By Walter Updegrave, senior editorAugust 6, 2010: 10:08 AM ET

CNNMoney.com

Money Magazine) — Question: I’m 28 and would like to have $1 million by the time I retire at 65. What are some of the investing options I should consider? –Joshua Sin, Fresno, Calif.

Answer: I’m all for savvy investing, and I’ll get to what I think you should do on that front in a minute. But let’s not forget that when it comes to building wealth, investing alone won’t do it.

You also need to save.

I don’t care how brilliant an investor you are. If you’re not putting away a decent amount of money on a regular basis throughout your career, your chances of accumulating a million bucks are lower than LeBron’s chances of getting elected mayor of Cleveland.

To understand what I’m talking about, let’s look at a few numbers.

If you begin putting away $100 a month starting now and continue doing so until 2047, the year you’ll turn 65, you would need an annual return of roughly 13.5% a year to turn that monthly hundred dollars into a million bucks.

What investment options can deliver a 13.5% annual return for almost 40 years?

None that I know of. A 13.5% long-term annual return is nearly 40% higher than the 9.8% annualized that stocks have gained over the past 80-plus years, and that near-10% figure includes some pretty dramatic run-ups in the ’80s and ’90s that we may not see again for a long time.

Suffice it to say that it would be wishful thinking to expect anything close to 13.5% over the long run.

If you increase the amount you save, however, you’ll see that the return you need to reach your goal becomes more manageable. Save $250 a month until you’re 65, for example, and you would need a 10% annualized return to hit that $1 million target.

I still consider that overly optimistic even for an all-stock portfolio, given the prices stocks are selling at today and the uncertainly surrounding the growth prospects here and abroad.

Boost your monthly savings to $400, and the return you need falls to about 8% annually. Possible? I suppose. But perhaps still ambitious. At any rate, it’s higher than the 7.8% that companies in the Standard & Poor’s 500 index are estimating for their pension plans, according to S&P.

At roughly $500 a month, however, the required return drops to 7% and if you can sock away just under $650 a month, you would need an annual return of about 6% a year. That seems reasonably achievable with a portfolio that contains both stocks and bonds, although not certain.

The idea behind this exercise, however, isn’t to make predictions about the long-term returns for stocks and bonds. Rather, my point is to show that the more you save, the less you have to count on lofty returns. It’s important to keep that in mind because ultimately we have more control over how much we save than the investment returns we earn.

That said, you don’t want to invest so conservatively that you end up having to save so much that you live like an ascetic. You should be willing to take prudent risks, especially when you’re young, in hopes of earning a higher rate of return and making your savings burden manageable. But you don’t want to invest so aggressively that you’re left in the lurch late in life if you don’t get the rosy investment performance you’d hoped for.

As for translating that trade off into specific investment options, someone your age who wants a reasonable shot at a seven-figure nest egg at retirement should be investing primarily in stocks. The exact percentage will depend on a number of factors, including how much you’re willing to see the value of your investments decline from time to time.

Generally, though, you’re probably talking somewhere between 70% and 90% in stocks with the rest in bonds (by which I mean a diversified portfolio of stocks and bonds, along the lines of what you might get combining the total stock market and total bond market funds in our Money 70 list of recommended funds.) The more anxious you get during market downturns, the closer you’ll probably want to be to the low point of that range.

Of course, you could go even more conservative, even to the point of not investing in stocks. But such a cautious approach means you’ll have to pump up your savings effort quite a bit.

If you’d like to see how your chances of accumulating a million bucks changes with different savings amounts and varying mixes of stocks and bonds, check out Morningstar’s Asset Allocator tool.

I’m not sure how you arrived at $1 million as your goal. Maybe it’s just a nice big round number. Remember, though, having a million bucks 37 years from now isn’t like having that sum today. In fact, assuming a modest 2.5% inflation rate, $1 million in 2047 would be the equivalent of having about $400,000 now. Or, viewed another way, you would need about $2.5 million in 2047 to have the purchasing power of $1 million today.

Finally, rather than shooting for a big lump sum, I think you’re better off thinking about how much income you’ll eventually have to replace to maintain your standard of living in retirement, and then figuring out what combination of saving and investing, along with other resources like Social Security, gives you a reasonable shot at hitting your goal. T. Rowe Price’s Retirement Income Calculator can help you on that score.

Granted, at your current age any estimates you arrive at are going to be rough. After all, a lot can change over the course of 37 years. But if you save diligently, invest reasonably, monitor your progress regularly and make adjustments as you go along, you’ll improve your chances of hitting 65 with the level of savings you need, whatever amount that turns out to be. 

Five Cents Ten Cents

Financial freedom, one realistic step at a time.

Did you know that you can check your own credit history for S$5 using Credit Bureau Singapore?

What is a Credit Bureau

Some of you might be wondering what a credit bureau is. The Credit Bureau Singapore is where financial institutions upload and also check on your history with regards to obtaining credit i.e. mortgage loans, car loans, credit card and other unsecured credit applications.

CBS explains:

Every month, payment performance data on approximately 3.6 million accounts is uploaded by the Banking and Finance industry to Credit Bureau Singapore (CBS).

Data relating to your loan payment performance is collated on your credit file and may be used by Banks and Finance companies as part of the assessment process for any new loans you may apply for, or for a review of your existing loans.

Your Credit Bureau file is an indication of your financial health. This is very important to the lenders as they assess the risk involved in granting credit.

You should therefore know what’s on your credit file and periodically check to see what new data has been uploaded.

Thus, CBS acts as a clearing house for information related to your credit history. It tracks if you are prompt or late in making payments on loans, credit card and related transactions. If you’re persistently late in making payments to banks and finance companies, that information would be available to potential lenders of monies to you.

Potential lenders would use that information as part of their decision making on your credit worthiness and risk of granting you credit. They may loan you smaller amounts or decline if their assessment is that your credit risk is too high relative to their own risk tolerance.

What Does a Credit Report Look Like?

I was curious to my own credit history although from my own experience I think I should be all right as I’ve never been refused credit card applications and I’ve managed to clear off my bank loan in full. Thus, I logged in using my Singpass and paid the $5 using my credit card to see what exactly my credit history looks like.

This is what a typical credit report looks like and the CBS teaches you how to read your own credit file.

It’s useful to have a look at your credit history especially if you are about to take up a major loan for car or house. This will allow you see if you have a good or not-so-good credit history.

Have you ever checked your own credit report before?

Tell Panzer in the comments section.

Be well and prosper.

‘Daddy, Are We Rich?’ and Other Tough Questions

By RON LIEBER, The New York Times

http://www.nytimes.com/2010/07/10/your-money/10money.html?src=me&ref=business

How to Create Your Own Real-World MBA

Written by: Tim Ferris

Posted: 28 Jun 2010 11:08 PM PDT

It’s fun to  think about getting an MBA.

They’re attractive for many reasons: developing new business skills, developing a better business network, or — most often — taking what is effectively a two-year vacation that looks good on a resume.

In 2001, and again in 2004, I wanted to do all three things.

This post is the first of two that will share my experience with MBA programs and how I created my own…

In the process, it’s my hope that these writings will make you think about real-world experiments vs. theoretical training, untested assumptions (especially about risk tolerance), and the good game of business as a whole. There is no need to spend $60,000 per year to apply the principles I’ll be discussing.

Last caveat: nothing here is intended to portray me as an investing expert, which I most certainly am not.

Beginnings

Stanford University Graduate School of Business (GSB). Ah, Stanford, with its palm tree-lined avenues and red terra cotta roofing, always held a unique place in my mind.

But my fantasies of attending GSB reached a fever pitch when I sat in on a class called “Entrepreneurship and Venture Capital,” taught by Peter Wendell, who had led early-stage investments in companies such as Intuit. The class is now co-taught by Eric Schmidt, CEO of Google, and Andy Rachleff, founding general partner of Benchmark Capital.

Within 30 minutes, Pete had taught me more about the real-world inside baseball of venture capital than all of the books I’d read on the subject.

I was ecstatic and ready to apply to GSB. Who wouldn’t be?

So I enthusiastically began a process I would repeat twice: downloading the application to get started, taking the full campus tour, and sitting in on other classes.

It was the other classes that got my panties in a twist. Some were incredible, taught by all-stars who’d done it all, but others — many others — were taught by PhD theoreticians who used big words and lots of PowerPoint slides. One teacher spent 45 minutes on slide after slide of equations that could be summed up with “If you build a crappy product, people won’t buy it.” No one needed to prove that to me with differential calculus.

At the end of that class, I turned to my student guide for the tour and asked him how it compared to other classes. He answered: “Oh, this is easily my favorite.”

That was the death of business school for me.

How to Make a Small Fortune

By 2005, I was done chasing my tail with business school, but I still ached to learn more.

Then, in 2007, I started having more frequent lunches with the brilliant Mike Maples, a co-founder of Motive Communications (IPO to $260,000,000 market cap) and a founding executive of Tivoli (sold to IBM for $750,000,000).

Our conversations usually bounced between a few topics, including physical performance, marketing campaigns (I’d just launched The 4-Hour Workweek), and his latest focus: angel investing.

“Angel investing” involves putting relatively small amounts of money — often from $15,000 to $100,000 — into early-stage start-ups. In Mike’s world, “early-stage” could mean two engineers with a prototype for a website, or it could mean a successful serial entrepreneur with a new idea. The angels usually have relevant business experience and are considered “smart money” — their advice and introductions are just as valuable as the money they put in.

After several lunches with Mike, I’d found my business school.

I decided to make (in my mind) a two-year “Tim Ferriss Fund” that would replace Stanford business school.

Stanford GSB isn’t cheap. I rounded it down to $60,000 a year, for a total of $120,000 over two years (these days, it’s $80,000+ per year).

For the “Tim Ferriss Fund,” I would aim to intelligently spend $120,000 over two years on angel investing in $10-20,000 chunks, so 6-12 companies in total. The goal of this “business school” would be to learn as much as possible about start-up finance, deal structuring, rapid product design, initiating acquisition conversations, etc. as possible.

The curriculum could be thought of as “The Start-up Lifecycle from Birth to Acquisition/IPO or Death.” But curriculum was just part of business school; the other part was getting to know the “students,” preferably the most astute movers and shakers in the start-up investing world. Business school = curriculum + network.

The most important characteristic of my personal MBA: I planned on “losing” $120,000.

I went into the “Tim Ferriss Fund” viewing the $120,000 as sunk tuition costs, but also expecting that the lessons learned, and people met, would be worth that $120,000 investment. The two-year plan was to methodically spend $120,000 for the learning experience, not for the ROI.

I would not suggest mimicking this approach:

1) Unless you have a clear informational advantage — insider access — that gives you a competitive advantage. I live in the nexus of Silicon Valley and know many top CEOs and investors, so I have better sources of information than the vast majority of the world. I don’t invest in public companies precisely because I know that professionals have better access to information than I do.

2) Unless you are 100% comfortable losing your “MBA” funds. You should only gamble with what you’re very comfortable losing. If financial loss drives you to even mild desperation or depression, you shouldn’t do it.

3) Unless you have started and/or managed successful businesses in the past.

4) Unless you limit angel investment funds to 10% or less of your liquid assets. I subscribe to the Nassim Taleb school of investment, with 90% in conservative asset classes like AAA bonds and the remaining 10% in speculative investments that can capitalize on positive “black swans”.

The problem is often that, even if the above criteria are met, people overestimate their risk tolerance. From my previous post, ‘Rethinking Investing: Common-Sense Rules for Uncommon Times’:

I’ve come to realize that the questions most investment advisers (and investors) ask are the wrong questions, or incomplete. Even if you have only $100 to invest, this is important to explore.

Most advice and decisions center on one question: what is your risk tolerance?

I had one wealth manager ask me this, and I answered honestly: “I have no idea.” It threw him off.

I then asked him for the average of his clients’ responses. The answer:
“Most answer that they would not panic, up to 20% down in one quarter.”

My follow-up question was: when do most panic and start selling low? His answer:
“When they’re down 5% in one quarter.”

Unless you’ve lost 20% in a quarter, it’s hard—neigh, impossible—to predict your response.

It’s not dissimilar from a common boxing maxim: everyone has a plan until they get punched in the face.

To would-be angel investors, I suggest the following: go to a casino or racetrack and don’t leave until you’ve spent 1/5 of a typical investment and watched it disappear.

Let’s say you’re planning on making $25,000 investments.

I’d ask you to then purposefully lose $5,000 over the course of at least three hours, and certainly not all at once. It’s important that you slowly bleed losses as you attempt to learn the game, to exert some control over something you can’t control. If you can remain unaffected after slowly losing your $5,000 (or 1/5 of your planned typical investment), consider making your first angel investment.

But proceed with caution.

Even among brilliant people in the start-up world, there is an expression: “If you want to make a small fortune, start with a large fortune and angel invest.”

The First Deal and First Lesson

So what did I do? I immediately went out and broke my own rules.

There was a very promising start-up which, based on comparables using Alexa ranking correlations to valuations, was more than 5x undervalued! If it hit even a “base hit” like a $25,000,000 exit, I could easily recoup my planned $120,000!

I got very excited — it’s the next Google! — and cut a check for $50,000. “That’s a bit aggressive for a first deal, don’t you think?” asked one of my mentors over coffee. Not a chance. My intuition was loud and clear. I was convinced, based on other investors and all of the excitement surrounding the deal, that this company was on the cusp of exploding.

Two years later, it still hasn’t popped.

Following the Rules

Lesson #1: If you’ve formulated intelligent rules, follow your own f*cking rules.

I learned many more important lessons over the following two years, most of which I’ll share in the next post. Thus far, following the rules, the stats look something like this:

15 total investments (some of which are listed here)
0 deaths
1 successful exit

The one successful exit thus far, DailyBurn, guarantees that I will not lose money on my two-year fund. But, as they say, “Once you’re lucky. Twice you’re good.” I’m still not convinced I know what I’m doing.

My hope, and that of most angels, is that each start-up will “exit”, or be bought within 3-5 years. I’ll therefore have a more complete view of the “Tim Ferriss Fund” two-year portfolio by 2013. There will be fatalities, no doubt.

But recall that the learning was my main reason for doing all of this.

I had one other exit: my own company. Using what I learned about acquistion deal structures through angel investing, I became less intimidated by the idea of “selling” a company. It need not be complicated, as I learned, and BrainQUICKEN was sold in late 2009. This means the ROI on my personal MBA is, so far, 2x.

Creating Your Own MBA

How might you create your own MBA or graduate program? Here are three examples with hypothetical costs, which obviously depend on the program:

Master of Arts in Creative Writing – $12,000/year

How could you spend (or sacrifice) $12,000 a year to become a world-class creative writer? If you make $50,000 per year, this could mean that you join a writers’ group and negotiate Mondays off work (to focus on drafting a novel or screenplay) in exchange for a $10-15,000 salary cut.

Masters in Political Science – (same cost)

Use the same approach to dedicate one day per week to volunteering or working on a political campaign. Decide to read one book per week from the Georgetown PoliSci department’s required first-year curriculum.

MBA – $30,000 per year

Commit to spending $2,500 per month on testing different “muses” intended to be sources of automated income. For an example of such, see “How I Did It: From $7 an Hour to Coaching Major League Baseball MVPs.”

If you’re interested in experimenting with angel investing, whether as an angel or as a start-up, here are a few of my favorite resources:

AngelList
AngelSoft
VentureHacks

Commit–within financial reason–to action instead of theory. Learn to confront the realities and rewards of the real world, rather than resort to the protective womb of academia.

Question of the day (QOD): what would you like to learn specifically about start-ups, angel investing, or start-up financing? Please let me know in the comments with “QOD”.

To be continued…

Helen Coster and Melanie Lindner
Saturday, February 20, 2010

Valuable lessons from preternatural wealth builders.

American philosopher Eric Hoffer said, “If a society is to preserve stability and a degree of continuity, it must know how to keep its adolescents from imposing their tastes, attitudes, values and fantasies on everyday life.” Too bad Hoffer never met Jamie Murray Wells.

In 2004 while studying for final exams at University of the West of England, Wells, then age 21, went shopping for a pair of prescription glasses. Nonplussed by the $150 pound ($300) price tag, Wells decided to funnel his $2,000 student loan into what would become Glasses Direct, a London-based online retailer that now generates $5 million in annual revenue.

Wells is part of an elite club of preternatural wealth builders who managed to cobble million-dollar enterprises before they graduated from college. The “million-dollar” measure refers to either total revenue generated or the value of the enterprise built (as opposed to the size of the total profit pile). That’s no mean feat for any entrepreneur, let alone one who can barely buy a drink legally in the States.

The nine entrepreneurs featured in our slideshow — six from the U.S. and three from the U.K. — started launching businesses by the tender age of 15, and one before he broke double-digits. Some of these wunderkinds, like Wells, identified problems and created companies to solve them; others turned their hobbies into money-making ventures. Some teamed up with friends, siblings and mentors; others plowed ahead on their own. Their common thread: singular focus, preternatural financial savvy and the optimism and confidence to wrest financing from seasoned investors.

Here’s a look at how a few of them pulled it off.

Smelling Opportunity: Jamie Murray Wells

When Wells was bemoaning the price of his lenses, four retailers dominated the U.K. prescription glasses market; all relied on pricey retail stores to move their merchandise.

Wells figured he could move the entire purchasing process online. All he needed was a factory to make the lenses, assemble them with frames and package them. He would then ship them to shoppers, who would simply e-mail or mail in their prescriptions and pay for their glasses online. Without the costly infrastructure, Wells could sell glasses for about one-tenth the price of the established brick-and-mortar players.

Getting Started

A nifty new business model isn’t nearly enough to launch a thriving company, let alone when you’re 21 and have no track record. “I was knocking on the door of an industry, saying, ‘The way that you’re selling glasses is wrong, and I’ve got a better idea,’” says Wells.

Luckily he had friends and family members who agreed to put up a few thousand pounds to help him get started. Wells didn’t disappoint: In the first year, Glasses Direct’s revenue topped $2 million. And unlike many zealous entrepreneurs, Wells figured out how to manage his cash flow to bootstrap the business. The company took credit card payments upfront but didn’t pay suppliers for another month. Wells used part of the float to hire a public relations firm to hype his low-cost strategy.

The next year Wells turned to professional angel investors. “With some investors, I simply walked in to a meeting with a sales graph and let that speak for itself,” says Wells. As demand grew, Wells raised $34 million in venture capital from the likes of Highland Capital, Index Ventures, and Munich-based Acton Capital Partners. That should tide Wells over until he turns his first profit.

Asking for Help

Wells believes his age and inexperience helped him. “Having a young founder helps to add a lot of personality to a business,” he says. Still, you can’t cover payroll with personality.

Recognizing his limitations (yet another challenge for many entrepreneurs), Wells sought out mentors, including ophthalmologist Dr. David Spalton, and David Magliana, a marketing guru who helped bag the 2012 summer Olympic games for London. While Spalton lent credibility with the eye-care community, Magliana worked with Wells on getting the word out about Glasses Direct.

“As an entrepreneur, it’s a lot easier than you’d think to reach out to people,” says Wells. On the flipside, “entrepreneurs love to be written to and asked for their advice,” he adds. “If your question is appropriate for them and they’re emotionally interested in you, you will get a letter back, and you will get to meet them for coffee.”

Running on Empty: Michael Furdyk

In 1996, as the dot-com boom started to simmer, Michael Furdyk started a Web site, called MyDesktop.com, an online computer magazine, in the basement of his parents’ home in suburban Toronto. Furdyk was 16 and a bona fide computer geek. His site was filled with tips and advice Furdyk gleaned in online chat rooms, where he also came across fellow teenager Michael Hayman in Australia. The twosome figured they could turn their passion for technology into a paying business. Hayman was so convinced that he moved to Toronto to get things started.

Just one problem: Their only source of income was Furdyk’s paper route. Solution: barter. In exchange for Web site storage space, they ran their host’s ads on MyDesktop.com. They negotiated cheap rent on their modest office by designing their landlord’s Web site.

Soon MyDesktop.com was bringing in $60,000 a month in advertising revenue from blue-chip clients like Microsoft and IBM. Furdyk and Hayman used some of their excess cash to scoop up smaller technology sites for $5,000 to $10,000 apiece. By 1999 the company was attracting 1 million unique visitors a month (serious numbers back then). Furdyk, Hayman and a third partner sold the company to Internet.com for “over $1 million,” says Furdyk.

Absorbing the Blows

As part of the MyDesktop sale, Furdyk and company received a small amount of venture capital funding for their next project, a product review site called Buybuddy.com. They raised an additional $5 million and brought on an outside management team. But the good times were short-lived. In 2001 the tech bubble burst; Buybuddy suffered and shut down within three years.

Furdyk hasn’t soured on entrepreneurship; indeed, he is promoting it via TakingITglobal.com, a nonprofit social networking site he launched for youngsters and educators interested in using technology to solve global problems. “Never be afraid of failure,” says Furdyk. “Just learn from it. When you’re young you have even less to lose.”

Going With the Flow: Fraser Doherty

While his fellow mini-moguls were making a mint on the Internet, Fraser Doherty was doing things the old-fashioned way. In 2002 at the age of 14, Doherty started making jams from his grandmother’s recipes in his parents’ kitchen in Edinburgh, Scotland. Neighbors and church friends loved them. As word spread Doherty received orders faster than he could fill them, so he leased space at a 200-person food processing factory several days a month.

By age 16 Doherty left school to work on his jams full time. In early 2007 Waitrose, a high-end supermarket in the U.K., came knocking, and within months there were SuperJam jars on the shelves of 184 Waitrose stores. Doherty borrowed $10,000 from a bank to cover general expenses and more factory time to produce three flavors: Blueberry & Black Currant, Rhubarb & Ginger and Cranberry & Raspberry.

Spreading the Word

Last year Doherty ramped up the company’s marketing efforts, printing 50 million coupons in newspapers across the U.K. He also ran a promotion in the Sun newspaper offering readers a free jar of jam. Good moves: SuperJam’s revenue hit $1.2 million in 2009, flat from the prior year. Doherty’s retailers now include U.K. chains Asda Wal-Mart, Morrisons and Tesco. This year he plans to introduce three new flavors.

Doherty remains the company’s only full-time employee, although he hired three part-time staffers to hand out samples in grocery stores. Within the next four months, he hopes to produce mini jars for airlines, hotels and gift boxes. Based on a reasonable valuation multiple of one time revenue (jelly maker J.M. Smucker generally trades between 1 and 1.5 times revenue), Doherty’s debt-free stake is worth between $1 million and $2 million.

As for taking SuperJam up a notch, Doherty asserts that his supply chain and operations can safely scale to meet heavier demand. “We’re sticking with what works,” says the entrepreneur, now a seasoned 21 years old.

MyYearbook.com: Catherine Cook

In 2005 Catherine Cook, 15, and her brother Dave, 17, were flipping through their high school yearbook and came up with the idea to develop a free interactive version online. The Cooks soon merged their social networking site with Zenhex.com, an ad-supported site where users post homemade quizzes, more than doubling traffic to their site. By 2006 MyYearbook had raised $4.1 million from the likes of U.S. Venture Partners and First Round Capital. The business attracted advertisers such as Neutrogena, Disney and ABC, grew to 3 million members worldwide and raked in annual sales in the “seven figures,” says Catherine.

Whateverlife.com: Ashley Qualls

Conceived by 14-year-old Detroit native Ashley Qualls as a personal portfolio with pictures and graphics, the ad-supported site evolved to offer free MySpace layouts and tutorials for teens who wanted to learn how to do their own graphic designs and coding. Whateverlife.com, which Qualls owns outright, claims to nab 7 million unique visitors a month and counts Verizon Communications as an advertiser. In March 2006 Qualls reportedly received an offer (from an undisclosed buyer) for $1.5 million, but turned it down.

Click here to see the full list of How To Make $1 Million Before Graduation.

Taking Steps To Prepare For The Worst

WHAT CPF SAYS

‘To date, two financial advisory firms with exceptionally high turnover percentages have been banned by investment platform administrators like iFast and Navigator from performing any CPF Investment Scheme transactions.

‘And in the last two years, the CPF Board has received 13 complaints from members who claimed there were unauthorised transactions performed under their CPF accounts by financial advisers.

‘Of the 13 complaints, six have been resolved upon investigation by the board, with members either having their principal investment amount or cash rebates reinstated.

‘For the remaining seven cases, two were closed due to lack of evidence, four were subsequently dropped by members and one is pending police investigation.’

Where to put your money next year

The world economy has got off the deathbed but its recovery in the year ahead will be sluggish. Gabriel Chen gets tips from financial experts for 2010 and finds out where the traps might be.

Mr Thomas Kaegi, head of macroeconomic research, Asia Pacific at UBS Wealth Management:

‘We advise clients to stay away from developed-market government bonds. Low interest rates make them an unattractive yield play and the removal of monetary policy support and rising inflation fears may hurt the sentiment towards governments.’

Mr Wyson Lim, OCBC Bank’s head of wealth management in Singapore:

‘Within the equities space, we remain most positive on the Asia ex-Japan region, which is expected to enjoy superior economic and earnings growth compared to developed markets. While bourses in the region have run up significantly in recent months and are fairly valued based on this year’s earnings, they are still attractively valued if investors are prepared to look out over the next two to three years.’

You could term 2009 the year the world did not end.

Flash back 12 months and it looked like a financial Armageddon was about to descend on us all.

Most experts were of like mind: Financial markets would continue to bleed, banks would keep failing, millions of jobs would be lost, profits would evaporate. Think of the worst-case scenario and double it and you have an idea of the mood back then.

‘Till March, negative sentiment was at the fore with concerns that capitalism was at an end,’ recalled Mr Daryl Liew, chief investment strategist of independent wealth management firm Providend.

But the world did not end; 2009 surprised us all.

Financial markets have been on a roll since March as investors’ risk appetite returned amid signs of recovery in the banking sector and global economies.

The MSCI index of stocks in the Asia-Pacific region outside Japan is up more than 60 per cent from a five-year low on March 9.

Dubai’s debt crisis, which unfolded last month and rattled global financial markets, turned out to be a blip on the radar screen.

Most markets have stopped panicking and have recouped their losses.

After a head-spinning year like this, it is no wonder many in

the prediction industry are scratching their heads when it comes to 2010.

Some finance practitioners caution that a big risk to the improving economic climate is the emergence of asset bubbles, fuelled by investors borrowing cheaply in US dollars to stock up on emerging market equities and commodities.

This risky strategy of using the weakening greenback to finance bets in higher-yielding assets

is known as the US dollar carry trade.

It can turn nasty fast. If the US dollar rises in value relative to the currency the investor is using to fund the purchase, then huge losses can result.

‘Everybody’s playing the same game and this game is becoming dangerous,’ warned New York University professor Nouriel Roubini, one of those who accurately predicted the magnitude of the global financial crisis.

‘This asset bubble is totally inconsistent with a weaker recovery of economic and financial fundamentals.’

Not everyone agrees with his assessment – further proof that even experts do not always see eye to eye.

‘What bubble? It’s clear Mr Roubini hasn’t done his homework, yet again,’ veteran investor Jim Rogers told Bloomberg.

Bubble territory or not, experts say that investors should be mindful of risks and be prepared for volatility next year.

‘With talk of higher interest rates, the easy gains behind us, and greater reliance on earnings going forward, it is likely that markets will see greater swings over the next year than has been the case since March,’ said Dr Shane Oliver, head of investment strategy and chief economist at AMP Capital Investors.

Mr Wyson Lim, OCBC Bank’s head of wealth management, advised those looking to invest to buy gradually over the coming months to ride out the uncertainty and volatility in markets.

Hot themes next year:

Defensive sectors  The cyclicals did better than the defensives this year.

Cyclical sectors such as financials, technology and property rallied ahead of defensive sectors like utilities, telecommunications and health care.

Experts tip the defensive sector – so-called because it comprises companies whose business performance and sales are not highly correlated with the larger economic cycle – to do much better next year.

‘In a nutshell, we recommend taking profits on cyclical equities and reinvesting proceeds on defensive stocks,’ said SG Private Banking’s chief executive for Singapore and South Asia, Mr Pierre Baer.

Ms Mah Ching Cheng, manager for research and analysis at First State Investments (Singapore), favours telecommunications companies due to their ‘defensive earnings, strong cash flows, stable dividends paid and attractive valuations’.

‘Telecoms companies in India and the Philippines look attractive for us at this juncture,’ she said.

gabrielc@sph.com.sg

Title : Financial help for debt

  Debt consolidation is a debt relief option that has helped many debtors to get out of debt and enjoy a debt free life. You can derive benefits from debt consolidation too provided you are serious about this option that can bring financial stability in your life. You can seek assistance of a debt consolidation company that will help you in enjoying better financial terms. This is achieved either with the help of a debt consolidation program or a consolidation loan.

 How will debt consolidation program give you financial stability?

When you approach a debt consolidation company, they will assess your financial situation, ask you to provide extensive information about your debts, the rate of interest attracted by each debt account etc. Thereafter, they will negotiate with your creditors so that you can enjoy a lower rate of interest. Once the interest rate is reduced, your payments become lower too. You will be required to make payments as per a payment plan that is worked out taking your convenience into account. So, a debt consolidation program will help you to make your debts manageable. The payment schedule helps you to keep track of the payments each month.

 How can a debt consolidation loan help you?

A debt consolidation loan is one that will replace your multiple debts with a single loan. If you have 4 debt accounts and the outstanding balance on each debt account is USD$500, USD$150, USD$200 and USD$700 respectively, you take out a consolidation loan of an amount USD$1550. You can either use collateral or take out an unsecured debt consolidation loan. It is always better to take out a debt consolidation loan that is unsecured. This is because you will not lose your home if you fall behind on payments.

 However, if you are planning to take help of a debt consolidation company, make sure it is accredited by the Better Business Bureau and find out its past records and credentials. Remember a good debt consolidation company will not run after you, it should be the other way around. You should shop around for a good debt consolidation company.

 In a nut shell, whether you opt for a debt consolidation program or a consolidation loan, it can do the following for you –

 It will merge all your debts into one thereby making them manageable

 1. As you become regular with your payments, your credit score improves

 2. You enjoy reduced interest rate and lower payments each month

 3. The repayment schedule allows you to make debt payments in an organized and systematic manner.

 4. You don’t receive collection calls from debt collectors

 5. Your debt load is reduced considerably

 6. Finally you get a debt free life

 So, if you are in a vicious cycle of debt tackle your debts efficiently so that you don’t have to walk around bankruptcy courts. Manage debts while they are still young.

Jason Holmes is one of the financial writers associated with the Debt Consolidation Care Community. With his in-depth knowledge and vast experience, he has made a profound impact through writing and advising on all debt consolidation companies, debt issues and has presented useful tips on debt. His remarkable guidance and support has improved the community into a global hub for the debt related situations.

Wake up call … Sophie Whitby and Amy King in Sydney yesterday. Source: The Daily Telegraph

GENERATION Y – the group that has never known financial hardship – has awoken to the rude realities of modern life.

Australian National Retailers Association research has found that Gen Y is running scared from the aftermath of the global crisis.

The survey of 1000 Australians found the generation once known for job-hopping was now more worried about hanging on to work. A third of 18-24 year olds felt their jobs were at risk in the current December half-year. Only 21 per cent of the general population were worried about their job security.

The lack of confidence also affected Gen Y’s spending, with 42 per cent of 18-24 year olds cutting back on dining out (compared to 29 per cent in the general population) and 32 per cent taking their own lunch to work (compared to 26 per cent generally).

The once big-spending Gen Y also appears to be shelling out much less on non-essential items such as iPods and seeing movies.

In a separate ANRA study last month – when 1000 women were asked how the imminent 0.25 per cent October rate rise would affect their budgets – 65 per cent of Gen Y females said they would cut back on entertainment expenses. This percentage was far higher than in any other age group.

ANRA boss Margy Osmond said there was now “an extreme level of caution” from the entitlement generation. “The global crisis has affected Gen Y in a very personal way. They know it’s a world phenomenon, but it feels like it’s happened to them personally, and they have no experience to judge it by,” she said.

Amy King, 23, a bank communications manager, said the global crisis taught her she was replaceable.

The crisis and the desire to buy a house had affected her spending habits: “I bring lunch to work now. I used to say: ‘$8 a day for lunch – no probs’.”

Merit in a small loan programme in S’pore

By Lee Yoong Yoong, For The Straits Times

HOW do you live on an income of less than US$2 (S$2.80) a day? More than a quarter of the world’s population struggle with this question every day. According to the World Bank, of the 1.6 billion people who fell into this category last year, 1.4 billion survived on less than US$1.25 a day.

In 1983, when Bangladeshi economist Muhammad Yunus established Grameen, a bank that lends money to the poorest women in his country to start small businesses, he aimed to help the poor by supporting personal initiative. His move was based on the conviction that credit paves the way to social independence: lend poor people money on terms that suit them, teach them sound financial principles, and they will help themselves.

This theory has been proven to work and Dr Yunus is widely credited as a pioneer in microfinancing. Today, more than 250 institutions in about 100 countries run microfinancing programmes based on Grameen principles. Can they be applied in Singapore as well?

Microfinance – or microcredit, as it is also known – can be defined as financial services for the poor. More broadly, it refers to a movement that works for access to a range of financial services, including credit and savings, for as many people as possible.

In countries like Bangladesh, microfinance loans start from as low as US$20 for first-time borrowers. The money tends to be targeted at a small group – a minimum of five people – consisting of people who are responsible for one another. When someone in the group defaults on his or her repayment, the whole group will face problems getting further loans. Hence, peer pressure keeps the default rate low. In fact, Grameen Bank loans have had a near-perfect repayment rate.

Compared with Bangladesh, Singapore is an urbanised, developed economy with higher business operating costs – all factors that could hinder someone looking to set up a small business. Singaporeans also do not have the close social networks that exist in rural Bangladesh and which are a key factor for Grameen’s success there.

In addition, Singapore is more highly regulated. In Bangladesh, people can use the loans to sell snacks or vegetables almost immediately. In Singapore, an entrepreneur in the food industry has to get a licence to operate a business and another to run a food-processing establishment. Throw in the health requirements, licence fees and paperwork, and it is not hard to see why someone may be deterred from starting a food business.

Even if a would-be entrepreneur could overcome the administrative hurdles, the high start-up costs might pose a barrier for someone who already has trouble making ends meet.

Then there is the issue of sustainability. Is it worth lending to people if they cannot invest the loan in a sustainable endeavour? Given that small-loan borrowers tend not to be highly skilled, will there be demand for the goods and services they produce? Moreover, the rates of return from small enterprises may not be high enough to persuade someone to take on the business. A number of initiatives in the past to help Singaporeans start micro enterprises – such as selling home- cooked food and snacks from motor vans in public carparks – failed. As a result, poor Singaporeans prefer to stick to low- paying jobs than to start a small business as a baker or dressmaker.

This is not to say that a small-loan institution should not be set up in Singapore. It is just that there are issues to be considered. The poor need more than loans: they need help to manage the resources given to them.

In other words, there is a need for a network of support groups. Business advisory groups could perhaps volunteer their time to guide small-loan receivers. There is already an encouraging number of Singaporeans becoming involved with social enterprise. They could chip in and help improve the entrepreneurial capability of small borrowers. Courses on IT skills and basic financial principles could also be run to teach people to manage the money they earn.

The Grameen model has been successfully transplanted to major cities such as Chicago and New York. If it can work there, there is no reason why it cannot work in Singapore too.

There is a need for small loans for poor Singaporeans. A single mother may be a talented cook or dressmaker and if she can get some capital, she can start a business in her home. At the moment, there is no institution she can turn to except pawnshops and loan sharks as commercial banks are not in the business of lending to the poor.

As Dr Yunus argues, the best way to help a poor person is to give not a handout but a loan. A hassle-free small-loan facility would be helpful in promoting inclusive growth.

The writer is a research fellow at the Institute of Policy Studies.