## Saturday, January 31, 2009

### 2009 Inflation January Update

I mention the Real Inflation is the Infaltion that is happening to you, not the 'number' released by your goverment in an old post titled "Inflation vs BLR".   Below describe a quick summary how and what to do ...
1. List down all your "daily routine" items and their costs
2. Determine what quantity / amount of each item is consumpt over a fix period of time
3. Sum up the total cost for that period

Then compare the difference between 2 periods give you a rate, that is the Your Inflation !

Lets get an update of this inflation rate from 3 real life examples.  Each example represend one of the Rich, Average and Poor categories.

Ahmad : found his alternative ways of life

Ahmad used to spend RM 5 to fill his stomach in a day (Jan 2008), today he is still using about the same averaging at RM 5.10.  By now, the garden he has been having has grown enough so that they can feed themselves more meals.  He also found a few more places where he packed left over food for his family before he goes home every night.  Hearing so many negative economy news, he didn't spend any extra money in clothing.  The place he is squading remains the same, no extra cost.  Bus fares increase quite a lot but he took some alternative routes and walk further to reach office, home and the stations.  Calculating all of this month's living expenses shows that Ahmad's inflation rate is 2.5% this year.  He doesn't think his life style has been degraded.  As a matter of fact, he found an opportunity to sell some used goods in a flea market on the new route when he walk further to work.

Mathew : no where to go, so just keep looking ...

Mathew is self employ but forecast to lose about 20-30% of his business income this year.  His wife stopped working since mid last year because her company was closed down.  Mat used to pay RM 3.50 to RM 3.80 for a bowl of his favourite Pork Meat Noodle Soup, now he pays RM 3.80 to RM 4.50.  His favourite drink Teh-C was RM 1.00 but now RM 1.10.  So instead of ordering one small cup of Teh-C, he ordered a big one for RM 1.60 and shared with his wife.  Prices of veggies and pork meat in wet market are not stable, he tried his best to buy whatever is cheaper at the time but still ended up an average cost increase about 5% to 15%.  In hypermarket like Carrefour and Jusco, tuna flake can food went from RM 3.30 to RM 4.50;  cheapest hot dogs from RM 2.90 to RM 3.80; salted pickle from RM 1.10 to RM 1.30 ...  Mathew's inflation is 24.3%

Ah Dung : What ?  What Crisis ?

Ah Dung continues to dine out in TGIF, Chillis, Coffee Beans, Starbuick, Old Town Coffee etc.  Average per person per meal remains the same at RM 50 compares to one year ago.  Some restaurant meal size becomes smaller but Dung just move from one restaurant to another, whichever is serving the meal the same way they did before the financial crisis.  Eventually most of these restaurants will serve proper meal size and more promotions will surface out.  Now TGIF also have kids eat free like Chillis.  MAS matching Airasia low air fares allow Dung to travel all over the world more frequent now.  Dung's bangalow architected by the same guy who designed for Dr. Mahatir continue to grow and takes up a huge chunk of his expenses but all these are rolled under his company accounts.  Dung's inflation rate is 4%

Below table shows the summarized inflation rate for these 3 person :

So while all the supermarkets are advertising for how low their prices are, what is your Very Own Personal inflation rate NOW ?

## Thursday, January 22, 2009

### Calculate How Much is Worth buying a stock !

I have just come up with a system that can calculate how much a stock is worth and therefore what is the suitable purchase price. It is based on the concept describe in this old post : when to buy at what price ?

In short, it is using past history record to project future price. Then depends on your target return rate, today's worth can be calculated.

EPS and PE are 2 critical data needed to use that system. In case you don't know where to get these data, refer to one of my old post here : where to get EPS, PE data

some of the old posts can also be used as examples or case studies : IOICorp, KNM

For those who are more curious to ask why more than just using the system, an old post explain slightly why use EPS and PE in stock valuation ?

I haven't published this system yet and only using it on my own now. But if you are interested, you can also use it from here ...

I am thinking to publish it once an anonymous browser can sign up as an user in order to use it ....

### 090122 Bank Negara reduces interest rate

On 22 January 2009, Bank Negara Malaysia (BNM) reduced the Overnight Policy
Rate (OPR) by 75 basis points which resulted in banks reducing their money
market interest rates as well.

For example in a private firm, 3% rate is reduced to 2% and 2.4% is reduced to 1.5%

Its time to take your money out and increase your Chinese New Year gambling money .... just kidding ...

### No More KLCI

In near future 6 July 2009, KLCI will NO longer be used as the index for KLSE.  It will be replaced by FTSE Busra Malaysia - FBM KLCI, or FBM30 which consist of 30 stocks, instead of 100 in KLCI.

Stock in FBM30 but not in KLCI in favor : Resorts, YTL, Parkson ...
The drop outs may not in favor : Gamuda, SP Setia ...

Bear in mind one of the fundamental fund manager portfolios is usually an index fund.  And they are benchmarking their fund performance with country's index ie. KLCI in the past.  Changing the country's index components means the fund managers may have to change their strategy too.

Generally this is good news ....  to general public especially mutual fund investors.  What will happen in short term is the not-so-good index fund will drop significantly but eventually all index fund are performing quite the same ....

## Tuesday, January 20, 2009

### All Stock Prices are NOT created Equal

Quite a few key information shared in this blog is actually so fundamental that they should be taught in school.  Until today I am still very puzzled that even the best financial consultant and market advisor do not share these with their highest paying client.  Anyway ... here comes another one ...

Says I am using the lowest fee broker in town and I have RM 16,000 at hand as my Minimum Optimized Trading Size.  Now I am ready to buy, hurray !  And my target is to make money the fatest way !!  In One Price Movement or One Tick !!

Case 1 : Buy at RM 1.00 :
When it goes up to RM 1.01 I have earned RM 99.20 or 0.62%

Case 2 : Buy at RM 2.00 :
When it goes up to RM 2.01 I have earned RM 19.20 or 0.12%

Case 3 : Buy at RM 3.00 :
When it goes up to RM 3.02 I have earned RM 45.87 or 0.29%

Case 4 : Buy at RM 4.00 :
When it goes up to RM 4.02 I have earned RM 19.20 or 0.12%

Case 5 : Buy at RM 5.00 :
When it goes up to RM 5.05 I have earned RM 99.20 or 0.62%

Case 6 : Buy at RM 6.00 :
When it goes up to RM 6.05 I have earned RM 72.53 or 0.45%

Have you seen it yet ?

Depending on the stock price you are buying,
the chances for you to
earn the same amount of money is
Different !!

For some of you who are not well wise in stock price movement, the following is the One Tick or Once Price movement observed in KLSE or Bursa Malaysia

As you may also observe, there is NO single Trend showing if buying lower price or higher price is better.  The return rate seems like going down and up and then down again.

I will leave this one open for a while as this is the ultimate exercise for my readers ...  Happy Chinese New Year !!

I have already briefly covered this in a few older posts like

This is just an official recap.

When you invest in stock market through a broker, the broker will charge you a brokerage fee.  Its normally in percentage form with a minimum fee which ever is higher.  For example, 0.7% and RM 40.

If you are investing RM 1,000 then
RM 1,000 x 0.7% = RM 7
Since RM 40 is higher than RM 7 so you will be charged RM 40 for that transaction.
Like wise, if you are investing RM 10,000
RM 10,000 x 0.7% = RM 70
Since RM 70 is higher than RM 40 so you will be charged RM 70 for that transaction.
For the RM 1,000 case above :  Since you are paying RM 40 fee for a RM 1,000 investment, the actual fee you pay is 4%
RM 40 / RM 1,000 = 0.04 x 100 = 4%
In this case, your paid fee is 4% which is much higher than 0.7%.  If you use 0.7% to analyse your investment, you may end up losing while you though you have earn or break even.
For example, your RM1,000 investment has given you a 2% return.  You may thought 2% - 0.7% = 1.3%.  But after selling the investment you may end up losing 2% because 2% - 4% = -2%
Hence, it is important to know what is your Minimum Optimized Trading Size !  Which base purely on the 2 numbers :
Minimum Brokerage Fee and
Brokerage Rate
Minimum Brokerage Fee / Brokerage Rate

In above example;

RM 40 / 0.007 = RM 5,714.29

If your investment amount is above RM 5,714.29 then your brokerage fee is always 0.7%.  If you keep above this amount, you can easily use 0.7% to calculate your return.  Else you will need to minus your return from RM 40 instead of a percentage.

Lower brokerage fee does NOT necessary mean Lower MOTS.  See this table below.

RM 40 & 0.7% is a typical example if you use an agent ( real human being ) as your broker in Malaysia.
RM 12 & 0.42% is a typical online trading account where you perform the transactions online through web.

Typically, lowering brokerage rate without lowering the minimum fee will only make it worse for small investors.

Cheapest Brokerage Fee I found is from Jupiter offering 0.05% and RM 8, you can sign up through me, read that post here.

All these figures are valid for transaction amount lower than RM 100,000.  Rates above RM 100,000 are usually negotiable.

## Sunday, January 18, 2009

### 2009 01 19 KLSE:KNM worth RM 0.49

KLSE:KNM worths RM 0.49

Data Used:
1999 EPS 0.9 and 2004 EPS 1.7 for EPS growth rate
2008 EPS 20 for Future EPS estimation
PE 5.5

Assumptions:
Earn compound 15% for the next 10 years

Current price is already lower than RM 0.49 so you can buy anytime if you plan to keep for 5-10 years to come.  The next few days drop or rise wouldn't make much different.

My roof and floor price for this stock is RM 0.49 on 19 Jan and 0.40, so I may buy either when it breaks RM 0.49 today or when it hit bottom at RM 0.40 for the next few days.

## Saturday, January 17, 2009

### Fundamentals are Noises ?

Very frequently investors who believe in Technical Analysis say that Fundamentals are useless and they treat them as noises !

Actually they are refering to Published News which they think are fundamentals but actually NOT.

Usually this group of people thought a good figure report should bring the price up but realized it did not and caused them to lose money.  Thats why they decided 'fundamentals' are noises.

Put aside speculation and rumors, it is a fact that sometimes Official Published Info does NOT affect the market price the way it should ... and this is why.

The fundamental of a business does not change Instantly.  Before the official report is published, the person who run the business already know the 'health' of his business.  Even people who work in that company would have an idea how the business is doing without any reports.  Suppliers, customers, contractors would also know something too although at different context and extend.  All these form an Expectation !

Fundamental of price movement is Supply and Demand.  When the Published News exceed the Expectation, Demand will rise.  Like wise when the report did not meet the Expectation, demand falls.

So if you only look at and wait for a report to be published without first understanding what the expectations were, you really need to learn more fundamentals.  Else no matter how good your technical analysis is, it may harm you as much as you think it helps you.

The real Fundamentals are;
1. What is the business doing and why can it be success for another 10 years ?
2. Who is running the business that you have confident in ?
3. How much is this business worth, its real value ?
4. etc.
Fundamentals don't change just because of one announcement but can be observed through a series of events.

An example of fundamental analysis is When to Buy at What Price.

## Wednesday, January 14, 2009

### Earn in 1 Tick without That Much Money ?

Recently I shared about the cheapest brokerage fee I find for KLSE market - 0.05%.  But in order to effectively enjoy that low brokerage rate, each of your transaction should be more than \$16,000 due to its minimum imposed \$8 fee.  Basically 8 divided by 0.0005 is 16,000 !

What if you don't have \$16,000 in every transaction ?  Should you still apply for this account ?

The simple answer is yes because even though you are investing in a much smaller way, you are still saving more because \$8 fee is still lower than \$12 and \$40 aka other brokers' minimum fee ! ( detail post here )

But the whole idea of LOW brokerage fee is to allow investor to earn in one Tick ( one smallest step change in unit price ) !  Can you still earn in one Tick i.e from \$1.00 to \$1.01 if you have less than \$16,000 !?

Before showing all the numbers, lets review what other charges are imposed here when we invest;
Brokerage Fee : \$8 or 0.05% whichever is higher
Clearing Fee : 0.04%
Stamp Duty : \$1 for every \$1,000 or parts of it
Assuming we buy and sell the shares on different days, that means we pay twice for the fee above at different prices, ie. once when the unit price is \$1.00 and another when we sell at \$1.01 ( one Tick ) !

Below table shows how much you earn or lose when price moves from \$1.00 to \$1.01 with different amount of investment.

You can see that even with the LOWEST brokerage fee in the market, if you buy a \$1.00 share with only \$1,000 you still CAN NOT EARN money in one TICK !!  As a matter of fact, you will lose \$8.80 !!

You will need at least \$2,391 to break even.  Or from above table, you will start earning money, ie \$5.60 if you invest with \$3,000 !!

So the answer is still YES, if you don't have \$16,000 you still can earn money in One Tick if you invest each time with more than \$3,000 when the unit price is \$1.00  !!

Don't underestimate this \$5.60 or 0.19%.  If you are able to do this once a week, continously for a year.  Then your effective rate of return is 0.19% x 52 = 9.88% annual return, compare to 3% FD !!  Ofcourse it is unlikely one can consistently achieve 0.19% every week.  The point here is NOT to get excited about the 9.88% but NOT to underestimate the 0.19%.

You may also observe the rate of return remains the same as 0.62% when your invest amount is \$16,000 and above.  That is due to the mini-optimum trading size we talked about earlier also.

### The Rich, Poor and The Average

Everybody talks about getting Rich.  Most often people just categorize between the Rich and the Poor.  Sometimes if we hear too much of it, we may forget the majority are actually the Average.

The gap between the Rich and Poor is also getting wider and bigger.  That is because more and more people become the Average everyday.

The Poors think they have no money and therefore do not need Financial Planning.
The Richs think they do not need to worry about Finance right now.
So most of the people who believe in and are actively practising Financial Planning are the Average !

The Averages and the Poors are usually easier to define as they are closely relate to each other.  The Rich however is a bit tough because the 'richness' gap among themselves are huge !

Lets try look at this from the income point of view in this writting.  In Malaysia and in MYR\$ units, a Rich guy would probably earn more than \$20,000 a month, an Average guy earns from \$2,000 to \$6,000 and a Poor guy earns below taxable income and usually below \$800.

And below shows some stereotype figures of total monthly usage from them.

Since there are more people among the Average perform Financial Planning, not many of the Average would drop back to the Poor, a few even make it to the Rich.  And some of the Rich did not manage their wealth properly and often drop to the Average within a short period of time, if not straight to the Poor sometimes.

It is easier for the Rich to drop back to Average than the Average to drop to Poor.
More Poors become Average than Average become Rich.
Eventually the Average gap grows wider and bigger.

People usually move from one range to another by increasing or decreasing Income.  Those are the ones who may be upgraded or downgrade again once their income changes.  But if you change 'group' not by changing your income but by a good finance plan, you will most probably never be downgraded anymore.

No matter which group you are in, as long as you have a solid finance plan, you can achieve finance independant within your own life style.

So achieving Finance Independance is not to become Rich, its simply by identifying your own life style and come up with a solid finance plan to support it Forever.

## Saturday, January 10, 2009

### Technical Analysis - Candle Stick

I brieftly mentioned Technical Analysis vs Fundamentals before, I also mention the #1 danger of using Technical Analysis, now lets look at one of the most common Technical Analysis -> Candle Stick and what you can get out of it ...

First of all, lets take a look at candle stick definition !

if the color of the bar is white, then the top of the bar refers to closing price.

if the color of the bar is black, the top of the bar refers to opening price.

this is because white refers to up trend and black refers to down trend

Sometimes different colors are used to represend the trend too.  For example, red refers to down trend and blue refers to up trend etc.

When a few of these candle sticks align to each other, certain patterns will form.  Some patterns can help you predict what will come next.

However, bear in mind that NOT all prediction are Equal.  Some are more reliable than another.

After studying all the basic candle stick patterns, these are the few ones with High Reliability.

When you see these patterns, it is almost guarantee the trend is going UP next !

or

Morning Star above indicate an upcoming UP trend while Even Star predict Down trend.  Other down trend patterns are as follows.
or

Once getting used to these patterns, it can help you to identify the right timing to enter or exit an invesment.

One point to emphasize is make sure you are very clear about the X axis.  For example, speculator may want to use 1 or 5 minutes candle sticks to obtain daily income.  On the other hand, a daily candle stick may be used to obtain weekly or monthly income.

## Wednesday, January 7, 2009

### Get Cheapest Brokerage Fee here !

Coincident or not, soon after I wrote about brokerage fee and minimum trading size Jupiter sent me an email stating if I can introduce more people to join their lowest brokerage fee stock investment account, they will be paying me RM 30 for every successful applicant who make at least 1 trade within 30 days.

These are some of the rules they share to me:

1.  This offer is valid from 5 Jan to 31 March 2009
2.  You must turn up personally in Jupiter office to sign the application form
3.  All I need is your Name, Email Address and Handphone number

If you need money badly then let me know how much you want to share out of those reward.  But bear in mind that I don't really receive the money.  They will just credit the money into my account in Jupiter, not into my bank.

Otherwise, I will use these money to fund this blog.

## Tuesday, January 6, 2009

### The 5th income category to RichPoorDad

I mentioned before that Rich Dad Poor Dad's income categorization is more of a concept and not finite categories.  It covers E as Employment, S as Self Employ, B as Business and I as Investor.

Well, there is one type of income I was trying to match into those categories but without success.

One of the examples I used in that old post is beggar.  I was showing how begging can be E, S and B.  However, in real life, no beggar is going to do anything like I suggested there.  Beggar simply beg for things without rules, timing or any pre-requisite.

Like wise, I also cann't find a category match for charity.  Old folk homes and orphan centers require high coordination and managment skill to make them run smoothly and their 'income' is one of the very important parts.

Sometimes I recycle quite a lot of stuff and I get money out of it.  I didn't really spend time and effort to recycle, its more like a mind set and way of life.  Yet I get income out of it.

Most religions in our world receive money from their belivers too and form a major part of the religion's income.

All these are real Incomes but not fall under E, S, B and I.  So I came up with the 5th category.  I don't really have a good name for it yet but I have been calling it "Charity".

Do not underestimate the power of charity.  The whole of our society today is run base on this income category.

There are a few ways to identify this income category;

1.  It starts with almost 'Nothing' and ends with an 'Income'
2.  Since it starts with nothing, you can actually "make any excuses" out of it without penalty
3.  It usually touches a human trait to do good, either for himself or for others.

Rob said the best way to earn income is by investing.  Well, that is because he didn't know the power of Charity at that time !

Just to bring us back to reality, quite a lot of illegal income falls under this category too.

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.
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speaking of which, its about time I need your donation to keep this blog going

## Sunday, January 4, 2009

### Minimum Trading Size vs Lowest Brokerage Fee

In last post, it was shared that in order to enjoy the lowest brokerage fee, you will need to identify the minimum trading size !

The Lower percentage of a brokerage fee, the Higher the minimum trading size becomes !  As a result, it seems like one should always pick an account type that matches his average trading size.

Wrong again ... I cann't stress enough that we need to analyse the real numbers to know the whole truth.  Not just the concept.

Compare different brokerage fee offers in an old post
As you can see the blue line in above graph.  Although your brokerage fee is as high as 0.8% when you only invest \$1,000 but it is STILL ALWAYS lower than other type of accounts, ie. 1.2%

At the end, the lowest brokerage rate with the lowest minimum brokerage fee DOES equal to Maximum saving in this case !

### Cheapest brokerage fee will cost you MORE ?

The cheapest brokerage fee to trade a stock in KLSE (MY) I can find is from Jupiter, offering 0.05% with a minimum of RM 8.

Normal online trade brokerage fee is 0.42% with a minimum of RM 12.
or
Jupiter also offers 0.2% with RM 12 minimum for non cash up front account.

click on image to view larger table

You may think since 0.05% and RM 8 are both the lowest, then picking this type of account will definitely save more ?

Well, lets see ...

If your average trade size is RM 1,000 then you would be paying RM 8 each time, equivalent to 0.8% and not the said 0.05%. Guess what, 0.8% is also much higher than 0.2% and 0.42% isn't it ?

In order to enjoy the said LOW brokerage fee, you will need to calculate the minimum trade size needed.

For 0.05% and RM 8, it comes up to RM 16,000 !! If you never trade up to that amount in every transaction, you actually NEVER enjoy the 0.05% brokerage rate AT ALL !!

So if you want to save in brokerage fee, which account type will you get ?

### Apply Dollar Cost Averaging in Investment Link

Investment Link plans deduct your investment units in order to pay for insurance coverages.  It was mentioned in last post that this is not good for you because it goes against the concept of Dollar Cost Averaging.

However, its actually NOT "ALL" bad.  As I mentioned before, one would really need to analyse with the real numbers and not just depend on a bare concept.  Lets look at this particular case.

Current way of deducting units is GOOD in an uptrend market.  Basically you buy more units initially and then deduct less units as the market price goes up.  However it is VERY BAD in a down trend market.

And ofcourse the insurance company HAS TO assume their investment would continously be going up when they are convincing you to buy it.  That is why they calculate the units the way they are !

You may think the insurance company should deduct the money first and then only invest to the units.  That way it would be like Dollar Cost Averaging, isn't it ?  Well ... slightly better but still NOT stable enough !

If you do that, you would just get a similar effect except it is BETTER in down trend market but WORSE during up trend.

Refer to above summary table, you can see that during up trend its better to deduct units to make payment;  However during down trend, its better to make payment first and then buy the units.  Either way, you are still widely open to market risk.
The TRUE dollar cost averaging application in this situation is to invest your money monthly and NOT yearly !  Since the insurance company is going to deduct the insurance coverage fee monthly, there is really no reason for you to prepay your premium without interest.

In short, when you buy an investment link policy, you should set your payment mode to Monthly !  That way, it doesn't matter if the insurance company deduct the units first or pay the coverage first, you would most probably always get the same amount of investment units !

In above example, you will always get 816.39 units no matter if the market goes up or down !

This example shows that Dollar Cost Averaging is a simple concept and easy to execute but sometimes can be overlooked and become very confusing.  The 3rd part ( if ever published ) may explains why we have such confusion.  Which venture a bit into the philosophical side of Financial Planning and Human Nature.

## Thursday, January 1, 2009

### Real Life examples how Banks abuse Credit Card Holders

A is M-ban, one of the banks in Malaysia and D is Daniel a citizen.

D : I receive a SMS asking me to make payment but I don't have any M-ban credit card
A : Sure sir, may I know your name ?
D : Daniel XXX
A : Ok Daniel, I have to ask you a few questions for verification.
D : Ok.

( after some identity card, address info sharing ... )

A : What is your Credit Card number ?
D : I don't have one.
D : But that is the whole point, I am complaining to you that I do not have M-ban credit card and yet you are asking me to make payment,
A : I know sir !  You have to tell me the credit card number before I can help you.
D : I don't have it.  Do you have other verification question ?

( silence for a short while )

A : Sure ... when is your card expiration date ?

( at the end, A "advised" D to make payment to avoid any further delay )

HL is another local bank in Malaysia and this time MS is Mew Siang, a HL-ban credit card holder.

MS's card is due renewal in June but MS doesn't need the card anymore.  So MS wrote an official email to HL to cancel the card back in May ( 1 month before renewal).  After 14 days, MS didn't hear from HL so MS called HL.

MS :  I wrote in to cancel my card a few weeks ago but I haven't heard from you since.
HL :  Sure miss, Let me .... ( after 5 minutes of verification )
HL :  Yes Miss, we have already received your cancellation letter and now it is in process.

2 months later in July, MS received a statement asking payment for renewal fee.  Soon after that MS received a call from HL.

HL :  Miss, in order for us to process this cancellation, you will need to fully pay up all the due amount !
MS : But I cancel this card 2 months ago !
HL :  Sorry miss, there is NO way I can cancel this card for FREE.  But you can keep it and use for 12 times.  Then we will waive the renewal fee for you !
MS :  What ?  I cancel this card and you ask me to use it ?
HL : Yes, that is the only way you can waive your renewal fee.
( MS firmly assure HL that she has all the documents in record and will submit to consumer rights report if HL doesn't do this properly )
HL : OK miss, I will cancel you card.

WTF ?  Didn't HL just said there is NO way she could cancel this card ?

is the credit arm of Aeon group who also own the famous supermarket Jusco.  Mou Tan, a consumer,  applied for its credit card because she was assured to collect 1.5X more points when she shop in Jusco which she always does.

After months of using the card, she found it extremely hard to make payment.  The only doable way to make her monthly payment is at Seng Heng, an electrical shop near by.  But in subsequent bill statement, it shows that an extra of \$2 was billed because she was making payment in Seng Heng, although that was instructed by AEON staff and without prior acknowledgement for such a fee.  She also found out that all her purchases are NOT collecting 1.5X points as promised earlier.  As a matter of fact, there are NO Points collected with her newly applied credit card.

She called to claim her points but without success.  There are so many terms and conditions that it is just not worth it to keep the card.  So she cancelled it.  Upon cancellation she was told the total amount to pay in order to cancel the card.  So she paid that.  2 months later, another bill come asking for more payment.

MT : I already cancel this card and already pay in full as instructed.
Aeon : Ya, I know.  But there are still some remaining amount here you have to pay.
( after 5 calls totalling 2.5 hours of no progress.  MT gave way and pay the remaining small amount hoping to end  the issue fast )

3 months later, another bill come asking payment for 4 cents.  MT ignored it every month and until today MT still get a bill asking for 4 cents.  Since 3 years ago.

### One of those traps in Investment Link Insurance

You probably know investment link insurance has many elements in it.  One of the elements in it is ofcourse insurance coverage.  While you can buy the 'cheapest' insurance coverage through investment link, do you know that your 'investment' element is badly affected in order to pay for the 'cheapest' coverage ?

Investment Link is a type of products you should consider if you do not know much about investment.  And if you do not know much about investment, you should at least know Dollar Cost Averaging.  Lets review Dollar Cost Averaging and Buy Low Sell High concept !  Basically you accumulate more units during down trend and less units during up trend.
In investment link policy, your annual premium is NOT directly credited into your account.  It will first be used to deduct your protection charges monthly.  The protection charges may remain the same but the way it is calculated is NOT a dollar to dollar deduction.  It will use the market price of your investment to deduct the number of units in order to match the premium payment.
For example;

 Premium Payment Needed Market Price Number of Units Needed \$100 \$1 100 \$100 \$2 50 \$100 \$0.50 200

So instead of deducting \$100 consistently from your account, it is deducting the number of units.

You can see that during a down trend ie. when market price is \$0.50 you lost 200 units.  And during an up trend ie. when market price is \$5 you lost only 50 units.

So instead of accumulating MORE units during down trend,
you LOST more units.

In long run, you are strategically put into a 'losing' position while the insurance company has a HIGHER chance to earn MORE of your money.  Because you are getting into a position that is OPPOSITE of Dollar Cost Averaging !

Below shows a Sample of an actual detail list of an invesment link policy, click on image to view in bigger  size.

### How to "REALLY" get a car FREE ?

I always share that below picture can help me answer ALL kinds of financial planning questions.  Let's try it now ...

First of all let me emphasize that I may not have free lunch here.  So if you are expecting magic here please wait a bit longer until I graduate from my magic classes :)

Legally there are 2 ways you can get a car for FREE
1) by adopting the green shaded area called "Earn \$2 with \$1" and
2) by applying some 'tricks' in the "Income" area
The easiest way to get your first car FREE is ... by NOT buying it "now".  You may say this is a no brainer or even a bit pissed with this suggestion but its the reality in Personal Finance Planning ;
DO NOT buy the things you cann't afford
Time with compounding interest is your friend
For example, an averagely usable used car would cost one to five thousands dollars, so lets say you are budgeting \$3,200 for this purpose and all you have is \$100 to start with.  According to Rule of 72, if you save \$100 with 12% interest, you will reach your target 30 years later.  So if you save your \$100 at age 10, you can buy your first car for "free" when you are 40 years old.

Some of you may get even more pissed by now, "What kind of lifestyle is that ?"

Well, above is assuming you do "nothing" or purely a "passive" growth.  If your expectation is you don't want to pay with Money but DO NOT MIND spending some effort, then keeps reading on ....

Playing with the same number game, these are the interests you will need and number of years to achieve your target.

18% : 20 years
24% : 15 years
36% : 10 years
72% : 5 years

Now this is the turning point ... 90% of the respond up to now is, " There are NO WAYS we can get 72% return !! "

Fewer would complain slightly differently, " The only way to get that return is by doing business myself ".

I know asking you to start a business to earn enough money to buy your first car would even be more lame for this topic.  But this still brings out another reality in Financial Planning ;
you will need to solve it "actively
"passive" means Earn \$2 with \$1 and Buy \$100 with \$1
"active" means doing something with your income

You may get away with NOT paying with money, but you would most probably still need to PAY with some effort or at least PAY with a Darn Good Idea !

Here comes a few ...

The next time you are offered a job, do not ask for salary raise.  Indeed ask for minimum wage and a FREE car.  In some case, the company car you received is still taxable but usually the total taxable is still lower than if you have a high salary.  There are a few ways how the company can do this although not common.  The general principal is that your lower salary helps you pay less tax and company purchase vehicles reduce business taxes.  At the end, you may receive more than your raised salary while your company is paying less.

Your effort :  You will need to calculate all the figures correctly and build a strong case to propose to your employer why it is beneficial for them to do it.  This requires you to really understand your local tax policy, your targeted purchased car resale value and depreciation rate, industry total compensation plan.  Lastly you probably need to have good presentation and convincing skill.

This is already a standard procedures for top positions in big companies with very expensive cars.  Smaller companies do not see the point of doing this with everyone because the saving is not that big.  However, if you do all the calculation for them, there is no reason why they don't want to save an extra penny.

Find an investor, buy 10 cars and rent them out.  You link all these people up but let your friends manage the business.  You keep a very small share or no share at all with the agreement that you can use one of the cars 5 out of 7 days or when the car is not in rent.  5 years later, you may keep the car for good.

Your effort : You will need real business skill to come up with the business plan and proper contract to get this going.

This used to be a very successful model in Langkawi and Labuan when they have a lot of tourists back in those days.

Be A Market Expert

Pick a used car model you are interested in.  Start compiling your own market price statistic by calling each seller.  Record the lowest selling price you get from each seller.  Eventually you should have the actual selling price of this car model in your local area.  Keep looking until you find one that is 20-30% cheaper than your compiled price.  Buy that car with 90-100% loan.  While driving the car, put up an adv with 5% more than the selling price but stated "negotiable".

Your effort : You will need to be a marketing guru to understand how above has used the technique of "leverage".  If done correctly, the cycle keeps going and you will have a free car.  But if done incorrectly, you may end up in debt trouble.  You will also really need to know the car and its price very well.

There are 2 ways in leveraging.  You may buy the car 20-30% cheaper than 'normal' or you can sell the car 20-40% higher than 'normal' by value adding.  This depends on how well you know cars, its supply and demand.  This technique is still actively practised everyday but not with the purpose of driving a FREE car.  The car sales men are adopting these strategies to earn big money.

Hmmm ...

I just realize this post has gone too long, I can go on and on ... so if you are still not happy with above suggestions, do leave comments why so and I would try to come back to this topic in future ...