Published by KCLau Dot Com Sdn Bhd

Authored by Ian Tai

Copyright © 2019 by Ian Tai & KCLau

All Rights Reserved.

No part of this publication may be reproduced in any form or by any

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Disclaimers:

This book contains the ideas & opinions of the author. It is intended for
mainly education and illustration purposes. It is not meant to be a
presentation of any specific financial advice or any recommendations
given to buy, hold or sell any investment vehicles contained within this
book.

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Although we had made the best efforts to provide the latest and most
accurate information, no warranty or guarantee is provided for its
accuracy, reliability or completeness of the information provided. Both
the author and publisher shall disclaim any rewards and responsibilities
for any gains and losses that could be derived as a consequence, directly
or indirectly, from the usages of this book.

In short, if you make money from our ideas, we would like to

congratulate you! You are very SMART! But if you lose money and sleep,
or suffer from doing something based on our suggestions, please don't
blame us. If you can agree with this, you can continue reading.

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TABLE of CONTENTS
The More Money You Make, the _ _ _ _ er You Become. 5
What is Wealth? 5
Am I Rich or just ‘Looking’ Rich? 6
When Looking Rich is not Being Rich 7
What if Chan Maintains his RM 2,500 a Month Lifestyle? 8
The Power of Investing for Cash Flows 9
Achieving Infinite Wealth 10
Conclusion: A Common Road to Real Wealth 11

7 Quick Tips to Clear Off Your Bad Debts. 13

#1: What’s a Bad Debt? 14
#2: Discover the Root Cause 14
#3: Work with a Partner 15
#4: Create a Spreadsheet 16
#5: Go on the Offensive ... 16
#6: A Word on Balance Transfers 18
#7: Celebrate Small Successes 18

5 Insurance Hacks to Safeguard Your Financial Future. 19

#1: Improved Your Health Condition 20
#2: When is Your Birthday? 21
#3: What to Buy First? 22
#4: High Coverage-to-Premium Ratio 23
#5: Minimum Cash Value 24

5 Things Unit Trust Consultants Will Not Tell You ... 26

#1: Beating FDs and EPF 27
#2: On Fund’s Performances 28
#3: Am I Buying a ‘Trading Fund’? 29
#4: Guaranteed Returns 30
#5: I’m a Risky Investor? 31

7 Investment Principles I Learnt from Berkshire Hathaway’s Annual

Report 33
Are You Speculating thinking that You are Investing? 33

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 Principle #1: I View Common Stocks as Interests in Businesses 34
Principle #2: Buffett Looks for Quality Businesses. 35
Principle #3: Buffett has 6 Acquisition Criteria 36
Principle #4: A Preference for Cash Flows 37
Principle #5: A Depressed Stock Market is Good News to Berkshire
Hathaway 38
Principle #6: A Good Night’s Sleep is More Important than ‘High Risk,
High Returns.’ 38
Principle #7: Have Some Cash Standby for Great Opportunities 39

How to Buy my First Investment Property if I’m a Fresh Graduate 42

#1: Debt-Service Ratio (DSR) 42
#2: Choice of Properties 43
#3: Down Payment 43
#4: My RONW 44
#5: Risks 45
What should I do? 46

If I have RM 25,000 to Invest ... 48

#1: What is Your Investment Plan? 48
#2: How Fast Can You Raise Money? 49
#3: Can You Increase Your Monthly Income by 200% in 2 Years? 50
#4: If I have RM 25,000 to Invest ... 51
#5: But, I don’t have a Product to Sell 52
Conclusion 53

10 Wisdom Nuggets to Improve Your Financial Life 54

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The More Money You Make, the _ _ _ _ er
You Become.
 
 
How would you fill in the blanks above?

Is it ​R​ ​I​ ​C​ ​H​? or, is it ​P​ ​O​ ​O​ ​R​?  

Hmm ... Wait a Minute!

Aren’t all people become ​RICHER​ as they make more ​MONEY​?

How is it possible for some to become ​POORER​ as they make more

MONEY​?

Good question. Let us discuss.

It is possible for us to be either RICHER or POORER as we make more

money. Our outcome depends significantly on our understanding of
what Wealth is as it will determine how we use or spend our money
when we receive them.

 
What is Wealth? 
I have read ​Rich Dad’s Cashflow Quadrant​ and would be adopting his
definition of wealth. It is as follows:

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‘The number of days you can both survive and maintain your standard of
living without physically working.’

For instance, Tom and Jerry have RM 100,000 each in savings. Tom
spends some RM 2,000 in monthly expenses. Jerry spends RM 5,000 in
monthly expenditures. In cases where both Tom and Jerry stop working,
Tom’s savings is able to support his living expenses for 50 months.
Meanwhile, Jerry’s savings would last him 20 months as he spends more
than Tom.

Tom’s Wealth
= RM 100,000 / RM 2,000 per month = 50 months

Jerry’s Wealth
= RM 100,000 / RM 5,000 per month = 20 months

Hence, Tom is wealthier than Jerry despite having the same amount of
savings. Wealth is measured based on the quantity of time, not the
quantity of money or one’s possessions.

Am I Rich or just ‘Looking’ Rich?  

How do you tell, whether or not, one is really rich and wealthy?

Is it by looking at the car he drives, the phone he uses, the restaurants

he dines, the wine he drinks, the places he travels, the clothes he wears
... so on and so forth?

No doubt. Some of these people are really rich and wealthy. But, looks, I
think, can be deceiving. It is hard to tell one who is wealthy from
another person who looks rich but not-so from his outer appearances.

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Instead, I find that a person’s financial statements are a more reliable
method of determining one’s level of wealth. Here, I’ll share how is it
practical to our own financial lives:

When Looking Rich is not Being Rich 

Let’s meet Chan, a 24-year old electrical engineering graduate who has
lately landed himself a job as an associate in an engineering firm in
Petaling Jaya. He makes RM 3,000 a month, spent RM 2,500 a month,
and hence, able to save a total of RM 500 a month.

At 24, he has a savings of RM 15,000. Thus, his wealth can last him for 6
months. It is useful to him if he decides to quit his job to find another.

Instead, he worked hard and soon climbed his ranks to be a project

engineer over 3 years. Now, at 27, Chan increased his income to RM
7,000 a month. With the rise in income, Chan upgraded his lifestyle and
spent RM 6,500 a month. It includes having a fancier car, expensive
meals, holidays, smartphones, entertainment ... etc.

Chan felt that he is doing good as he continues to save RM 500 a month

and he has, after 3 years of saving RM 500 a month consistently,
increased his amount of savings to RM 28,000. Formula:

Chan’s Savings
= Savings at 24 + (RM 500 x 12 months x 3 Years)
= RM 15,000 + RM 18,000 = RM 33,000.

Chan looks more ‘prosperous’ but is he wealthier?

The answer is Nope. Chan’s wealth at 27 is 5 months, a decline from 6

months of wealth when he was 24. This is despite him having more
amount of savings.

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 Chan’s Age 24 27

Savings Amount RM 15,000 RM 33,000

Monthly Expenses RM 2,500 RM 6,500

Chan’s Wealth 6 months 5 months

What if Chan Maintains his RM 2,500 a Month Lifestyle? 

Let’s assume, Chan’s monthly pay increment is a step-up from RM 3,000
at 24, to RM 4,000 at 25, to RM 5,500 at 26, and finally hitting RM 7,000
at 27. In the 4 years, Chan maintains his living expenses at RM 2,500 a
month. Hence, Chan would save RM 114,000 in 4 years.

Chan’s Monthly Salary Monthly Monthly Annual Savings

Age Expenses Savings

24 RM 3,000 RM 2,500 RM 500 RM 6,000

25 RM 4,000 RM 2,500 RM 1,500 RM 18,000

26 RM 5,500 RM 2,500 RM 3,000 RM 36,000

27 RM 7,000 RM 2,500 RM 4,500 RM 54,000

Total Savings after Working 4 Years RM 114,000

Initial Savings at 24 RM 15,000

Accumulated Savings after 4 Years RM 129,000

Adding to his initial savings of RM 15,000, Chan would increase his

savings to a total of RM 129,000. His wealth is RM 52 months. Thus, it
means that Chan has enough savings to sustain his current lifestyle for,
at least, 4 years if he chooses to quit his job today.

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 Chan’s Age 24 27

Savings Amount RM 15,000 RM 129,000

Monthly Expenses RM 2,500 RM 2,500

Chan’s Wealth 6 months 52 months

As a result, Chan has become wealthier ... although he might be

‘branded’ as a list of names like Scrooge, Stingy, Thrifty, ‘Koo-Hon’,
‘Kiam-Siap’... etc. In a way, peer pressure may come as a difference
maker between you ‘looking rich’ or a person who is really wealthy.

Considering it part of the price of ‘Becoming Rich and Wealthy’.

The Power of Investing for Cash Flows 

Supposedly, Chan had invested half of his savings into an investment
vehicle, it could be stocks, ASB, properties ... etc., and is now receiving
an average yield of 5% per annum. As for his remaining half, Chan places
RM 34,500 in a handful of fixed deposit accounts which earns 3.5% yield
per annum and RM 30,000 in his savings account. ​(Note: Returns have
to be in Cash Flows, not Capital Gains)

Chan earns RM 4,433 a year or RM 369 a month in passive income.

Chan’s Annual Annual Monthly Cash

Assets Amount Yield Cash Returns Flows

Investment
Vehicles RM 64,500 5.00% RM 3,225 RM 268.75

Fixed
Deposits RM 34,500 3.50% RM 1,208 RM 100.63

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 Savings RM 30,000 0.00% RM 0 RM 0

Total RM 129,000 3.44% RM 4,433 RM 369.42

If Chan stops working today, he will continue to earn a passive income

of RM 369 for, at least, one year. This amount would subsidise Chan’s
living expense of RM 2,500 a month. Hence, Chan’s net cash outflow per
month is reduced to RM 2,131.

Therefore, his wealth of RM 129,000 is estimated to sustain his lifestyle

for 61 months as a result of receiving passive income. Imagine. What
would your life look like if you know that you have enough finances to
last you for 5 years without working?

Chan’s Age 24 27 27

Savings Amount RM 15,000 RM 129,000 RM 129,000

Monthly Expenses RM 2,500 RM 2,500 RM 2,500

Monthly Passive
Income RM 0 RM 0 RM 369

Net Cash Outflow per

month RM 2,500 RM 2,500 RM 2,131

Chan’s Wealth 6 months 52 months 61 months

Achieving Infinite Wealth 

‘What if, the amount of cash flows received from your investments have
really surpassed your monthly expenses?’

Congratulations! You have achieved financial freedom and more

importantly, a lifetime of infinite wealth.

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In the case of Chan, if his passive income is RM 2,500 a month which
works out to be equivalent to his monthly expenses, he can practically
quit his job and be comfortable, knowing that his accumulated savings
would not deplete, at least, for the shorter term.

Chan’s Wealth
= Savings / (Monthly Expenses - Monthly Passive Income)
= Savings / (RM 2,500 - RM 2,500)
= Infinite Wealth

Chan’s Age 24 27 27 Certain Age

Savings Amount RM 15,000 RM 129,000 RM 129,000 Any amount

Monthly Expenses RM 2,500 RM 2,500 RM 2,500 RM 2,500

Monthly
Passive Income RM 0 RM 0 RM 369 RM 2,500

Net Cash Outflow

per month RM 2,500 RM 2,500 RM 2,131 RM 0

Chan’s Wealth 6 months 52 months 61 months Infinity

Conclusion: A Common Road to Real Wealth  

In short, let me summarise with a handful of pointers which are useful if

you intend to build real wealth for the long-term.
1. Wealth is measured based on time, not money or possessions.

2. Looking Rich is not Being Rich.

3. Maintain Current Lifestyle despite Pay Raise. Unless if you can

continue to raise income faster than your increase in living

Page 11 of 57
 expenses.

4. Turn excess savings received into cash-producing investment

assets.

5. Infinite Wealth is achieved when Passive Income exceeds your

monthly expenses.

Page 12 of 57
 7 Quick Tips to Clear Off Your Bad Debts.

Imagine.

You finished work, drove home, and the very first thing that ‘greets’ you
after a long day of work is an envelope that contains your credit card
statement which states:

Outstanding Balance: RM 12,345.67  

And, you are overwhelmed as you wonder: ‘How on earth am I going to

pay off my credit card debt? It is way too much, and I do not have much
cash in hand to do so. Am I screwed?’

If that is you, I think, ‘feeling screwed’ is a good start. At least, you know
that it is a problem and you are not living in denial, thinking that ‘all
things - including credit card bill’ would eventually fall into place. As
quoted, wisdom starts when one begins to say: ‘I don’t know. Please
help me.’

Today, regardless of how much the amount of outstanding balance it

may be, it is not the ‘end of the world’. There are methods you can
apply to get yourself out and enjoy freedom from these bad debt.

Here, I’ll share 7 hacks that you can immediately apply to clear off these
debts.

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#1: What’s a Bad Debt?  
First, we must understand that not all debts are bad.
There are two types of debt: Good Debt and Bad Debt.

Good debt is debt that makes you richer. For instance, real estate
investors are experts in using debt as leverage to invest in properties
and thus, become a lot richer and wealthier over time.

Bad debt is debt that makes you poorer. For instance, a lot of people
borrowed money to buy things where their value drops over time, thus,
resulting them to become poorer. They include credit card debt &
personal loans as their interest rates are substantially higher than good
debt like mortgages.

#2: Discover the Root Cause 

For some, life did happen. Perhaps, it stems from medical bills, or a
failure in business or experiencing a pay cut, retrenchment, or any
setbacks that are .... really no laughing matter. If that is you, just know
this: It is temporary and here with KCLau.com, we wish for a speedy
recovery in your financial life.

In most cases, having excessive bad debts is more than just a financial
issue, but rather, a psychological issue. I believe there is a deeper root
cause which might be the culprit to your financial problems. If you think
about it, it is common to find people without much money to:
- Buy stuff that one don’t really need?
- Attend expensive social gatherings?
- Go on a holiday trip overseas?

Page 14 of 57
If that is you, please do take some time to do some soul searching. I
think it can be helpful if you take a stroll in the park to reflect on these
questions: ‘As of now, do you find yourself trying to:
- Keep up with the Joneses?
- Protect your image of success?
- Impress people whom you care but doesn’t honestly care about you?

The list above is just a handful of examples to get your brain going.
Please treat it as an exercise. The goal is to know yourself better,
understand what and why something is important to you, and hopefully,
you can decide whether or not, a U-Turn in your financial situation is
necessary.

If you think it is, then, let us move on to Step #3:

#3: Work with a Partner  

If you are young and single, you may consult your parents about it. They
would offer some practical advice (lashing, nagging, scolding... maybe).
But, for most people, you may even receive financial grace from your
parents, and it could be a great temporary relief to your problems.

But, with that said, you might lose a valuable chance to improve your
financial intelligence as you have received a ‘bailout’ from your parents.
If you intend to be smarter with your finances, try refraining yourself
from ‘bailouts’ despite its usefulness as a ‘Get Out of Jail Card’ for your
financial problems.

I am confident if you seek advice, knowledge and insights... instead of

money to solve your problems, you would become smarter with your
finances and are more capable of taking on greater financial issues - the
right type, I mean in the future. Hence, if you can find a mentor or a
trusted friend who are savvier financially than you to work with you on
solving your financial problems, that is a good thing.

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If you are in a relationship, it is ideal for both of you to work on such
issues not alone but as a team. It is helpful to be transparent about it
and to work on it as a couple. It may not be easy initially. But, I am sure
of one thing: ‘If both of you succeeded in clearing your own bad debts,
your relationship would come out stronger and more refined as a
couple.

Otherwise, it is hard to remain in a healthy relationship for the

long-term if anyone of you chooses not to be on the same page in
financial matters and work on improving them. So ... work on it.

#4: Create a Spreadsheet 

It’s helpful to create a spreadsheet where you list down:
- Your Credit Cards & Personal Loans
- Your Outstanding Balance of each Credit Cards & Personal Loans.
- Your Interest Rate for each Credit Cards & Personal Loans.
- Your Monthly Payments over the next 12 - 24 months.

If you are unsure on how to go about it, you may get a trusted friend to
work it out for you. All in all, a Spreadsheet is one which gives you an
overview on your debt position so that you can strategise and prioritise
which bad debt you want to clear off first, second, …. until the last one.

#5: Go on the Offensive ... 

If you have little financial resources to work with, you may start by
setting up a small goal to raise an additional RM 500 a month to clear up
your bad debt.

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It may be hard initially. But, if you have learnt how to raise RM 500 a
month to clear bad debts, very soon, you would also know how to raise
RM 500, or even more, for your future investments.

‘Okay ... so, where do I start?’, you may ask.

Here, I’ll share a guideline that enables you to take baby steps that
propels you towards freedom from bad debt. First, you can split the RM
500 per month into two categories: (1) Earn RM 250 a month (2) Cut RM
250 a month in expenses.

For a start, here is a list of what you can do to:

Make RM 250 a month

- Do Overtime.
- Make More Sales if you’re a salesperson.
- Take up one or two freelancing jobs.
- Sign up as a Uber or Grab Driver.
- Have a part-time job.
- Give tuition classes to school kids.
- Sell your unwanted stuff on eBay or Mudah.my
- Refer customers to your business friends for referral fee.
- Join MLM, sell insurance, but please … don’t join money games.

Save RM 250 a month

- Track your expenses. You’ll find items to cut on very quickly.
- Say ‘No’ to expensive social gatherings.
- Say ‘No’ to smoking, alcohol, nightclubs and KTVs.
- Say ‘No’ to gambling.
- Cut entertainment expenses.
- Cancel expensive gym memberships. Run in the Park.
- Cancel Low-Yielding Unit Trust Investments.
- Cancel Endowment Plans with Low Sum Assured.
- Exercise Delay Gratification.
- Quit drinking Starbucks or just reduce four RM 15 drinks a month.

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#6: A Word on Balance Transfers 
Being aware of the latest promotion on balance transfers is helpful.
However, it is also imperative for you to check the following before
agreeing to do a balance transfer on your credit card debt:

- Is it on an Effective Rate or Flat Rate?

- Is it calculated based on an Annual Rate?
- What are the Clauses for Early Repayment?
- How much is your Monthly Repayment after doing Balance Transfer?

If you are not sure whether a Balance Transfer is to your advantage, you
might want to consult a trustworthy friend first before proceeding on it.

#7: Celebrate Small Successes 

Please don’t forget to live life.
For instance, if you have made it a goal to raise RM 500 per month and
you did just that in the first month, celebrate that…. with a ‘Milo Kosong
Beng’. Haha.

Thus, it’s important to set small goals such as:

- Did I save RM 250 a month?
- Did I make an extra of RM 250 a month?
- Did I clear debt on one of my credit cards in 3 months?

These small goals - are essential as they keep you focused on the
needful on a daily basis while working towards true freedom from bad
debt.

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 5 Insurance Hacks to Safeguard Your
Financial Future.

I’m an advocate of one achieving financial freedom through savvy

investing.

Having said that, I too believe that not everyone is ready to invest. It is
vital for anyone first to be financially fit to invest. It means, before we
start our hunt for the next stock or property deal, we should get our
finances in order. It involves having, but not limited to:

- zero or negligible outstanding credit card debt or personal loan.

- savings to fund at least 6 months worth of living expenses.
- a complete life & medical insurance plan.

Here, I’ll focus on life and medical insurance matters.

Why? Let's assume, we have built ourselves a sizeable investment
portfolio. It is worth a lot to us personally, and we are proud of it. But, if
we are to face with a misfortunate event such as being hospitalised for
medical treatments, here is my question: ‘Without insurance, who do
you think will be footing in your bill?’
- Your Family (Wife, Brother, Sister, Father, Mother ... etc.)?
- Your Relatives (Uncles, Aunties, Cousins, ... etc.)?
- Your Friends?

"Don’t they have financial issues of their own?"

If it is possible, you may not want to burden them especially if you are
the type that loves your friends and family members and cares for them
responsibly.

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I think it makes sense to have the insurer to take care of it and hence,
avoiding the need to liquidate our portfolios to pay for it.
Most of us do get the idea. But yet, we are still underinsured as a nation,
which is a concern. Perhaps, it is due to a general misconception, where
life insurance is expensive and unaffordable. This either stems from:
- Lack of financial education or awareness of its importance
- Bad marketing as some agents are only interested in selling the most
profitable products
- The thoughts of you being immortal

As such, I’ll share, from my viewpoint:

- how to get the best insurance deals in the market today?
- how to save or slash your insurance cost by 30 - 50% a year?
- how to fund your premiums by using investment income?

Thus, here are the 5 key life insurance hacks that you need to know
before you buy your next insurance policy:

#1: Improved Your Health Condition 

I heard from my insurance agent that as much as 30% of his customers
have received either a rejection or a conditional acceptance on their
proposals to buy new insurance policies from insurers. In most cases, it
is due to a poor health condition.

"Is it because the clients are all old uncles and aunties?’
The answer is nope.

His clients are relatively young where their age is below 40. It is a
concern as we, young people, should enjoy excellent health. Here, I’ll
share 3 things which all of us can start doing now to improve your health
and enhance your chances of getting a straight acceptance for your next
purchase of an insurance policy:

Page 20 of 57
Tip 1: Body Mass Index Below 30
Here’s one of the main reasons why insurers reject a new customer:
Obesity.

If you are overweight, don’t worry. I’m not here to condemn you or put
you on a strict diet or a heavy workout to get you back on shape. Will
power is useless for most who intend to lose weight and stay healthy.

Instead, the best way to start losing weight is as follows:

- Reduce carbs. Replace it with protein.
- Drink water, eat fruits and vegetables.
- Don't feel guilty about eating. Just eat better and healthier.
- Take a nice stroll in the park or go on a slow hike.

Tip 2: Blood Pressure

If a new potential customer is found to have hypertension, he would be
paying, at least, 20% higher insurance premiums than one who does
not. Hence, if you see yourself to have beyond (140/90) in your blood
pressure reading, it is time for you to adjust your lifestyle to improve
your health.

Tip 3: Quit Smoking

It is healthier, saves you money, and your premiums would definitely be
lower by 10% - 20% than non-smokers. I will not elaborate this as it is a
widely known fact.

#2: When is Your Birthday?  

Your insurance premium is calculated based on your ‘Age Next Birthday’.
So, as I write today which is on 31 January 2019, if you are born on:
- 1 January 1990: Your Age Next Birthday is 31. (Could be more
expensive)
- 1 June 1990: Your Age Next Birthday is 30. (Could be cheaper)

Page 21 of 57
In general, your premiums would be lower if you buy your policies at
lower age next birthday. Hence, if you wish to purchase your next plan,
you can meet up with your insurance agent some 3 months before your
birthday.

It allows you adequate time to get a new policy before your birthday.

#3: What to Buy First?  

If you are a fresh graduate and earns a salary of below RM 3,500 a
month, you may consider having medical coverage as your utmost
priority. As your income rises, you may then buy other types of life
insurance products. Here, I’ll share 2 types of medical insurance that you
can buy today.

Standalone Medical Cards

They are quite affordable. Most college students today are able to get
them as their prices are around RM 50 - 80 a month. It comes in handy if
you are really tight on budget. Unless your employer is providing the
top-notch medical coverage plan for you, you wouldn't want to save
money and omit medical insurance.

If you opine that these cards are expensive, but yet, you are using an
iPhone X, then Yikes ... You may want to rethink your life priorities when
it comes to your financial life.

Investment-Linked Cards
Today, the ‘better’ medical cards are sold as a package with
investment-linked life insurance policies.

Investment-linked policies are policies that package term insurance, unit

trust, and a medical card into one plan.
Here, I’ll share one tip that I used to boost my medical coverage in a
policy like this. For one of my policies, I requested for minimum term

Page 22 of 57
insurance coverage and unit trust investment value in exchange for
higher medical coverage.

My First Policy:
Low Insurance Cover & Unit Trust = High Medical Coverage

Presently, if you are below 30 years old, you can get excellent medical
coverage of about RM 1 million a year, with no co-insurance and lifetime
limit at a premium of approximately RM 200 a month. (Mine, of course,
has gone beyond the RM 1 million marks).

If your current medical coverage is below RM 1 million, I think, it is a

good time for you to think about an upgrade. It is really not that
expensive.
Of course, after I bought my policy as above, I had moved on to buy my
second policy which is strictly meant for life insurance. Thus,

#4: High Coverage-to-Premium Ratio 

The coverage-to-premium (CTP) ratio measures the amount of insurance
cover your beneficiaries are getting per RM 1 in premium. The rule of
thumb is to get the highest possible CTP ratio for our insurance
purchases.

Our ideal CTP ratio would vary according to our age, gender, health, ...
etc. For instance, if you are currently below 35, you may aim for a high
CTP ratio of 200 and above. The formula is as follows:

Month Premium = RM 150

Annual Premium = RM 1,800
CTP = 150
Minimum Sum Assured = RM 1,800 x 200 = RM 360,000

Page 23 of 57
This means, if you can afford a monthly insurance premium of RM 150,
you can aim for a life insurance cover of around RM 360,000 in the
event of death, total permanent disability, and 36 critical illnesses.

#5: Minimum Cash Value 

‘But when you with a high CTP insurance policy, what about its cash
value?’

Obviously, it would be low. As my aim is for coverages (protection), I

want the best insurance cover for the least amount of premiums. It is
not an investment bought with the purpose of making money.

Understandably, your insurance agent (could be your friend) may

debate with you on this. Please do not blame them for they are ‘trained’
in that manner by their immediate officers (superiors) and their
respective insurers.

Why? This is because their job, apart from being responsible insurance
agents, also involves finding additional funds to boost their insurers’
investment funds as a significant portion of profits is derived from these
investment funds.

Take a look at the fictitious quote below:

Fictitious Quote
Policy Investment-Linked Wholelife

Sum Assured RM 360,000 RM 300,000

Yearly Premium RM 1,800 RM 5,000

CTP 167 60

Cash Value @
Year 20 Negligible RM 100,000

Page 24 of 57
Personally, I prefer the investment-linked policy over a whole life policy.
Why?

This is because I would save RM 3,200 a year in insurance premiums and

it can be invested for higher returns. For instance, let's make a
comparison if you are making about 6.5% per annum in dividend yields
from a stock portfolio. If you choose to buy the RM 1,800 a year policy
and pay for it for 10 years, you would have saved RM 32,000 in
insurance premiums in Year 10.

If all of these RM 32,000 are invested in a stock portfolio that yields

6.5% per year, they will generate RM 2,080 per year in dividends
(passive income).

The amount of passive income is sufficient to pay for my policy, and I

would not be burdened by its premiums. In fact, I have upgraded my
insurance policies as I increased my passive income over time. It is a
better way of enhancing my life insurance policies over the long-term.

If you intend to use the saved premium of RM 3,200 to speculate stocks

or on Bitcoin or any other forms of ‘gambling activities’, then, it will not
work for you.
One important tip here - you can get all the features of #3, #4 and #5 in
one policy alone - Investment-linked Policy. Get full quotation from
several insurance companies, asking for these features:
- Investment-linked plan
- a medical card attached
- Highest coverage-to-premium ratio
- Minimum cash value, the least possible

Then ask the agent to show you the tricks of preventing the policy from
lapsing due to insufficient fund. If the agent doesn't know how, you
should find someone who is more competent.   

Page 25 of 57
 5 Things Unit Trust Consultants Will Not
Tell You ...

Lately, I met up with a unit trust consultant.

‘Seriously? But Ian, I thought you are an avid stock investor. Why do you
need a fund manager when you can invest in stocks yourself?’

Good question.

Yes, I have built my own stock portfolio from scratch, and I believe
anyone of us can do it too without a fund manager. As such, I usually do
not meet up with a unit trust consultant as I do not have any intentions
to do so.

But, as I write, I am still a young chap, and I am qualified to enjoy the

PRS Youth Incentive scheme offered by the government. So, I have
decided to check it out myself before making my final decision on it.

The meeting was casual. We had coffee. After some pleasantries, Mr

Tan, the consultant began his presentation which has been well
rehearsed. Apart from PRS funds, I was also introduced to a series of
unit trust funds, that are not part of the PRS scheme.

After the meeting, I have collected my thoughts and did some studies on
them, both PRS and non-PRS unit trust funds.

Here, I’ll share 5 things to know about unit trust funds first before you
invest in them. Most likely, these are the kinds of stuffs that unit trust
consultants would not tell you beforehand when you are considering to
invest in them.

Page 26 of 57
#1: Beating FDs and EPF  
Tan: ‘Ian, it’s not enough to rely on FDs and the EPF to finance our
retirement.’
Ian: ‘What do you suggest?’
Tan: ‘How about our equity fund?’
Ian: ‘What’s the sales charge?’
Tan: ‘5% of your capital.’

As I write, most FDs are offering interest rates a little higher than 3% per
year. As for the EPF, they have declared 5% - 7% of dividends to their
contributors.

So, if you are considering an investment into a unit trust, I believe you
may need to achieve:

FDs:
If you park RM 1,000 in FDs, you’ll receive RM 1,030 upon its maturity.
Instead, if you choose to put it in an equity fund, you would first incur a
sales charge of 5%, which is RM 50. Hence, you are left with a total of
RM 950 in initial capital. To match your returns from FDs, you would
need to earn RM 80 in your first year from your unit trust fund. It
equates to a gain of 8.42% from RM 950 of your initial capital.

FD:
= RM 1,000 + 3% Interest Rate = RM 1,030.

Equity Fund:
= (RM 1,000 - 5% Sales Charge) + 8.42% = RM 1,030.

EPF:
For every RM 1,000 in your EPF account, your account would grow to
RM 1,060 if it declares 6% in dividends. This means you would need to

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earn a total of RM 110 in your first year from your unit trust fund. It
equates to a return of 11.58% from RM 950 of your initial capital.

EPF:
= RM 1,000 + 6% Interest Rate = RM 1,060.

Equity Fund:
= (RM 1,000 - 5% Sales Charge) + 11.58% = RM 1,060.

#2: On Fund’s Performances 

Tan: ​‘The performance of this fund is good. It has made, on average, 8%
a year in returns since its inception in 2013.’

Question:
How are returns from unit trust funds measured?

Answer:
It is based on net asset value (NAV) appreciation of unit trust funds in a
specific period. It is a measure of capital growth, not cash returns.
Hence, their performances are dependent on the NAV fluctuations of
unit trust funds, which aren’t guaranteed.

What is less mentioned to the public is the term: ‘Fund Volatility Factor
or FVF’.

It is measured based on an investment’s annual returns for 3 years. For

instance, if you opened an FD account 3 years ago and had received 3%,
3%, and 3% in interests for the last 3 years, then, the FVF is 0% which
indicates that your returns from FD are not volatile.

It is mandatory for unit trust funds to report their FVF. Hence, if you
happen to find a fund where its FVF is 10%, it means, its returns would

Page 28 of 57
deviate by +/- 10% per annum. Hence, if a fund is averaging 8% in
returns a year, its performances can be fluctuating between -2% to 18%.

Thus, funds with high FVF would have greater uncertainties in future
returns as they are more volatile than low FVF funds. It explains why
some have experienced inconsistent returns from investing in unit
trusts.

#3: Am I Buying a ‘Trading Fund’?  

Tan: ‘The objective of investing in an equity fund is to achieve
mid-to-long term capital appreciation. A unit trust is a long-term
investment, and it is not really for short-term gains.’

I believe many sincere people buy units of unit trust funds on a regular
basis as they think that they are ‘investing’. In my opinion, they could
have been grossly misled.

Here, I’ll share another term which is less mentioned: ‘Portfolio

Turnover Ratio or PTR’.

It is a simple way to tell us whether a unit trust fund is genuinely an

investment fund or a ‘trading’ fund. Let me illustrate with an example.

For instance, IGB REIT is a REIT that derives rental income from two
properties: MidValley and the Gardens Mall. Since its launching, it never
bought or dispose of any investment properties. Thus, IGB REIT’s PTR is
zero as there is no change at all in the composition of its investment
portfolio.

Meanwhile, there is a high probability of finding ‘equity funds’ which

possess a high PTR. This shows that its fund manager is really active in
buying and selling investment securities in the market. If a fund’s PTR is
consistently high, then, it is practically a trading fund as it has less

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tendency of holding onto investments for the long-term, which investors
usually do.

Basically, buying a high-PTR fund is like handing over your capital to your
fund manager to ‘play, trade, or even speculate’ the stock market. So, it
is truly not an investment as investors hold onto their investments for
the long-term.

#4: Guaranteed Returns 

Tan: ‘Of course, I must tell you beforehand that returns are not
guaranteed.’

Pardon me for writing this.

I believe the priority of all unit trust consultants is to make their
principals, i.e., mutual fund companies rich first over sincere customers
(unit trust investors).

A unit trust is a vehicle of the rich to generate excellent passive income

and cash flow to its owners. It is a resilient business model that is able to
create stable income in both good and bad times. Here is why:
- In good times, when funds make money, unit trust companies make
money.
- In bad times, when funds lose money, unit trust companies still make
money.

You may comment: ​‘Huh? That does not seem to be fair, right?’

Yes, it is not if you believe that unit trust companies should only be paid
if they generate profits from investing your money. After all, you may
wonder why do you need to pay them if they lose your money.

So, let me share what is guaranteed if you choose to invest in unit trust:
- Payment of Sales Charges for Units Bought.

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- Payment of Management Fees for Units Held within Your Account.
- Payment of Trustee Fees for Units Held within Your Account.
- More Payments if Units went up in Value.
- Less Payments if Units went down in Value.

Bottom Line:
Unit trust companies are guaranteed of income regardless of market
directions in the future. Your investments, unfortunately, not so. This
has illustrated how the rich invest differently from the rest of the
population.

#5: I’m a Risky Investor?  

Ian: ​‘Well Tan, I invested in stocks.’
Tan: ​‘So, you are an aggressive investor. I think you can take higher risks.
After all, stock investors are high-risk takers.’

Ian: ​‘Ehm… Not exactly, bro. I’m actually quite conservative.’

There is a misconception of who stock investors are, their nature and

what they actually do. It arises from one’s inability to differentiate
between: an investor, a trader, and a speculator. Their differences are
plentiful, but here, I’ll highlight one significant difference between an
investor and a speculator.

In most cases, investors are conservative by nature. Before investing,

they wish to know what they are buying into, how their money is
utilised, what returns can they expect, how potential risks could be
mitigated and so on and so forth.

This is why when investors buy stocks, they would want to gather and
read their annual & quarterly reports, press releases, and presentations
before putting down their capital.

Page 31 of 57
But, it is not the same for unit trust. Most people ‘invest’ in unit trusts
because they either trust their friends and family members who are unit
trust agents or hope that unit trusts would do better than FD and EPF.
But, the common thing is that they do not know how their money would
be managed or invested but just ... hope somehow these units would
appreciate in prices in the future.

From an investor’s point of view, if a unit trust consultant fails to explain

how my money is going to be invested, I reckoned that the investment
in a unit trust is very risky.

Now, if you are reading this and are interested to find out - ‘what really
is going through the mind of a savvy investor when he invests?’, then,

let us move onto the chapter.  

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 7 Investment Principles I Learnt from
Berkshire Hathaway’s Annual Report

Reader: ‘Ian, should I buy Gamuda Bhd today?’

Ian: ‘Why do you want to buy Gamuda Bhd?’
Reader: ‘The price now is RM 2.48, some 50% drop from RM 5 in April.’
Ian: ‘Do you know how much earnings Gamuda is making lately?’
Reader: ‘I don’t know.’
Ian: ‘How much return on investment (ROI) are you expecting from
Gamuda?’
Reader: ‘I don’t know.’
Ian: ‘If Gamuda drops more, would you sell or buy more?’
Reader: ‘I haven’t thought about that. What do you think I should do?’
Ian: ‘I don’t know. What is your plan?’

Are You Speculating thinking that You are Investing?  

Many who buy and sell stocks believe that they are ‘investing’ when in
fact, they are speculating. It is evident when one purchases a stock
based on a person’s opinion on stock prices and where it would be
heading in the future, not based on a complete study of the stocks’
business models, financial results, and the plans for future growth.

Most know very little about their stocks that they have bought into as
they are just buying ‘stock codes’ in the hope that they would
‘somehow’ go up in prices. In a way, the mindset is similar to one who
buys lottery tickets from Magnum 4D in the hope of receiving a jackpot.
Here, I am not against you if you are speculating in search for some
excitement and fun from the stock market.

Page 33 of 57
But, if you sincerely wish to improve your financial standings through
investing in stocks and believe that it involves speculation and
prediction of stock prices, I would like to encourage you to change your
mindset about stock investing. Let's revisit the basics of stock investing
as profoundly explained by Warren E. Buffett, billionaire stock investor.

Here are seven investment principles that I learnt from Berkshire

Hathaway’s Annual Report 2017.

Principle #1: I View Common Stocks as Interests in 

Businesses  

Charlie and I view marketable common stocks that Berkshire owns

as interests in businesses, not as ticker symbols to be bought or
sold based on their ‘chart’ patterns, ‘target’ prices of analysis or
the opinions of media pundits.

Source: Page 10 of Berkshire Hathaway’s Annual Report 2017

Warren Buffett is an advocate of business-like investing in the stock

market. It means, buying shares of a company is viewed as a decision to
be a part-owner of a business where you intend to hold onto it over the
long-term or ‘indefinitely’.

Here, I would list down five stocks that Warren Buffett had invested and
had held their shares for a minimum of 10 years, not 10 months or 10
days.

Figures in US$ Million

Page 34 of 57
 Market Value
No. Stocks Costs (31/12/2017)

1 American Express Company 1,287 15,056

2 Wells Fargo & Company 11,837 29,276

3 U.S. Bancorp 3,343 5,565

4 The Coca-Cola Company 1,299 18,352

5 Phillips 66 5,841 7,545

Source: Page 9 of Berkshire Hathaway’s Annual Report 2017

Principle #2: Buffett Looks for Quality Businesses.   

For new businesses, the key qualities we seek are durable
competitive strength and high-grade management, good returns
on the net tangible assets required to operate the business,
opportunities for internal growth at attractive returns, and finally, a
sensible purchase price.

Source: Page 9 of Berkshire Hathaway’s Annual Report 2017

Instead of looking at stock prices, Buffett would first study the stock’s
business model, its management team, its financial results, and assess
its ability to grow in the future. All of these qualities are studied
beforehand, way before he even considers its stock price.

If the business is desirable, Buffett would only buy its shares if the price
is right.

‘Would you pay RM50 for a great fish or RM10 for a rotten fish?’. If you
think about it, a rotten fish is worthless regardless of its price. You can’t
eat it. Hence, isn’t it logical to first assess the quality of a fish before

Page 35 of 57
even considering its price? In Buffett’s case, the same wisdom applies to
stocks.

Principle #3: Buffett has 6 Acquisition Criteria 

We are not interested, however, in receiving suggestions about
purchases that we might make in the general stock market.

Source: Page 23 of Berkshire Hathaway’s Annual Report 2017

I realised many believe that ‘success in stock investing’ depends on

advice, recommendations, and tips from friends, family members,
financial media, and stockbrokers. Most are seeking a free and simple
answer of what to buy today. If stock investing is that simple, then, all of
us should be quitting our day job or business and become a millionaire
stock investor ourselves.

The message is clear: ‘Success is stock investing is not about asking for
tips and recommendations about what stocks to buy today.’ The reason
why you would ask for tips is that you do not have your acquisition
criteria before you invest in the stock market.

Besides, here is another nugget of wisdom. If a billionaire stock investor

has set himself acquisition criteria for stock, shouldn’t we who own
much lesser than Buffett have our standards established before
investing? What do you think?

In Buffett’s case, he has laid down six acquisition criteria for a stock, and
it works for him. If you do not have your own acquisition criteria, you
may take a look at his as a reference:

1. Large Purchases (Minimum of US$ 75 million in Pre-Tax

Earnings).
2. Demonstrated Consistent Earning Power.

Page 36 of 57
 3. Good Return on Equity while Employing Little or No Debt.
4. Management in Place.
5. Simple Business.
6. An Offering Price.

Principle #4: A Preference for Cash Flows  

Our goal is to directly own a diversified group of businesses that
generate cash and consistently earn above-average returns on
capital.

Source: Page 18 of Berkshire Hathaway’s Annual Report 2017

‘Should I invest for capital gains or dividend yields?’ This question is an

age-old one and remains frequently asked by new budding investors.
Buffett, who had achieved a Compounded Annual Growth Rate (CAGR)
of 20.9% in market value of Berkshire Hathaway’s shares for 50 years,
has revealed his ‘secret sauce’ for investing and that is to focus on cash
flows.

Why cash flows? Because it leads to capital gains. How? If a business has
good cash flow management, it can reinvest its cash flow to expand its
business. This includes the development of new products, expansion of
plants and markets and even acquisition of new companies which would
grow a stock’s sources of income. With more income and cash flows, the
stock would then be revalued at a higher price when it has more
income-producing assets.

The success of a stock’s ability to invest its capital is measured by

calculating its return on equity (ROE). If a company makes RM 1 million
in annual earnings from a capital (shareholders’ equity) of RM 10
million, then, its ROE is 10% per annum.

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 ROE = (Shareholders’ Earnings / Shareholders’ Equity) x 100%

Suffice to say, Buffett would prefer a stock with higher ROE than one
with little or no ROE as it is efficient in using the capital to generate
wealth to its investors.

Principle #5: A Depressed Stock Market is Good News to 

Berkshire Hathaway  

A depressed stock market is likely to present us with significant

advantages. It tends to reduce the prices at which companies
become available for purchase. It is easier to buy small pieces of
wonderful businesses - including the ones we already own - at
attractive prices. Berkshire would benefit from a sinking stock
market and it is good news for Berkshire.

Source: Page 19 of Berkshire Hathaway’s Annual Report 2017

Buffett is an accumulator of fundamentally sound stocks. He does not

build his wealth from stock trading or speculating. If Buffett paid US$ 1
to invest in one share of a good business, then, the same percentage at
US$ 0.80 is a better deal than US$ 1.00. Instead of selling, Buffett would
accumulate more of these shares, averaging down its cost per share for
the same stock.

Principle #6: A Good Night’s Sleep is More Important than 

‘High Risk, High Returns.’  

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The financial calculus that Charlie and I employ would never
permit our trading a good night’s sleep for a shot at a few extra
returns. I never believed in risking in what my family and friends
have and need to pursue what they do not have and do not need.

Source: Page 19 of Berkshire Hathaway’s Annual Report 2017

Here is the thing. Even Buffett, the world’s greatest investor, is human
and had made costly investment mistakes. As we build our wealth
investing in stocks, we are bound to make some mistakes or lose some
of our capital along the way, despite we being prudent with our stock
investments.

For instance, you are confident of stock and have capital of RM 50,000
to invest in it. First, would you dump in RM 50,000 to buy the stock? No.
Second, would you borrow money from family, friends, and financial
institutions like banks and insurers to grab as many shares as you may
buy? Of course, not. You may think: ‘That is insane.’

This is why no matter how confident you are, it is best to learn about a
handful of risk management principles and apply it strictly to your
portfolio. Remember this: A good night sleep is worth a lot more than
taking an unnecessarily high risk to generate higher returns.

Principle #7: Have Some Cash Standby for Great 

Opportunities  

Over the past 53 years, the company has built value by reinvesting
its earnings. Year after year, we have moved forward. Yet,
Berkshire Hathaway shares have suffered four major dips:

Page 39 of 57
Figures in US$
No. Period High Low Drop by

1 Mar 1973 - Jan 1975 93 38 -59.1%

2 2/10/1987 - 27/10/1987 4,250 2,675 -37.1%

3 16/9/1998 - 10/3/2000 80,900 41,300 -48.9%

4 19/9/2008 - 5/3/2009 147,000 72,400 -50.7%

In the next 53 years, our shares will experience drops resembling

those in the table. No one can tell you when these would happen.

When major declines occur, however, they offer extraordinary

opportunities to those who are not handicapped by debt. That’s
the time to heed these lines by Kipling’s If:

If you can keep your head when all about you are losing theirs ...

If you can wait and not be tired of waiting ...

If you can think - and not make thoughts your aim ...

If you can trust yourself when all men doubt you ...

Yours is the Earth and everything that’s in it

Source: Page 10 of Berkshire Hathaway’s Annual Report 2017

It is always helpful to have some cash - despite it not bringing any gains
financially. Buffett has been investing in the stock market for 50+ years.

Page 40 of 57
He has seen the Nixon’s Shock (1973-1974), the Black Monday (1987),
Dotcom bubble (2000), and the Global Financial Crisis (2008-2009). To
him, stock market boom and bust are normal and expected.

In these times, when it happens in our future, instead of panic, stock

investors like Buffett would be in the stock market to buy great
companies at discounted prices. If an investor bought Berkshire
Hathaway at US$ 72,000 in 2009, his investment would grow to US$
326,706 as I write (November 2018), hence, giving him an impressive
return of 18.30% per annum.

Once again, the best time to buy a good stock is when the market is bad.

Page 41 of 57
 How to Buy my First Investment Property
if I’m a Fresh Graduate

A reader wrote to me:

‘Hi, I’m a fresh graduate. I’d just secured my job which pays a monthly
salary of RM 3,400. I want to start investing in property as I intend to
earn myself rental income. Ideally, the rent should cover the monthly
mortgage payments.
Question: How can I make this work?’

Here are 5 key things that you would work on first to better prepare
yourself for your first investment property.

#1: Debt-Service Ratio (DSR)  

First, you can estimate the maximum amount of property loan which
you could be eligible to obtain by using the free calculator at
loanstreet.com.my.

Based on the message above, let’s further assume that the questioner is
below 35 years old and now receives a gross monthly salary of RM
3,400. Thus,
- He can qualify for a maximum loan tenure of 35 years.
- His net monthly salary is estimated to be RM 2,900 after a deduction of
income tax, EPF, and SOCSO.

From the calculator, he may obtain:

- Maximum Property Loan: RM 428,943.
- Maximum Monthly Installment: RM 2,030.

Page 42 of 57
This is applicable only if he is entirely debt-free. The maximum loan that
he could obtain would be much lower if he has a car loan, outstanding
credit card debt, personal loan and PTPTN.

#2: Choice of Properties  

Second, you may narrow down your property search after you had
estimated the maximum loan as stated earlier in Point #1. From the
message above, my reader intends to earn rental income from his
investment property. Hence, I believe, he may choose to invest in a sub
sale property where its price is now below RM 400,000. The choice of
properties are:
- Low-Cost Flat
- Walk-Up Apartments.
- Medium-Cost Condominiums.

What about new projects which are under construction? In his case, the
new development does not qualify as he could not earn rental income
immediately upon purchasing his property.

#3: Down Payment 

The questioner qualifies for a 90% financing loan from local banks as he
is purchasing his first property.

From above, his selection of property would now be narrowed down

further by his available capital. As a rule of thumb, he should prepare as
much as 15% of his property price as his down payment, legal fees,
stamp duties, and as well as minor renovation on his property.

Thus, if he intends to buy:

- Low-Cost Flat worth RM 100,000, he needs RM 15,000.

Page 43 of 57
- Walk-Up Apartments worth RM 200,000, he needs RM 30,000.
- Medium-Cost Apartments worth RM 300,000, he needs RM 45,000.

#4: My RONW  
RONW stands for Return on Net Worth.
It is a measure of the efficiency of the usage of my capital to generate
wealth. It’s a useful formula to ascertain whether an investment would
bring more wealth to me or otherwise. Thus, it allows me to allocate my
capital more efficiently.

Let me use the following assumptions as an example to calculate his

RONW:
- He buys a Low-Cost Flat worth RM 100,000.
- His initial capital works out to be RM 15,000.
- The interest rate of his loan is 4.5%.
- His loan tenure is 35 years.
- His property is tenanted where the rent is RM 500 a month.
- The lease can offset both his instalments and maintenance fees.
- He assumes that property prices would appreciate by 2% per annum.

Thus, his RONW on this property investment is:

Asset:
Item: Value CG CR TR Total Return

Low-Cost Flat RM 100,000 2% 6% 8% RM 8,000

Note:
- CG = Capital Gains
- CR = Cash Returns (Annual Rent / Property Price) x 100%
- TR = Total Returns (Capital Gains + Cash Returns)

CR:

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= (RM 500 x 12 months) x 100% / RM 100,000
= 6% per annum.

Liability:
Item: Value CG IP IP Total Interest

Mortgage RM 90,000 n/a 4.5% 4.5% RM 4,050

Note:
- IP = Interest Payments

Thus, his net returns from this property investment is RM 3,950 where it
can be calculated:

Net Returns
= Total Returns - Total Interest Payments
= RM 8,000 - RM 4,050
= RM 3,950

Finally, his returns on net worth from this property investment is 26.3%.
It is calculated:

RONW
= (Net Returns / Initial Capital) x 100%
= (RM 3,950 / RM 15,000) x 100%
= 26.3%

#5: Risks 

Is 26.3% returns from a Low-Cost Flat sound enticing?

Before you get into it, let me share its potential downsides:

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 a. The conditions for Low-Cost Flat or any properties priced under
below RM 300,000 are often less ‘Posh’ or ‘Classy’ than lovely
condominiums.
b. Are you comfortable with letting your property to tenants who in
most cases are low-to-middle income earners?
c. In Malaysia, you can obtain a 90% loan to finance your purchase
of two properties. Thus, by getting a low-cost flat, you would be
locking in one of the two loans with a mortgage of a low amount.
This can be an issue if you have used up two 90% loans on
low-priced properties and intend to buy your third property of a
higher priced in the future. It is because the maximum mortgage
for your third property is 70% of its price.

What should I do?  

It depends.
Would you be able to grow your monthly income soon?

So, this is my verdict.

If you foresee yourself doubling or even tripling your monthly income
from RM 3,400 to RM 7,000 or RM 10,000 in one or two years, then, you
should be aiming for a much better property than a low-cost flat. In that
case, you should reconsider your investment options carefully.

However, if you don’t foresee yourself with such an increment in

income, then, it is okay. I am not writing this to condemn you. You may:

1. Settle with a property or two which is priced under RM 300,000.

I think it would be difficult for you to handle a property at a
higher price. Let’s put aside parental support for the time being
for the sake of education.

2. You may consider investing your income back into yourself to

enhance your employability. It involves acquiring new sets of

Page 46 of 57
 professional skills and networks of people that could lead to
higher revenue in the future.
3. Read the next chapter for more ideas.

Page 47 of 57
 If I have RM 25,000 to Invest ...

If you just graduated a few years ago, landed yourself a real job, and
started working for a fixed paycheck. From it, you paid bills, pinched,
and saved whatever is left diligently. Month after month, you repeated
this cycle until ...

Now, you have RM 25,000 to invest.

It may not be much to some. But, to you, it is a significant sum as the 25

grand is a representation of your labour. If that is you today, I feel you
bro ... after all, once upon a time, I was there too. I am not exactly one
who had a silver spoon when I arrived on planet earth.

You might be thinking, ‘FD rates are low. So, how should I invest my
money? Is it better to put it into stocks, unit trusts, gold, or bitcoin to
enjoy better returns for my money? What do you think?’
Here are my views:

#1: What is Your Investment Plan?  

Or, should I ask, ‘Do you have an investment plan?’

Most invest without one. That is risky. It is similar to a builder who is

trying his best to build a house without ... a blueprint. Consequently,
many failed to produce sustainable wealth from investing. In most cases,
these failures are not entirely the fault of the investment but from the
investors themselves.

Page 48 of 57
A simple write-up perfectly illustrates it in Robert Kiyosaki’s book,
‘Unfair Advantage’. Here it goes:

FAQ: ‘Is real estate a good investment?’

Answer: ‘I don’t know. Are you a good real estate investor?’

FAQ: ‘Are stocks a good investment?’

Answer: ‘I don’t know. Are you a good stock investor?’

FAQ: ‘Is a business a good investment?’

Answer: ‘I don’t know. Are you a good entrepreneur?’

Source: Page 119 - Unfair Advantage by Robert T. Kiyosaki

You may ask, ‘What should I do? Where to start? How do I find myself a
plan?’

That leads us to my next viewpoint.

#2: How Fast Can You Raise Money? 

Here is one thing that I had learnt from Mark Chua, Best-Selling Author
of ​Who Says You Can’t be Rich Working a 9-to-5 Job​ and that is …

The More You Earn, The More You Can Leverage to Invest.

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Even if you do not wish to leverage by taking on debt, you would still
have more investment options if you earn more money. Does it make
sense?

If you have RM25,000 today and you are currently saving RM500 a
month for investment, you would have lesser options than one who is
keeping or raising as much as RM5,000 a month ... even if he does not
have a single cent in his bank account today.

So, here is a question: ‘What is the difference between one who saves
RM500 a month from the other who saves or raises RM5,000 a month?’

Is it frugality and thriftiness? Nope as there is a limit to how much you

can ever pinch. If you make RM5,000 a month from your job today, can
you pinch more than RM5,000 a month? It is impossible.

The answer, in most cases, lies in income or a person’s earning

capabilities. So, if you currently make lesser than RM5,000 a month,
please read on, as I think, it could be an eye-opener to you.

#3: Can You Increase Your Monthly Income by 200% in 2 

Years? 
It means, if you are making RM3,000 a month, your immediate focus is
to boost your income to RM6,000 a month. Similarly, if you make
RM5,000 a month, then you should try aiming for RM10,000 a month.
Here, the idea is to increase your earned income which could be
leveraged for investments.

You may wonder, ‘Can or not? Is it possible for me?’

First and foremost, it depends on whether or not, improving your

abilities to earn more money is a necessity to your financial survivability.
If this is a necessity, I suppose you will find ways to make more money.

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So, how to boost my earned income?

There are many ways to go about it. But, in general, the common
denominator that I found lies in ‘The Art of Selling’. Your ability to sell
has a direct impact on how quick you are in raising cash or make money.

‘But wait, I’m not a salesman. Are you suggesting me to be a salesman?’

On the contrary, I think ​everybody, you and me, are salespeople

regardless of what or how you perceive salespeople are today. For
example, you are selling when you are interviewing for a job. You are
selling your time, effort, expertise and commitment to your employer
for a fixed paycheck. As for myself, I am selling my ideas to you so that
you are happy enough to keep visiting KCLau.com and if you are reading
this, I think I did a pretty good job as a salesman myself thus far. The
bottom line is this - All of us are salespeople with something to sell.

#4: If I have RM 25,000 to Invest ...

You think I have forgotten about it, don’t you? Nope, I did not go off
track and am still in the subject.

First, if I have RM 25,000 to invest and I don’t have a plan on how to

invest yet, I would place it in a short-term, like 3-6 month Fixed
Deposits.

Second, I would allocate time for coffee with people who are making
twice and thrice my monthly income, I would ask them for guidance. If
they are willing to sit down and talk, great. I would be thankful. I hope
you would too for they are offering gems of wisdom and their prices
are... coffee. Occasionally, or in most cases, they are happy to foot in the
bill. Most people are friendly and are willing to ‘pay it forward’ when it
comes to wisdom.

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Third, I would spend time on improving my ability to sell. This is critical if
I am making anything lesser than RM5,000 a month. There are only two
ways to sell: By Speech or By Writing. Speech includes direct selling,
presenting to a live audience ... including KCLau’s webinars. Meanwhile,
writing comprises a range of different skills such as copywriting,
advertising, and digital marketing.

In this case, you may read books about selling, marketing, or branding.
Or, you may attend a seminar, a conference, or a workshop on sale,
public speaking, digital marketing, social media advertising, etc. To
some, investing a portion of the RM 25,000 into a sales-related course
could be life-changing as it brings massive changes in terms of your level
of income.

After all, Sales = Income.

#5: But, I don’t have a Product to Sell

There is a much different interpretation of what selling is.

Here is mine. I think sales is about adding or creating real value to your
clients in exchange for income. The value is based on how efficient you
are in ‘solving’ your customers’ problems. Big problems command big
sales dollars for clients demand a better and higher standard of
solutions for their problems. Therefore, if you don’t have a product to
sell:

Firstly, you can create your own product. Perhaps, you can do
something which people are willing to pay money for. You could bake,
cook, write, teach, design, edit, program, etc. in exchange for cash.
What are you passions? As for KCLau.com, we are passionate about
bringing you the best financial ideas. Thus, we have created a dozen of

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online courses to transport you towards the economic freedom that you
truly deserve. So, start finding yours.

Secondly, you can sell other people’s products for a commission.

Perhaps, you are already a paying customer of a product which you like
very much. That is another good starting point to finding what you could
sell. Commit a few moments of thinking, researching, and
brainstorming. I am pretty sure that you would come out with
something if you sincerely have a burning desire to boost your earned
income today.

Conclusion 

‘But, I thought I would get typical answers like ‘Buy Maybank shares’ or
‘Invest in some Unit Trust funds’ or ‘Get into Real Estate’ for the
question above. How about some typical investment tips for me if I have
RM 25,000 to invest today?

Sorry mate. We don’t dish out typical or average investment advice for
we do not have plans to be typical of average ourselves.

Remember: Investment is a Plan... not a Procedure nor a Product.’ So,

 
the best and the most responsible answer I can share is - Start Having
Your Own Plan if You Don’t Have One.

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 10 Wisdom Nuggets to Improve Your
Financial Life

Congratulations!

You have made it through all the chapters of this eBook.

It shows that you have a sincere desire to improve your financial future.
Thus, you have earned my utmost respect.

You exposed yourself to pearls of wisdom in multiple areas of personal

finance, from clearing lousy debt to insurance and investments.
Understandably, if you are not financially savvy, it is an eye-opener and
a lot of information to swallow.

Here, let me summarised my key points into ten wisdom nuggets which
you can use immediately to improve your financial life. They are:

Wisdom 1:
Wealth is the number of days you can survive
and maintain your standard of living without physically working​.

Wisdom 2:
Looking Rich & Spending like a Rich
does not necessarily mean that You are Rich.

Wisdom 3:
Maintain Your Current Lifestyle despite Receiving a Pay Raise.
Turn Excessive Savings into Cash-Producing Investments.

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 Wisdom 4:
Infinite Wealth is achieved when
Your Passive Income exceeds Your Monthly Expenses.

Wisdom 5:
There are two types of debt: Good Debt and Bad Debt.
Good Debt makes you Richer. Bad Debt makes you Poorer.

Wisdom 6:
Priority in Buying Insurance Policies:
(1) Medical & Hospitalization Benefits (2) Life Insurance

Wisdom 7:
Insurance is meant for Protection, not for Investment.
Aim to Get the Highest Possible Coverage for the Lowest Possible
Premiums.

Wisdom 8:
Unit Trust is an Investment of the Rich.
The Rich owns Unit Trust Companies and Earns Passive Income from
them,
whether or not you made money from it.

Wisdom 9:
The Rich invests for Cash Flows.
The Rest of the Population speculate for Capital Gains.

Wisdom 10:

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 Investment is a Plan, not a Procedure or a Product.
Never invest until you have an Investment Plan.

Sincerely, I hope that you will benefit from them.

Here, with KCLau.com, we are passionate about what we do - It is to

bring you the latest Practical Money Tips to all Malaysians via multiple
channels:

Please Check Out:

a. Our Latest Articles.

b. Our Latest Webinars.
c. Our Latest Facebook Postings.

Be Smarter with Money!

Regards
Ian Tai
Content Producer of KCLau.com

Edited and curated by KCLau

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