probably the hardest task for many an investor, especially those with a high level of conviction in their views like me.

Gold has also surged, pushing the DWS Noor Precious metals fund higher. For me though, this fund, which I hold, and the FLF equity Russia fund which is an oil play are hedges against rising inflation. I would be perfectly happy though if gold, oil prices do not surge and these two funds which I hold creep along over the next two years. Because that would mean that inflation is kept under control, and if it happens, Asia’s economies will benefit the most from this and continue to surge forward. There is a reason why these two funds are less than 10% of my total portfolio.
Asia is showing great resilience in the face of this time’s recession and I am confident that we will experience a V- shaped recovery coming out of it. The coming 6 to 12 months are going to be very exciting ones.

Switched a Fund, Reluctantly (7 Sep 2009)

I just switched from one Asia ex Japan fund to another today. I would normally always advise against doing this. Chasing fund performance, especially within the same sector is not a thing one should usually do. Fund managers each have their own styles, and you should usually give them some time to really confirm that they are underperforming before you decide to switch.

In my case, it wasn’t a case of underperformance either. I was quite happy with the performance of DWS Asia Small/mid cap fund. It had returned me close to 40% since I bought it.

The problem was that the fund house itself wants to close the fund. Those of you who have the email should have received the email from us by now. They just had an EGM to close the fund, it didn’t pass. Now they are going to propose another one. Now, I actually like small caps right now. I think blue chips have gone up to a certain extent, and it’s many of the small caps that are lagging.

While the risks are higher for small caps, that is precisely why getting exposure to them via a small cap fund makes sense. Even if one or two fails, it would hardly impact the fund, and in the meantime, if the other small caps in the fund moves up strongly, it would more than make up for the few that fail.

But in this case, the fund house seems determined to close this fund. And if I were the fund manager, it would certainly come as an unwelcome distraction. How well can you concentrate on running a fund if it could potentially get closed within the next 3 months? As an investor, the uncertainty is also not a good thing. So, I decided to switch out of this fund. But because I still like Asian small caps, I had to do what I normally would not advise people to do. I switched from one Asia fund to another Asian fund, and their objectives are similar. Both are small cap focused.

The new fund I have switched to is Aberdeen Asia Smaller Companies. While it is not easy to run a small cap fund. I am confident that Aberdeen has the expertise to do it. I did not want to switch to a more typical Asian ex Japan fund because I already had those. I wanted specifically one that was focused on small caps.

Based on the overall performance that the fund has shown over the past few years, I chose Aberdeen Asia Smaller Companies. The fund has the best 3 year track record amongst the funds in this category. And it had also fell the least during the tough times in 2008. While it has underperformed in the initial run up compared to the other funds in this category, it was because the fund manager did not want to chase up the frothier sticks with no fundamentals. And I share a similar view in that in the medium term, the stocks with the stronger fundamentals will shine through.

Sometimes, Its The Money You Didn’t Spend That Counts (1 Sep 2009)

I bet most people bemoan not having enough money. Few people are ever in a position in which they claim that they have more than enough money and wouldn’t want more. That’s why so many of us want to invest. And indeed, investing will help to grow your wealth. Money that is invested is money which is working for you 24 hours a day, 7 days a week.

In contrast, debts, whether from credit cards, car loans, renovations loans are all draining money from you constantly. Before you even start investing, clear your short terms debts first. And sometimes, the best way is to not even incur them in the first place, so very often, it’s the money that you didn’t spend that will form the base capital for your investments.

We live in a materialistic society and it is almost impossible to keep away from spending. The key is moderation, and to be aware of your expenses so that you don’t spend more than what you can afford. In today’s world, where credit cards are readily available, and where there are many purchases which allow for installment repayments, awareness of how much you are spending is very important.

Furniture, and electronic items which allow 12 months or even 24 months repayment periods should not be seen in terms of their monthly cost. In the end, the total cost is what you will eventually pay, even if you get to pay that over 12 months instead of straight away. If a person couldn’t save up that money to pay it off right away to begin with, he may not be able to adjust his spending downwards in the subsequent 12 months for it either.

A car is one of the biggest-ticket items that you can spend your money on. So, be very careful when you are thinking of buying a car. It’s not just the upfront cash you may have to fork out, or even the monthly car installment payments, which are substantial. There is also petrol, parking fees, maintenance, road tax, ERP, car insurance, to name the most common costs. All these could easily add up to a few hundred dollars as well depending on the type of car you purchase. Personally, I believe I have managed to save a substantial amount of money simply because I did not buy a car the minute I started working. I still take the MRT to work and back every day.

Especially at the initial stage of building up your wealth, saving is very important. So, be aware of the big ticket items. Be it an extravagant wedding, expensive furniture, electronics, a car, sometimes, it’s the money you didn’t spend that will be key.