Financial Freedom

Many people dream of financial freedom but most of them misunderstand what is the true meaning of financial freedom. Most people believe that financial freedom is equal to rich, and they no worry about money in future. Actually this is wrong, imagine if I give you $1,000,000 does it mean you already achieve financial freedom?

What is Financial Freedom
In order to explain more detail, you may need some basic understanding of “Income”. Income has 2 types Active & passive. Active Income commonly known as Salary. Where most of the people know this. Passive income is termed as you are not required to work much and money keeps flowing in. Example, renting out a house, all you need to do is collect monthly rental fee only.

The correct way is to convert active income into passive income. Example, use active income to buy a house, rent it out, then collect monthly rental fee. Assume that your monthly loan installment is $500 but you collect monthly rental $700, therefore you have make $200 passive income every month. Once your passive income is consistent and become more than active income, you are achieved financial freedom. And this is the way to achieve ultimate wealth.

Technical Analysis vs Fundamental Analysis

There are 2 type of analysis methods for investor use to analyze financial market. It is “Fundamental analysis” and “Technical analysis”.

Fundamental analysis
Is a method of evaluating the value of a company, the share price, by researching and examining the corporate financial statements, the business itself, industry outlook and etc…. Conventional wisdom dictates that the price of a stock that is trading for less than its intrinsic value should rise and the price of a stock that is trading for higher than its intrinsic value should fall. Fundamental analysis assumes that the market has perfect information and investors will act rationally based on the information.

Technical analysis
Is a method of evaluating future price of a stock based on statistical analysis of past behaviors of the stock. Behaviors of stock include trading volume, moving averages, price trends and other types of charts. Technical analysis assumes that the price chart frequently anticipates news and other fundamental events before they become public knowledge. It is used by market analysts to identify the beginning of an uptrend, entry point, beginning of a downtrend and the exit point.

In conclusion, both analysis method have their merits and should be used at the right times. As a good investor, you must make use of both analysis methods to help you success in your investment.

Profit and Loss Threshold in Stock Investment

Many people are thinking of invest money into stock market. Usually they know the concept “high risk high return”, but almost 80% of them are losing money in stock market. The reason is they don’t have clear guideline for when to sell stock.

Basically this is related to setting up ROI (Return of Investment). For example,

Understand Your Total Investment
If you bought $950 worth of stock and your fees were $50, then your total investment is $950 + $50

Setting Up profit and Loss Threshold
Write down the amount of profit or loss associated with your investment. Most people only plan for profit, but they didn’t really plan for loss. This is very important to set a threshold for both maximum profit and maximum losses.
If your maximum profit threshold is set to $1200, then you must sell it when the stock price reach your threshold. This is same applied to the loss threshold, whenever the stock price drop to that threshold, you must sell it immediately too (cut loss).

Discipline is everything
Setting up threshold is just for guideline only; you must ensure you will follow your plan disciplinary. Self-discipline is a key factor to success in stock market.

Rule of 72

“Rule of 72” I got to know this from my colleague’s blog. This is very useful method to estimate your investment doubling time.

72 / Annual Return = Number of Years for Your Money to Double

Assume that you put $10,000 for fixed deposit with 3% interest per year. Calculation (72 / 3 = 24) Therefore, your $10,000 will take about 24 years to become $20,000.

As refer to above calculation, it gives us an idea on how hard money work in investment. Of course everyone want higher return of investment, but the question is how high is consider high? What is the timeframe?

Just ask yourself, is it worth to keep money in bank with only less than 2% annual interest? Why don’t you go for other better investment?

Profit Margin and Sale Revenue During Economy Crisis Time

In the real world, things are fair and proportional to each other. For example, if the car engine performance increased, then fuel consumption will increase too. Therefore, in order for company to capture more market and generate more sales, they have to produce a car with reduce fuel consumption but increase / maintain the same engine performance.

Due to global economy crisis now, many companies encounter sale drop. To overcome this, usually are below 2 methods (of course it can be more):

a) Reduce profit margin, increase / maintain sale revenue
b) Reduce sale revenue, increase / maintain profit margin

We have to determine which methods are suitable for the company. Both methods can be applicable, but we need to choose the one with most effective & efficiency for result generating.

Here to share an idea, this is one of the success story in Malaysia, “McDonalds fast food restaurant”. They are using method (a), by offer special price RM5.95 (where usual price is RM 8.95) on their value meal during lunch time 12-3pm. With this strategy, McDonalds manage to capture more market and also increase their sale revenue too. Due to this proven work strategy, other fast food restaurants like KFC, A&W, PizzaHut are quickly offer such promotion during this crisis time….

Singapore vs Malaysia

Currency rate (up to date)
$1 Singapore dollar = $2.4 Ringgit Malaysia

Basic monthly salary range (for fresh graduate)
Professional (Engineering, Accountant, Architect….)
Singapore: $2400 – $ 2800 Singapore Dollar
Malaysia: $2200 – $2600 Ringgit Malaysia

Non-professional (Sales, Admin, HR….)
Singapore: $2000 – $ 2400 Singapore Dollar
Malaysia: $1700 – $2200 Ringgit Malaysia

Housing price – about 800 square ft apartment
This is subject to different location, I just assume average price for reference.
Singapore: Around $400k – $500k Singapore Dollar
Malaysia: Around $130k – $220k Ringgit Malaysia

Car price (Toyota Vios)
Singapore: $50k Singapore Dollar
Malaysia: $80k Ringgit Malaysia

Iphone 3Gs 16GB
Singapore: S$288 with 2 years plan contract (monthly commitment S$56)
Malaysia: RM1790 with 2 year plan contract (monthly commitment RM155)

Food
Hawker Center (Curry noodle + hot Coffee)
Singapore: S$2.80 + S$0.60
Malaysia: RM3.80 + RM1.80

Fast Food (KFC – Snack Plate meal)
Singapore: S$5.90
Malaysia: RM9.95

Summary:
If compare base on currency rate, Singapore price is higher. Please think wisely, for Singaporean who earn Sing Dollar and spend Sing Dollar, then everything for them is cheap except housing.

Difference Between Effectiveness and Efficiency

In my previous article “Earn more, Work less and Enjoy life”, I did mention about the different between effectiveness & efficiency. These two terms feel similar but confusing many people. Therefore, you must be clear with the basic concept of this 2 terms, if not it could be pretty disastrous for success and growth.

What is difference between effectiveness and efficiency?

To make is simple and short, here is the definition. Effectiveness: It means getting work done or achieving the desired result. Efficiency: It means achieving result in the most economical manner using minimum resources.

For example, Effectiveness simply relates to reaching goals, so a company that has captured a 75% market share is very effective. Efficiency relates to how much they needed to spend or invest in relation to their effectiveness. If two companies each had only a 0.1% rejection rate off the assembly line, they would be equally effective. But if the first company invested half as much as the second company in quality control, the first company is twice as efficient as the second company.

A true success is achieving goal with both effectiveness & efficiency way

9 Tips to Success in Share Market

1. Cut your losses
Always remember to set stop loss point.

2. Learn from your losses
Make each loss as a lesson to enrich your investment experience.

3. Don’t be greedy
People always turn their large profits into losses because of greedy.

4. Never leverage in a losing position
Most of people try to leverage in losing position. It’s a BAD idea.

5. Observing
Standing aside is a good idea when you cannot judge which the coming direction is.

6. Discipline and patience is the key to win
Don’t chase high if you are not sure when will the market reverse.

7. Apply only few strategies to suit different stocks
Using too many strategies will make you confuse.

8. Narrow down your focus
Do not try to focus on too many stocks at once. Suggest limit to 6-7 stocks.

9. Find a good mentor
A good mentor is the golden key to your investment success

Prepare To Enable Your Ideal Lifestyle

For purposes of Lifestyle Design, it is necessary to move from annual thinking and total costs to monthly cashflow. Then ask yourself below:

• What is your ideal lifestyle?
• How much does it cost per month to maintain your ideal lifestyle?

Above figure will becomes your TMI—Target Monthly Income. This is divided by 30 to give you a TDI—Target Daily Income. By doing this, you should know your daily cost to cover all your expenses (including a new house or motorcycle), having nice dinner and etc….Probably you must make $200 per day? $100 per day?

Yes….That is your TDI and it will enable your ideal lifestyle.

Earn More, Work Less and Enjoy Life

This is a good topic to discuss. I believe above 3 word phases are most people’s dream. Everybody like this including me too. Due to that I starting to find out more information on how to achieve it. I search over the internet, do research and study on relevant books. Eventually, i found something interesting….

I found that this is never ending routine. It is also like a trap set by our parent. As a child, we always asked ourselves and our parents, “Why do we have to study so hard?” Standard answer received is “To get a better job and better pay”. Since we are young, our parent is already program our mind and keeps telling us “in order to have more money, only path is to work”.

Relate to my topic here. To earn more, you must work hard. If you work hard, you can’t enjoy life. To enjoy life, you need more money to spend. Is that true? So, is there any idea to quit this routine? How to achieve it? Here I will share my finding.

To earn more, but not work hard
Understand the cashflow, know how to let money work for you. Know what is the different between poor people and rich people. (See my articles under “financial category”)

To work less but remain high performance
Understand the different between “effectiveness” & “efficiency”. Understand the Parato principle 80/20 rules. I suggest you read this book “The 4-hour workweek” by Timothy Ferriss.

Enjoy life without spending money
Please to be grateful – No matter how many pleasant things you do, if you don’t learn to be grateful you will always see things negatively.
Slow down your step – Life has a lot of simple things you can enjoy. But if you move too fast you will overlook most of them. So don’t be in a hurry. Don’t move too quick. Slow down and pay attention to the world around you.